Overview of Macy’s Inc
1.Macy’s Inc is a company that operates departmental stores in United states and some other countries and specializes in various products like clothing, footwear, furniture, jewelry, housewares, beauty products etc. The company has more than 888 stores that contributes to the overall revenue of the company. The company has two major subsidiaries that functions under its brand that includes Macy’s and Bloomingdale’s. Recently the company has also entered the field of online shopping and is performing well in this sector also. The key products that the company provides are fashion products and as per reports it is the world’s largest retailer in this sector, based on all the other products it is considered the 38th best retail company in the world. The company mostly targets women and keeps on bringing variety in their products that keep people coming back to their stores. With the advent of social media, the company has started their own apps and online marketing and selling is also a major sector from where the company earns revenue (Dichev, 2017). The main USP of the company is that it has a large back head division that effectively manages the overly presented retail sector and contributes to the overall success of the company. The key products of the company include:
- Fashion and Lifestyle
- Housewares
- Home decors
And all of these are focused on the tastes of the general public and most of the products are very affordable, with variety being the main key.
The company is organized in a way that there is a holding company that manages the other two subsidiaries that includes Macy’s and Bloomingdale’s. The company has retail outlets that sales variety of products under one roof, each store has different sections that includes products related to fashion, lifestyles, housewares etc. The major investment of the company is under opening similar outlets in different parts which has contributed to the overall geographical expansion of the company. Recently the company has announced to close certain stores that have not been performing well, owing to economic conditions and the company is also considering merger with other major departmental companies. Most of the outlets of the company are opened on the Thanksgiving Day and this has been a tradition since years. The company has good backend operations team that helps in making the shopping experience good for the people. It focuses on promoting the entire scenario as a brand that wants to excel rather than as a departmental store that is selling general products to the people (Svahn, Mathiassen, & Lindgren, 2017). The company sells fashion products that contributes a major profit in the retail sector and the varieties in the same makes people come back to the company every now and then. In cases and areas where the company finds that their stores are not performing well and they require to bring changes in it, they either close those stores, or opts for lowering the investment in the same and opts for development in stores that are performing well and in this way, they are saved of major losses that might have occurred (Chariri, 2017). So, this influences the overall financials of the company and effects the overall profit that the company earns, in a way that it lowers the return and reduces the losses both at the same time, with major investments being taken in different places. In case the company operates in less revenue, it can also consider mergers with other departmental companies and this will help in reviving the sick units and help in generating synergies that would be beneficial in the long run for the overall growth of the company.
Key Products and Services
Based on the above reports it can be said that there has been a decrease in the overall revenue of the company in the last three years which indicates that the financial health of the company is weak. The cost of revenue has also increased which in turn has caused a decrease in the total operating revenue of the company (Delone & Mclean, 2004). This may be since the retail sector was not performing that well in recent times, due to the economic changes and because people were more inclined towards online shopping so that affected the overall profits of the departmental stores in the country (Alexander, 2016). The one thing that stands out in this is the minority interest which the company pays to the dissenting shareholders in case of holdings and the company is having two subsidiaries, and in 2017, the overall minority interest was thrice of 2016. This indicates that the overall shareholders that do not agree to the organization has increased and is also an indicator of poor health of the company which is because the company is considering merger with other companies and close many outlets and many layoffs has also taken place, that in turn will help in reducing the total operating cost of the company. So, in a way it can be said that the company needs to revive its falling revenue and take necessary steps that will help in reducing the losses and improving the overall economical position of the company and its sustainability (Maynard, 2017).
Based on the cash flow analysis it can be seen that there has been many changes in the liabilities from past years, and we also see on the same side the investments have also become positive, which suffice people are investing in the company that is leading to cash inflow (Alsagoff, 2010). The Accounts receivable has also shown drastic change that shows that the incomes has reduced, and the cash flow in case of other operating activities has also changed significantly. All this is an indicator of the poor financial health of the company contributing to the fact that the company needs to incorporate in changes that will help in improving the overall situation and improve its financials (Abbott & Kantor, 2017).
On the basis of the financial activities we see that the net borrowings have increased more than two times, which indicates that the company is taking company from the market to fuel in its operations, which in turn has affected the overall liquidity position of the company (Explaining auditors’ propensity to issue going-concern opinions in Australia after the global financial crisis, 2017).
Retail Outlets
Based on the overall analysis it can be said that the business is struggling in the industry and there are many changes that the business needs to incorporate in the times to come(Golden, 2006). The financial health of the company is very weak and because of the same it is considering mergers with other major companies that will help in fuelling the progress of the company. In recent times, the company has closed many of its stores due to poor performance and is looking for ways to spin off the revenue. This is basically since more than the physical retail shopping people prefer online shopping and this sector is new for the company and it needs to find ways to excel in the same. The overall economic conditions are also not in favour of the company and it had to lay off many of its employees because of the same(Iasplus, 2017). This is also since the company is operating only in few countries, it needs to think of global expansion but that will require huge amount of funds and that is for the time being not possible. The company can also try to improve its position in the field of online shopping and contribute to the same, this way the company can reduce its losses and improve its revenue. Overall it can be said that the business is struggling in the industry and there are many reasons for the same, it is most important to initiate change from level 1 that will help in bringing changes in the top levels initially. The company should opt for mergers with other companies in this sector to fuel its overall performance and contribute to its success accordingly for long term growth and development (Sikka & Willmott, Current Financial Health
Based on the current financial statements the overall debt of the company has increased, the shareholder’s equity has also increased over prior years. The total cash and cash equivalents are also less, which may not be enough to fuel other operations for the company. The overall accounts receivable is very less in comparison to the accounts payable for the company (Chron, 2017). One thing that needs to be seen is that there is an increase in the overall shareholder’s equity including the non- controlling interest and the minority position in the company (Delone & Mclean, 2004). The liquidity position is not stable, with overall debts being much more than the equity which brings the company on more risky position overall (Explaining auditors’ propensity to issue going-concern opinions in Australia after the global financial crisis, 2017).
Financial Health of the Company
The cash and cash equivalents are not enough to fuel future growth; the company needs to bring in more investments that will help in the same. In case the company has more amount of funds it should invest the same to fuel future growth for the company, invest in the money in the overall development of the company, it should not pay dividends as the profit is not sufficient for the same, neither it should opt in for repurchasing its own share, the company should think about expansion that will help in improving the overall position of the company and once the company opts for global exposure the overall profit will also increase considerably(Vieira, O’Dwyer, & Schneider, 2017).
The key financial indicators includes the financial ratios and the share price of the company. The company is listed on the stock exchange and as it can be seen that currently the share price is depleting which is an indicator of poor health of the company. The current share price is $28.88. The key financial ratios for the company includes –
Based on this we can see that the current ratio for the company is very high that indicates that the company has less amount of current assets in comparison to its current liabilities, so the company needs to work on the same (Fereidooni, Classen, Spink, & Patra, 2017). The P.E ratio is also less, and has decreased from prior years, which is an indicator of poor financial health, as it is the ratio between the share price and the market value of the shares of the company. Owning to the fact that currently the company is performing poorly, it needs to take necessary steps that will help in improving its overall profit position and that will make the ratio better (Sikka & Willmott, 2010).
The investors should think before putting in their funds for the company as presently the financial condition is not that stable, so the overall return that the company provides to the shareholder may not be enough. So once the company take necessary steps to change its current scenario and invest in funds, that would generate enough profit for the growth of the company and provide considerable returns to the shareholders (Chiapello, 2017). The company is a enriched entity it is just because of the present conditions that the company is not able to overcome its losses and in times to come the situation will changes and then people can consider investing in the same (Vieira, O’Dwyer, & Schneider, 2017).
References
Abbott, M., & Kantor, A. (2017). Fair Value Measurement and Mandated Accounting Changes: The Case of the Victorian Rail Track Corporation. Australian accounting Review.
Alexander, F. (2016). The Changing Face of Accountability. The Journal of Higher Education, 71(4), 411-431.
Alsagoff, N. (2010). Microsoft Excel as a tool for digital forensic accounting.
Chariri, A. (2017). FINANCIAL REPORTING PRACTICE AS A RITUAL: UNDERSTANDING ACCOUNTING WITHIN INSTITUTIONAL FRAMEWORK. Journal of Economics, Business and Accountancy, 14(1).
Chiapello, E. (2017). Critical accounting research and neoliberalism. Critical Perspectives on Accounting, 43, 47-64.
Chron. (2017). five-common-features-internal-control-system-business. Retrieved december 07, 2017, from https://smallbusiness.chron.com/five-common-features-internal-control-system-business-430.html
Delone, W., & Mclean, E. (2004). Measuring e-Commerce Success: Applying the DeLone & McLean Information Systems Success Model. International Journal of Electronic Commerce, 9(1).
Dichev, I. (2017). On the conceptual foundations of financial reporting. Accounting and Business Research, 47(6), 617-632.
Explaining auditors’ propensity to issue going-concern opinions in Australia after the global financial crisis. (2017). Accunting and Finance, Carson,E;Fargher,N;Zhang,Y;.
Fereidooni, H., Classen, J., Spink, T., & Patra, P. (2017). Breaking Fitness Records Without Moving: Reverse Engineering and Spoofing Fitbit. International Symposium on Research in Attacks, Intrusions, and Defenses, 48-69.
Golden, T. W. (2006). A Guide to forensic accounting investigation. Hoboken: Wiley.
Iasplus. (2017). www.iasplus.com. Retrieved december 07, 2017, from https://www.iasplus.com/en-ca/projects/assurance/research-projects/iaasb-revisions-to-isa-315-identifying-and-assessing-the-risks-of-material-misstatement-through-understanding-the-entity-and-its-environment-research
Maynard, J. (2017). Financial accounting reporting and analysis (second ed.). United Kingdom: Oxford University Press.
Sikka, P., & Willmott, H. (2010). The dark side of transfer pricing: Its role in tax avoidance and wealth. Critical Perspectives on Accounting, 342-356.
Svahn, F., Mathiassen, L., & Lindgren, R. (2017). EMBRACING DIGITAL INNOVATION IN INCUMBENT FIRMS: HOW VOLVO CARS MANAGED COMPETING CONCERNS. EBSCO Information Services, 41(1), 239-254.
Vieira, R., O’Dwyer, B., & Schneider, R. (2017). Aligning Strategy and Performance Management Systems. SAGE Journals, 30(1).
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