MACY’S VS JC PENNEY

SHARON SINGLETON, ALEXANDRA BROOKS

RUBEN PEDROZA, STEVE CHAKYTEAM 3Z

Industry

Retail Department Store Market $60Bn in US, $400Bn Worldwide

Mature and Highly Competitive Compete with discount department

stores, specialty stores, outlet stores, internet, and home shopping network.

Sales have declined between 2000-2010

Business Overview – Macy’s

150 years old, originally knownas Federated Department Stores Macy’s Inc. and Bloomingdale’s Merchandise

Men’s, Women’s, and Children’s Apparel Accessories, Cosmetics, and Jewelry Home Furnishings

850 Stores and Ecommerce – macys.com and bloomingdales.com

Business Overview – JC Penney

Established beginning of 20th Century 1,100 Stores in all 50 US States and ecommerce Merchandise

Apparel and footwear Accessories, jewelry, and beauty supplies Home Furnishings

Services Styling Salon, optical, portrait photography,

and custom decorating

Major Strategies – Macy’s

Private and Exclusive Label Brands Madonna, Martha Stewart, etc…

Magic Selling Enhance Customer Experience

My Macy’s Localization Strategy

Omni-Channel Integration Store-online-mobile device

Major Strategies – JC Penney

Exclusive Brand Portfolio Increase Online Presence Rebranding Image CustomerFIRST program Merchandise at Regular Price

Financial Report – Macy’s

Impact from Omni-Channel Decrease of Long-Term Debt

Repayment Internet Business – up 28% 2010 Decrease in Cash and Cash Equivalents Outflow from Investing Activities

Increased

Financial Report – JC Penney

Revenue increase from 2009 to 2010 Long term debt decrease Investing activities decreased from 2009

to 2010 Capital Expenditures

New Stores and Major Renovations New Sephora Section at Existing Stores

Accounting Policies – Inventory Macy’s - LIFO

$4.7Bn B/S in 2010 JC Penney’s - FIFO

$3.2Bn B/S in 2010 LIFO to FIFO in 2009 $1.8M increase to gross margin recorded

Accounting Policies – Gift Card Recognition

Both record Liability at POS and recognize revenue upon merchandise redemption

BUT, differences in how they treat unredeemed cards Macy’s

Historical Data JC Penney

Escheatment After 60 months

Accounting Policies – Revenue Recognition

Macy’s Time of delivery Estimates are established for future returns based on historical return rates

JC Penney Merchandise – POS/Customer take possession Services – Customer receives benefit Online – Time of shipment Estimates are established for future returns

based on historical return rates

Measures of Success

Macy’s**

JC Penney

Industry Avg.

ROE* 12.28%

17.23% 13.4%

ROA* 3.22% 6.02% 6.2%

Debt/Equity*

2.45 1.74 2.7

Net Profit Margin*

3.63% 3.98% 2.7%*Averages over six years, 2005-2010 ** Averaged over 5 years from 2005-2010, excluding 2008

Summary

Macy’s & JC Penney are leaders in the industry

Continue to invest in strategic growth initiatives

Challenges Economy, Housing Market, Inflation Ecommerce and competition

Both will need to focus on retaining and growing market share in a evolving marketplace

Questions and Answers