Present Value: Macy’s Inc., Research Paper Example

Macy’s Inc. (NYSE: M) is one of the biggest US retail companies. It concentrates on sales of a range of merchandise, including men’s, women’s, children’s apparel and accessories, and to some extent cosmetics, furnishing and other consumer goods. Macy’s operates more than 800 “Macy’s” retail stores in 45 states of the US and in the District of Columbia, Guam and Puerto Rico. The company also operates 40 “Bloomingdale’s” stores in 12 states. The overall diverse workforce reaches the quantity of about 167,000 employees, and the fiscal sales reached $24.9 billion in 2008. Before being named “Macy’s” on June 1, 2007 it was known to be “Federated Department Stores, Inc. Its corporate offices are situated in Cincinnati as well as New York. Now it also operates online stores such as macys.com and bloomingdales.com, which contribute great shares of profit.

Macy’s activity in the market is mostly seasonally defined. Sales depend on clearances which are made due to holidays. Sales are also defined by the popular brands which are represented by Macy’s, however its market growth is constant with the periodic downfalls caused by overall economic downfalls. A five year financial chart of Macy’s showed the company to being in a bullish run, and only amid the global financial crisis it suffered a steep plunge, reaching a record low share price of $5.85 per share. Macy’s is a company alike all other retailers, attracting because of significantly generating cash flow and at the same time is able to maintain a strong balance sheet. Even though it has been making serious expenses for rebranding, showing negative profit it maintains strong price control among the retail stores. Further expenses will be implemented for the restructuring of the company, making it controlled locally. The gross margin could further improve due to the acquisition and use of the best practices the former May and Federated Department stores had. Besides the mentioned above the combination of operating margin expansion, increase of efficiency, asset sales, and the merger of synergy of competitors are factors that would drive the Macy’s stock more and more higher. The top managerial of Macy’s cope to conducting initiatives that would guarantee long-term growth, however today’s discretionary consumers are the problem because overall national unemployment level is still high causing limited consumption of goods.

When making the final decision of buying 100 shares of Macy’s under a futures contract for a year I would make some assumptions according the aspects of the deal. I assume that in a year Macy’s stock would grow approximately by 75-80 per cent. Today’s price per share is at the point of $18.01, this price has dropped by about $2.50 dollars from the middle of October. The drop is a seasonal tendency, closer to the Christmas holidays the price per share is most likely to rocket, and then again after the New Year it will fall to some extent. Under the impact of the global financial crisis, where the population’s consumption was cut down, Macy’s share price grew by 66.54%, from the ultimate low of 5.73 to the place it is now. A 75-80 per cent estimate is probably the minimum estimate, if the economical situation in the nation will develop, this percentage is most likely to be higher. However if 100 shares would bought at the price of $18.01 per share, in a year, with the guarantee of the futures contract, I would earn approximately $1,350-$1,440 of profit. The stock of Macy’s is relatively not risky, over the past 5 years, the stock price rose steadily, until the acquisition of the May and Federated Department stores, where the stock continuously dropped until the financial crisis hit the world. Beginning with the financial crisis, the initiative taken by the executives provided a steady growth. However to my point of view, if one year would be not risky, two or more years would be otherwise. Of course I doubt that you will be able to find a bank with a higher rate on a savings account, and in the case of Macy’s it would be more profitable to buy a futures.

References

Yahoo! Finance, 2009. Macy’s, Inc. (M). Retrieved Nov. 14, 2009 from http://finance.yahoo.com/q?s=M/

Forbes.com, 2009. Macy’s, Incorporated (NYSE: M). Retrieved Nov. 14, 2009 from             http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=M/

Macy’s, Inc., 2009. Macy’s, Inc. At-A-Glance. Retrieved Nov. 14, 2009 from http://www.macysinc.com/Investors/overview.aspx/