April 24, 2013


Click here to read their 2012 annual report.

They now call themselves "America's Omnichannel Store".  You'll have to come up with a different slogan, sorry.  This slogan, however, comes with a price.  Now we're watching.  If you claim you're the best at something, we're going to compare your progress to the progress of others who aren't quite as boastful.  And for being "America's Omnichannel Store", Macy's did not post comp store sales gains as strong as Nordstrom, a company that does not mention the word Omnichannel once in their 2012 10-K.

In fact, the word "omnichannel" appears 30 times in the report.  Thirty.  The word "profit" or "profitability" appears 9 times.  Nine.

Profit should be called out, because EBITDA is closing in on 14% of net sales.  In retail, that's some sweet action.

Comp store sales were +5.3% in 2011, and dropped to +3.7% in 2012.  Oh oh.

Let's think about a key omnichannel strategy - the ability to fulfill items from other stores or the online channel should boost sales, right?  Macy's went from 23 stores in 2011 to 292 stores executing this key omnichannel strategy in 2012. So why are comp store sales falling, when this key omnichannel initiative should cause sales to increase?  Give that some thought.

Macy's 10-K talks about marketing to Millenials ... those age 13-30, suggesting that this is a key marketing initiative.  Pay attention, folks.

Macy's generated $422,000,000 in co-op advertising ... in other words, brands paid Macy's $422,000,000 to advertise their products.  Catalogers - pay attention!!!

Macy's has $6.8 billion ($6,800,000,000) in long-term debt, and paid $425,000,000 in interest payments in 2012.  This is common in retail.  It also illustrates why retailers jump all over omnichannel initiatives ... when sales struggle, it hurts to make $425,000,000 in interest payments, payments that accomplish virtually nothing. 

Think about this ... Macy's has 800ish stores, suggesting that each store generates somewhere in the range of $3,000,000 to $4,000,000 in profit.  It takes 100 stores, generating average levels of profit, just to pay the interest on long-term debt.

Worded differently - the sole purpose of 100 of the 800+ stores is to generate enough profit to only pay interest on long-term debt.  Did anybody tell you how important a heavy debt load was, when thinking about accomplishing a brilliant omnichannel strategy?  Macy's has +/- 30% of annual net sales tied up in long-term debt, and it must be paid off.  We're only talking interest here.  And when you do pay it off at a faster than expected rate, Wall St. hammers your stock price.  So there.  Omichannel.  Fun stuff!  Just don't let sales decrease, you've got interest payments to make.

We're going to pay attention to Macy's, going forward.  If you claim to be "America's Omnichannel Store", we're going to measure you against alternative strategies.