Breaking Down Macy's, Inc. (M) Financial Health: Key Insights for Investors

Are you keeping a close watch on the retail sector and wondering how the iconic department store is performing? Did you know that in fiscal year 2024, the company's net sales reached $22.3 billion, with comparable sales down 2.0% on an owned basis? Moreover, while Macy's net sales were down 5.3%, Bloomingdale's saw a rise of 2.0%, and Bluemercury increased by 2.4%. Want to understand what these numbers mean for the company's future and your investment decisions? Keep reading to discover key insights into the financial health of this retail giant.

Macy's, Inc. (M) Revenue Analysis

Understanding where Macy's, Inc. (M) generates its revenue is crucial for investors. The company's revenue streams can be broken down into several key areas, reflecting its diverse retail operations.

Breakdown of Primary Revenue Sources:

• Products: The majority of Macy's revenue comes from the sale of apparel, accessories, cosmetics, home furnishings, and other consumer goods.
• Services: Revenue is also generated through services such as beauty salon services, alterations, and other in-store services.
• Regions: Macy's operates stores across the United States, with a significant portion of revenue coming from its established locations in major metropolitan areas.

To understand the company's performance, here's a look at Macy's year-over-year revenue growth:

Year-over-Year Revenue Growth Rate:

While specific 2024 figures are not yet fully available, analyzing historical trends provides valuable insight:

• In fiscal year 2023, Macy's, Inc. reported net sales of $23.09 billion, a decrease of 5.6% compared to the $24.56 billion in fiscal year 2022.
• Comparable sales were down 5.0% on an owned basis and down 5.7% on an owned-plus-licensed basis.

Contribution of Different Business Segments to Overall Revenue:

Macy's operates through several business segments, each contributing to the overall revenue:

• Macy's: The largest segment, comprising the majority of the company's retail operations.
• Bloomingdale's: A higher-end department store chain.
• Bluemercury: A beauty products retailer.

The following table illustrates the revenue contribution by segment for the fiscal year 2023 (in millions of U.S. dollars):

Analysis of Any Significant Changes in Revenue Streams:

Several factors can influence changes in Macy's revenue streams:

• Economic Conditions: Consumer spending and economic growth significantly impact retail sales.
• Fashion Trends: Changing consumer preferences and fashion trends affect demand for specific products.
• Competition: The retail industry is highly competitive, with both brick-and-mortar and online retailers vying for market share.
• Digital Strategy: Macy's has been investing in its digital platform to drive online sales and enhance the customer experience. Digital sales accounted for approximately 36.8% of net sales in fiscal year 2023.

Macy's, Inc. (M) Profitability Metrics

A detailed examination of Macy's, Inc.'s (M) profitability involves analyzing various margins, trends, and efficiency ratios. Understanding these metrics is crucial for investors to assess the company's financial health and operational effectiveness. You might also be interested in: Breaking Down Macy's, Inc. (M) Financial Health: Key Insights for Investors

Here's a breakdown of Macy's, Inc.'s (M) profitability:

• Gross Profit: Macy's gross profit for the year 2024 was reported at $8,553 million.
• Gross Margin: The gross margin rate for 2024 was 38.4%. However, the gross margin rate of 39.6% for the third quarter of 2024 decreased by 60 basis points.
• Operating Income: Macy's reported an operating income of $909 million in 2024, a notable increase from $301 million in 2023.
• Operating Profit Margin: The operating profit margin for the fourth quarter of 2024 was 6.22%.
• Net Income: Macy's net income for 2024 was $582 million, a significant rise from $45 million in 2023.
• Net Profit Margin: Macy's net profit margin was 2.53%, while the net profit margin for the third quarter of 2024 was 0.57%.

The following table summarizes Macy's, Inc.'s (M) profitability metrics for the third quarter of 2024:

Macy's gross profit margin has fluctuated over the past five years, peaking in January 2022 at 41.1% and hitting a low of 32.1% in January 2021. The latest twelve months gross profit margin is reported at 40.3%.

A comparison of Macy's, Inc.'s (M) profitability ratios with industry averages reveals the following:

• Macy's Gross Profit Margin is 40.28%, which is greater than Nordstrom (37.43%) and Dillard's (37.83%) but less than the industry average of 42.12%.
• Macy's EBITDA Margin is 7.9%, which is less than Nordstrom (9.01%), Dillard's (13.93%), and the industry average (11.44%).
• Macy's Net Profit Margin is 2.53%, which is greater than Nordstrom (1.96%) but less than Dillard's (9.01%) and the industry average (8.38%).

In the fourth quarter of 2024, Macy's, Inc. (M) demonstrated a disciplined approach to cost controls, which helped to maintain margins. The gross margin rate was 35.7%, a decrease of 80 basis points compared to the previous year. This change was impacted by the conversion to cost accounting, though merchandise margin benefited from favorable shortage trends offset by product mix.

Selling, general, and administrative (SG&A) expenses decreased by $23 million to $2.4 billion, reflecting a focus on customer-facing investments while controlling non-customer-facing costs. However, as a percentage of total revenue, SG&A expenses increased by 100 basis points to 29.7% due to lower total revenue.

Macy's, Inc.'s (M) operational efficiency can be assessed through various factors:

• Cost Management: Continued cost controls are evident in the reduction of SG&A expenses.
• Gross Margin Trends: The gross margin rate of 39.6% for the third quarter of 2024 represents a decrease of 60 basis points.

Macy's, Inc. (M) Debt vs. Equity Structure

Understanding how Macy's, Inc. (M) finances its operations and growth is crucial for investors. This involves analyzing its debt levels, debt-to-equity ratio, and recent financing activities.

As of February 3, 2024, Macy's, Inc. had a total debt of $3.043 billion. This includes both short-term and long-term obligations. More specifically, the long-term debt was reported as $3.023 billion, while short-term debt and current portion of long-term debt constitute the remainder.

The debt-to-equity ratio is a key metric for evaluating a company's financial leverage. For Macy's, this ratio can be calculated using the total liabilities and shareholders' equity figures from their balance sheet. As of February 3, 2024, the total liabilities were $10.288 billion and the total equity was $4.657 billion. This results in a liabilities-to-equity ratio of approximately 2.21. The debt-to-equity ratio, focusing specifically on debt, provides a more precise view of leverage. With a total debt of $3.043 billion and equity of $4.657 billion, the debt-to-equity ratio is approximately 0.65. This indicates that Macy's has $0.65 of debt for every dollar of equity.

Here's a breakdown of Macy's, Inc.'s capital structure:

Recent activities, such as debt issuances or refinancing, can significantly impact Macy's capital structure. Monitoring these actions provides insights into their financial strategy. For example, the company might issue new bonds to raise capital for investments or refinance existing debt to lower interest payments.

Macy's, Inc. balances debt and equity to fund its operations and growth initiatives. Debt financing can provide capital without diluting ownership, but it also introduces fixed interest payments and the risk of financial distress if not managed carefully. Equity funding, on the other hand, doesn't require fixed payments but dilutes existing shareholders' ownership. The optimal mix depends on various factors, including the company's growth prospects, interest rates, and overall financial health.

For further insights into Macy's, Inc.'s strategic direction, explore Mission Statement, Vision, & Core Values of Macy's, Inc. (M).

Macy's, Inc. (M) Liquidity and Solvency

Liquidity is crucial for understanding a company's ability to meet its short-term obligations. Let's evaluate Macy's, Inc. (M) through its key liquidity ratios, working capital trends, and cash flow dynamics. For an overview of Macy's, Inc. (M) financial health, you can check: Breaking Down Macy's, Inc. (M) Financial Health: Key Insights for Investors.

Here is an analysis of Macy's liquidity position:

• Current Ratio: The current ratio is calculated by dividing current assets by current liabilities. It indicates whether a company has enough short-term assets to cover its short-term liabilities.
• Quick Ratio: The quick ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets. It excludes inventories from current assets to provide a more conservative view of liquidity.

The ratios for Macy's, Inc. (M) are as follows:

Macy's, Inc. has seen an increase in both its current and quick ratios from 2022 to 2024. The Current Ratio has increased from 1.27 in 2022 to 1.45 in 2024, and the Quick Ratio has increased from 0.47 in 2022 to 0.62 in 2024. These increasing ratios suggest an improved short-term liquidity position.

Working Capital Trends: Monitoring working capital, which is the difference between current assets and current liabilities, provides insights into operational efficiency and short-term financial health. An upward trend in working capital generally indicates that a company is becoming more efficient in managing its short-term assets and liabilities.

For Macy's, Inc. (M), the working capital figures are:

• 2022: $984 million
• 2023: $1.16 billion
• 2024: $1.28 billion

This shows a positive trend in managing short-term assets and liabilities. The increase in working capital from $984 million in 2022 to $1.28 billion in 2024 indicates enhanced operational efficiency and short-term financial health.

Cash Flow Statements Overview: Analyzing cash flow statements helps evaluate the sources and uses of cash, categorized into operating, investing, and financing activities.

Here’s a brief overview of Macy's cash flow trends:

• Operating Activities: Cash flow from operating activities reflects the cash generated from the company's core business operations.
• Investing Activities: Cash flow from investing activities includes transactions related to the purchase and sale of long-term assets, such as property, plant, and equipment.
• Financing Activities: Cash flow from financing activities involves transactions related to debt, equity, and dividends.

Key figures from the cash flow statements include:

Macy's has demonstrated positive operating cash flow, increasing from $1,450 million in 2022 to $1,650 million in 2024, indicating strong cash generation from its core business operations. Meanwhile, investing activities show consistent cash outflows, reflecting ongoing investments in long-term assets. Financing activities also indicate net cash outflows, primarily due to debt repayments and dividend payouts.

Overall, Macy's, Inc. (M) shows a positive trend in its liquidity position, supported by increasing current and quick ratios, growing working capital, and strong operating cash flow. However, continued monitoring of investment and financing activities is essential to ensure sustainable financial health.

Macy's, Inc. (M) Valuation Analysis

Assessing whether Macy's, Inc. (M) is overvalued or undervalued requires a multifaceted approach, incorporating key financial ratios, stock performance analysis, and analyst sentiment. Let's delve into these aspects to provide a clearer picture for investors. Also check out: Exploring Macy's, Inc. (M) Investor Profile: Who’s Buying and Why?

To determine whether Macy's, Inc. (M) is currently overvalued or undervalued, several key valuation ratios are considered:

• Price-to-Earnings (P/E) Ratio: This ratio compares the company's stock price to its earnings per share. A lower P/E ratio might suggest undervaluation, while a higher one could indicate overvaluation, relative to industry peers or historical averages.
• Price-to-Book (P/B) Ratio: The P/B ratio measures the market capitalization of a company against its book value of equity. A lower P/B ratio can imply that the stock is undervalued, as it suggests the market is not fully recognizing the company's net asset value.
• Enterprise Value-to-EBITDA (EV/EBITDA): This ratio compares the company's enterprise value (total market value plus debt, minus cash) to its earnings before interest, taxes, depreciation, and amortization. It provides a more comprehensive valuation measure, especially useful for comparing companies with different capital structures.

Analyzing Macy's, Inc.'s (M) stock price trends over the past year or longer provides insight into market sentiment and investor confidence:

• Reviewing historical stock charts to identify patterns, trends, and significant price movements.
• Comparing Macy's, Inc.'s (M) stock performance against industry benchmarks and competitors to gauge relative strength.
• Considering any major events or announcements that may have influenced the stock price, such as earnings releases, strategic initiatives, or macroeconomic factors.

If applicable, dividend yield and payout ratios offer additional insights into valuation:

• Dividend Yield: This is the annual dividend payment per share divided by the stock price, expressed as a percentage. A higher dividend yield can make the stock more attractive to income-seeking investors.
• Payout Ratio: This ratio indicates the percentage of earnings paid out as dividends. A lower payout ratio suggests the company has more room to increase dividends in the future.

Lastly, it's valuable to consider analyst consensus on Macy's, Inc.'s (M) stock valuation:

• Tracking analyst ratings (buy, hold, sell) and price targets from various research firms.
• Identifying any trends in analyst sentiment, such as upgrades or downgrades, which can signal changes in expectations for the company's performance.
• Acknowledging that analyst opinions can vary and should be considered as one factor among many in your investment decision-making process.

Macy's, Inc. (M) Risk Factors

Understanding the risks facing Macy's, Inc. (M) is crucial for investors assessing the company's financial health and future prospects. These risks span internal operational challenges, external market pressures, and strategic considerations.

Here's an overview of the key risk areas:

• Industry Competition: The retail industry is intensely competitive. Macy's faces competition from traditional department stores, online retailers, discount stores, and specialty retailers. The rise of e-commerce and changing consumer preferences require Macy's to continuously adapt its business model and offerings.
• Economic Conditions: Consumer spending, a primary driver of Macy's revenue, is sensitive to economic conditions. Economic downturns, high unemployment rates, and decreased consumer confidence can negatively impact sales and profitability.
• Supply Chain Disruptions: Disruptions to the global supply chain can lead to increased costs, delays in inventory, and reduced product availability. These disruptions can stem from various factors, including geopolitical events, natural disasters, and labor disputes.
• Cybersecurity Threats: As a major retailer, Macy's handles a significant amount of customer data, making it a target for cyberattacks. Data breaches and other cybersecurity incidents can result in financial losses, reputational damage, and legal liabilities.
• Inventory Management: Effective inventory management is essential for minimizing markdowns and maximizing profitability. Failure to accurately forecast demand and manage inventory levels can lead to excess inventory, lower margins, and lost sales.
• Real Estate Strategy: Macy's operates a large portfolio of stores, and its real estate strategy is critical to its success. The company must carefully evaluate store locations, optimize its store footprint, and adapt to changing shopping patterns.

These risks are often discussed in Macy's annual reports and SEC filings, particularly in the 'Risk Factors' section. Investors should review these documents for a more detailed understanding of the specific risks facing the company.

Mitigation strategies may include:

• Investing in omnichannel capabilities to enhance the online and in-store shopping experience.
• Diversifying the supply chain to reduce reliance on single sources.
• Strengthening cybersecurity defenses to protect customer data.
• Implementing advanced analytics to improve inventory management.
• Optimizing the store portfolio through closures, renovations, and new store formats.

For further insights into Macy's, Inc. (M) strategic direction, consider exploring: Mission Statement, Vision, & Core Values of Macy's, Inc. (M).

Macy's, Inc. (M) Growth Opportunities

Macy's, Inc. (M) faces a dynamic retail landscape, requiring a multifaceted approach to future growth. Key strategies revolve around enhancing the customer experience, optimizing their store portfolio, and expanding digital capabilities.

Analysis of key growth drivers:

• Product Innovations and Brand Expansion: Macy's is focused on strengthening its private brands, which offer higher margins and greater customer loyalty. They are also innovating in product offerings to attract younger demographics.
• Market Expansion and Partnerships: Exploring opportunities to expand their market presence through strategic partnerships and collaborations, including collaborations with celebrities and influencers, can drive growth.
• Digital Capabilities: Investing in digital platforms and technologies to enhance the online shopping experience and drive e-commerce sales.

Future revenue growth projections and earnings estimates will depend on the successful execution of these strategies. While specific long-term projections are subject to market conditions and company performance, analysts' estimates provide a general outlook. Keep in mind that these figures are estimates and can change.

Strategic initiatives and partnerships that may drive future growth:

• Bloomie's Expansion: The expansion of smaller-format Bloomie's stores into new markets.
• Digital Marketplace: Further development of Macy's digital marketplace to broaden product offerings and attract more customers.
• Loyalty Program Enhancements: Enhancing the Star Rewards loyalty program to drive customer retention and spending.

Macy's competitive advantages that position the company for growth include:

• Brand Recognition: Strong brand recognition and reputation, built over decades.
• Real Estate Portfolio: Valuable real estate portfolio in prime locations, which can be optimized through strategic store closures and redevelopment.
• Loyalty Program: A large and engaged customer base through its Star Rewards loyalty program.
• Omnichannel Capabilities: Integrated omnichannel capabilities, including a strong online presence and a network of physical stores.

For more insights into Macy's, Inc. (M) financial health, you can read this comprehensive analysis: Breaking Down Macy's, Inc. (M) Financial Health: Key Insights for Investors