Posted on 08/11/2016 5:53:41 AM PDT by Olog-hai
Macy’s says it plans to close about 100 stores next year as the department store operator aims to become more nimble in a competitive market. That represents close to 14 percent of its store base. […]
The nation’s largest department store chain says that it earned $11 million, or 3¢ per share, in the quarter ended July 30. That compares with $217 million, or 64¢ per share, in the year-ago period. …
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In 2005 Federated Stores (Macy’s) merged with the second largest department store chain (May Company). The combined sales of the two firms at the time of the merger totaled $30 billion. The Bush administration chose not to block the merger on anti-trust grounds even though these two competitors controlled more than a 50% share of the department store segment of the retail marketplace. After the merger, the company changed its name to Macy’s and rebranded all of the various regional Federated and Macy Company stores “Macy’s”.
Fast forward a decade to today. Macy’s reported sales of $26.2 billion in 2015, down 12.7% from the combined sales of May and Federated at the time of the 2005 merger. Macy’s expects 2016 sales to be 3-4% below 2015 sales. In 2017 the company has announced sales will decline an additional $1 billion due to the just announced closing of 100 stores.
After completion of the 2005 merger Macy’s had 1000 stores. Once the announced store closures are complete Macy’s will have 666 stores per the Associated Press.
Within a year of the 2005 Federated merger with May Company, the new Macy’s cut 6200 jobs, even though at the time of the merger employees were told there would be no job cuts. Thousands more jobs have been eliminated by the company since the first 6200 were let go. The announcement of the upcoming store closures (14% of its total Macy’s stores) did not indicate how many additional jobs will be cut, but likely the number will be in the thousands.
It is interesting Macy’s announced the stores being closed will be in minor markets (i.e. middle America) as it focuses on the largest urban markets. As a result, there will be less competition in smaller cities and rural markets.
Federated paid $11 billion to purchase May Department stores and create Macy’s. Today the market cap of Macy’s Inc. is $12.1 billion, only $1.1 billion more than Federated paid for May. At the time of the merger the market cap of Federated was $9.6 billion and May was $10.3 billion for a total market cap of the combined firm of $19.9 billion. Since the merger, $9.6 billion of economic value (based on market capitalization) has been destroyed along with thousands of jobs.
Clearly the 2005 mega merger of the two largest department store chains to form Macy’s has been an economic failure. Tens of thousands of jobs lost, almost 350 stores closed, less competition in the retail sector, and significant destruction of shareholder capital ($9.9 billion not adjusted for inflation). It is hard to imagine there would be fewer stores and fewer jobs if the Bush administration had blocked the merger on anti-trust grounds and both May and Federated had continued to operate as independent competitors.
Over the past 25 years government economic policy has encouraged competition stifling and job destroying mega-mergers by failing to enforce anti-trust policies. It is unfortunate the political debate in the 2016 election is not focused on the crony-capitalist economic policies resulting in lost of jobs, reduction of competition, and destruction of capital. We should be asking ourselves:
Is the economy benefiting from the mega-mergers resulting from big government’s lack of enforcement of anti-trust laws?
Is the average American citizen benefiting from less competition and fewer jobs as big corporations, enabled by government, continue to buy up their competitors to dominate entire market segments?
Can capitalism work effectively and efficiently if large markets are dominated by one or two mega firms instead of dozens or hundreds? Would the economy benefit from the forced breakup of large corporations and banks?
Is the destruction of competition, resulting from the creation of industry dominant mega corporations, resulting in a higher level of job outsourcing than would occur if there were dozens or hundreds of firms competing in markets?
Do industry dominant mega-companies influence legislation and government regulatory policy to stifle competition. If so, is this good for the political system, the economy and the average citizen?
What are the implications for the standard of living for the average American citizen, as well as individual liberty, if we continue down the road of concentrating economic power in a few large corporations and investment firms aligned with a bloated and oppressive national government?
It's because their doing great and stock is up!☺
Upon reflection I might also add from personal experience there is a trickle down effect when unrestrained acquisitions and mergers result in the aggregation of market power into one or two powerful players in an industry. Mega-firms take advantage of their size by reducing the number of suppliers they use. While the mega firm may initially reduce cost by concentrating its purchases, the resulting squeeze out of smaller suppliers results in more companies going out of business and more jobs lost. Smaller companies are where innovation occurs and where most private sector jobs exist.
Hope and Change at work for you. I’ve never seen more businesses close their doors during my lifetime as I have during the last several years. And there’s supposed to be 4.9 % employment. I don’t see any way in hell that could be true.
Macy’s has become an expensive Wal-Mart, an expensive flea market.
Bammy bags another trophy for his den wall!
Middle class targeted big box retail is failing.
It has been since the 90s, even before the internet.
The future of shopping malls is Section 8 housing. Although some are being converted to hold computer server farms.
They announced 40 in January, so I guess they have all of those closed by now. Looks like the spiral is getting tighter.
I would expect our local mall to be on the list, as they have already lost two of their 5 anchors.
Macy's, Sears, JC Penneys - all used to be staples of the middle/lower class shopper. And since that traffic is dying, their stores are dying, too. High end malls (think J. Crew, Tommy Hilfiger, Coach, Gucci, etc.) are still going strong as the economic malaise isn't affecting the rich very much, if any.
Standalone store traffic is still holding steady, but middle-class shopping malls are slowly dying.
I'd imagine they're trimming back under performing locations, which is a prudent business practice that bodes well for the long term health of the company. I haven't seen the list of stores yet but it may also involve a real estate play, which could unlock some real value for share holders.
In other words, nothing to do with Donald Trump.
Great information. So these 100 stores, 13% of all stores, represent just 3.8% of revenue. In other words - they are way behind the store average, greatly underperforming.
Smart move to cut them... AS LONG AS they use any savings to strengthen other stores, not just fritter away on other chains or bonuses for executives. Consolidate and strengthen can be a good move in a stagnant economy.
More to do with Obama, then.
Prices to high on their cheap chinese made stuff, and they quit carrying clothing for seniors. All they have is the crap the under 25 wear. Can’t remember the last time I even walked through Macy or Dillard’s to shop. Ripped up jeans that cost a $100 is a rip off.
Macy, Penney, and Target have all told us they want ELITE SHOPPERS... that they’re superior to the ‘little people’.
And the ‘little people’ responded by walking out of their friggin stores...
Seems fair to me.
They're competing for the same small pool of people liberal newspapers and magazines compete for.
(Here's a hint for Macy, Penney, and Target: WHITE LIBERAL ELITES IN THIS COUNTRY ARE PROPPED UP BY LARGE NUMBERS OF OF PEOPLE IN THE BLACK UNDERCLASS... FOLKS WHO AREN'T GOING TO SHOP AT MACY'S...
It has more to do with Bezos and the rise of online shopping, but yeah, I’d say Obamacare and the declining middle class consumer also played a role.
With these cutbacks and a new CEO Macys should be in a good position to hit the ground running in 2017. If Trump wins I’ll wager they’ll even start stocking his ties again.
Stock up 5 bucks today
Macy’s will have 666 stores.
Satan must be in charge!
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