An American Legend Macy’s is an iconic American Company, but like many brick and mortar retailers,...

An American Legend

Macy’s is an iconic American Company, but like many brick and mortar retailers, it has been struggling to maintain market share. For this case study find the company’s most recent financial statements, including the income statement and balance sheet. There are many sources of this data, but one quick source is Morningstar.com. If you enter the company’s ticket symbol, “M” in the quote box, you will find a report on the company’s stock price as well as a host of other information, such as performance, key ratios, and financials. On the financial tab, you can find the income statement and balance sheet for the past five years.

Question 1- Worth 25points

Looking at Macy’s income statement, what has been the trend in sales (total Revenue) over the past three years? What can you conclude from this? What picture does it tell?

Question 2- Worth 25points

As you have learned, gross profit is the difference between sales (or total revenues) and cost of sales (or cost of revenue). What is Macy’s gross profit for the last three years? What does this data tell you about Macy’s pricing strategy and costs?

Question 3- Worth 25points

Looking at Macy’s income statement, what has been the trend in net income over the past three years? What can you concluded by this?

Question 4- Worth 25points

What is the relationship between the price of Macy’s stock and earnings? What are the earnings per share for each of the past three years, and what does that number mean to investors?

Expert Solution

Question 1

The revenue has reduced slightly but is more or less constant. The trend is slightly downward. This shows that the revenues of Macy's has stagnated. It is unable to expand and number of customers to Macy's has been decreasing or stagnated.

Question 2

The Operating Income is constantly decreasing for Macy's. This implies that the costs/expenses for Macy's are increasing, as the revenues have mostly remained constant so the decreasing operating income can only mean that costs have increased.

Question 3

The net income has increased for 2018 but then again decreased sharply for 2019. But over the 3 year period Net income has a positive trend.

Question 4

	2019	2018	2017
Diluted EPS	3.56	5.04	1.99
P/E	5.06	5.4	11.15

The P/E ratio has declined over the years. It means that the stock is available at a comparatively cheaper level as over the previous years. For the investors, looking at P/E ratio alone, Macy's looks a better investment now than it was 2 years ago.

jeff jeffy answered 4 months ago

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