Financial Statement Analysis Report for Macys and Nordstrom

Contents

Macys Inc Financial Statement Analysis BACKGROUND Macys Inc is one of the nations retailers which operates the Macys And Bloomingdles brands with about 850 department stores and 4 Bloomingdles outlet stores across the nation. It is the one of premier retailers of feminine accessories, apparel, cosmetics and shoes. The company also runs Internet sales on its own website www.masys.com. PROFITABILITY REVIEW Net sales were down $1,403 million or 6% from 2008 to the end of 2009. Although it decreased from2008, net sales are increase from 2009 (by $1,514 million) to the end of 2010.

From graph 1 we can find that the Impairments, store closing costs and division consolidation costs has been $25 million that has been 0.1% of net sales. It decreases a lot compared with which was at the year of 2008 ($398 million and 1.6%o of net sales) and 2009($391 million and 1.66 of net sales). Impairments include Properties held and used, Acquired indefinitelived private brand trade names, and Marketable securities. Store closing costs includes severance and other. I would question why this was reduced (as a percentage of sales) for 2010. A possible explanation could be the decrease amount of the closure of underperforming Macys store. The company announced the closure of three, five and eleven underperforming Macys store at January 2011, 2010 and 2009. According to its measurement of impairment loss long-lived assets, impairment includes properties that were the subject of announced store closing. Because the reduce of the closure of store from 2008 to 2010, this kind of cost has been decreased. In the other side of view, the decrease of the number of the closure for underperforming Macys store means the total performance of Macys store become well from 2008 to 2009. From the 10-K report of Macys Inc., it shows a significant rise of earning per share (Basic EPS). At the year of 2008 it has been negative $11.34, whereas it has been $0.78 for 2009 and

$2.00 for 2010. At the end of January, 2011 Macys PE ratio is 23.15/2=11.575.

BALANCE SHEET REVIEW The liquidity of Macys has declined from 2010 to 2011. The Current Ratio which measures a company's ability to meet its current obligations has decreased from 1.54 in January 29, 2010 to 1.36 in January 29, 2011. As a rule of thumb, a current ratio of 2.0 is considered indicative of adequate liquidity. Both of the two years ratio are lower than 2.0. The ability of the company to pay current debts is not good enough.

The debt ratio of Macys has increased from 0.73 in Jan 2010 to 0.78 in Jan 2011. It means that most of total assets are provide by creditors. The acid-test ratio of Macys are 0.37 in Jan 2010 and 0.46 in Jan 2011. Both of them are lower than 1 which is considered indicative of adequate liquidity. It means the firm is lack of ability to meet its current obligations. OPERATING EFFICIENCY REVIEW The accounts receivable turnover (sales/average accounts receivable) of Macys is fairly consistent at 66.67 in Jan ,2011 versus 62.64 in Jan,2010. Compared with Macys, Nordstrom has a much lower A/P turnover which are 4.59 in Jan,2011 and 4.07 in Jan,2010. The significance difference of A/P turnover between Macys and Nordstrom is driven by the higher sales and much lower accounts receivable of Macys. Macys dayssales in accounts receivable is 5.72 days in 2010 and 5.98 days in 2009. Whereas Nordstroms daysales in accounts receivable is much higher than Macys , which has reached to 79.43 days in 2010 and 89,95 days in 2009. It shows that Norsdstrom has a longer collection period of accounts receivable.

Both of the two companies use an indirect method to show their cash flows and their cash flow from operations are all positive. Macys statement of cash flow show that the firm suffers a decrease of cash balance from 1.686 million in 2009 to 1,464 million in 2010. The percentage of the decrease is about 10%.The reason should be the increase of its financial activities. Macys has a much higher Debt repaid number in 2010, according with the decrease in its long-term debt from 2009 to 2010, Macys paid much more short-term debt at

the year of 2010 than before. Whereas, Nordstrom has a increase of cash balance from 795 million in 2009 to 1,506 million in 2010. The percentage of increase has reached to 97%. One reason is the raise of Cash and cash equivalents at beginning of year. FINANCIAL RISK REVIEW The debt ratio of Macys has been raised from 73% in 2009 to 78% in 2010. Similarly, Nordstroms debt ratio has been increased from 73% to 76% during the same period. Both of the two firms shows a high debt ratio, which means most of their assets being provided by creditors. The debt to equity ratio of Macys is 358% in 2010 and 273% in 2009. The same kind of ratio for Nordstrom reach to 319 %in 2010 and 269%. That is the proportion of contribution from creditors is much higher than it from owners. So both of the two companies might face a high financial risk. SUMMARY

REFRENCES 1. Financial Statement Analysis Report- Five Star Furniture and Subsidiaries Bangor from http://bbs.pinggu.org 2. Report of new shares-Robam electrical appliances from the Department of Securities Research in CITIC, China. 3.IPO Value Analysis Report-Soyuter Inc. from the Department of Securities Research in CITIC, China.

APPENDICES

Part : Results of Calculations

Macy's Inc Horizontal Analysis Fiscal year

Fiscal year

Item Net sales Cost of sales Gross margin

2010 $25,00 3 14,842 $10,16 1

2009 $23,48 9 13,973 $9,516

2008 Item $24,89 Net sales 2 15,009 Cost of sales $9,883 Gross margin

2010 100.45 % 106.22 % 102.81 %

2009 2008 94.36 100% % 93.10 100% % 96.29 100% %

Item Net sales Cost of sales Gross margin

Nordstrom Horizontal anaysis Fiscal year Fiscal year 2010 2009 2008 Item 2010 2009 2008 $9,31 $8,25 $8,27 Net sales 112.55% 99.83% 100% 0 8 2 5,897 5,328 5,417 Cost of sales 108.86 98.36% 100% % $3,41 $2,93 $2,85 Gross margin 119.54% 102.63 100% 3 0 5 %

Macy's income statement analysis 2010 ROI 0.04 the Dupont Model 0.04 margin 0.03387593 turnover 1.19257828 ROE 0.15 Times Interest earned 2.28

2009 0.02 0.02 0.014006556 1.120364408 0.07 2.85

Nordstrom income statement analysis Jan 29,2011 Jan 29,2010 ROI 0.08 0.07 the Dupont Model 0.09 0.06 margin 0.065843 0.053403 turnover 1.326116 1.176269 ROE 0.30 0.28 Times Interest earned 8.80 6.04

Macys Impairments, Store Closing Costs and Division Consolidation Costs (in millions)

 Impairments: Properties held and used . Acquired indefinite-lived private brand tradenames Marketable securities Store closing costs: Severance Other Division consolidation costs Total

2010 $18 1 6 $25

2009 $115 2 4 270 $319

2008 $136 63 12 4 7 176 $398

Macy's balance sheet analysis current ratio working capital Debt Ratio Debt/Equity Ratio Acid-test Ratio Jan 29,2011 1.54 2,420.00 0.78 3.58 0.46 Jan 29,2010 1.36 1,834.00 0.73 2.73 0.37

Nordstrom Inc balance sheet analysis current ratio working capital Debt Ratio Debt/Equity Ratio Acid-test Ratio Jan 29,2011 2.01 2,038.00 0.76 3.19 1.41 Jan 29,2010 2.56 2,945.00 0.73 2.69 1.88

Macy's activity measures Total asstes turnover Inventory turnover A/R turnover PPE turnover Day's sales in A/R Day's sales in Inventory Jan 29,2011 1.19 5.34 66.67 2.73 5.72 117.15 Jan 29,2010 1.12 5.01 62.64 2.56 5.98 120.55

Nordtrom activity measures Total asstes turnover Inventory turnover A/R turnover Day's sales in A/R Day's sales in Inventory Part :Financial Statement Jan 29,2011 1.33 6.29 4.59 79.43 38.30 Jan 29,2010 1.18 5.68 4.07 89.95 39.69