Macy's Cost Structure

844 Words Jan 14th, 2015 4 Pages
Macy’s Cost Structure
Macy Inc. (M) has a cost structure that can best be viewed using SWOT analysis, which is a way of evaluating the strengths, weaknesses, opportunities, and threats to the corporation. Macy’s strengths include customer loyalty, a recognizable store name, use of technology, a substantial supply chain, its comprehensive size, and the locations of its stores. In total, these strengths enable Macy Inc. to provide a unique service that offers a characteristic their competitors do not have: merchandise tailored to the customer by store and climate zone. Macy’s main weakness is its cost structure: costs are high compared to their competitors due to a complete operational transformation that includes localizing merchandise by
…show more content…
When price increases sales decrease because fewer customers feel the product is a good value. Exclusive distribution rights for national manufacturers would help with increased growth and having vendors make unique products specifically for Macy’s would enable shopper loyalty which would also affect the variable costs.
The type of activity to estimate behavior of costs depends on the cost. Macy’s would use the number of labor hours to estimate labor costs and sales dollars to estimate cost of goods sold. The fixed costs remain unchanged in total as the level of activity changes however; fixed costs are divided evenly per finance period.
Macy’s enjoys economies of scale giving them purchasing power with their suppliers and the ability to reduce operating costs by spreading fixed costs over a larger base; due to this process Macy’s buys in bulk which locks in larger discounts they can pass on to the consumer creating a win/win situation. This purchasing power allows them to control a larger section of the market and protects them from smaller retailers purchasing the same product. Macy’s sales equal $27.82B with a gross profit of $11.21B. Most analysts recommended buying Macy’s stock last month with 6 analysts predicting a strong performance. Dillard’s revenue is $6.69B and J.C. Penny Corporation revenue is reported at $12.98B for the same time period. (Macy’s (M), 2014). Macy’s, Inc. is currently trading at $57.11 (Macy’s (M), 2014) with a 52-week high of
Open Document