Macy's: Strengths, Weaknesses, Opportunities, and Threats
Macy's (NYS: M) is a well-known brand. It has maintained its upmarket appeal over the years and has registered healthy growth this holiday season. When consumer tastes and market dynamics change with time, new sets of strengths, weaknesses, opportunities, and threats emerge for a company. With competitors like J.C. Penney (NYS: JCP) lurking around the corner, let's see how Macy's fares on a SWOT test.
- Macy's brought in Bloomingdale's as a distinct brand for the classy customer. Bloomingdale's offers upscale merchandise from fashion labels such as Armani, Burberry, Chanel, Christian Dior, Jimmy Choo, and Prada. Its positioning as a store for the newest looks and hottest styles from fashion trendsetters attracts high-net-worth consumers who are brand-loyal and can spend more.
- Macy's has an impressive portfolio of strong private brands. Each of the brands possesses a unique differentiating factor that meets specific consumer needs in order to provide better value. It also has agreements with many well-known faces such as Madonna and Sean Combs to provide exclusive products. Its "Only at Macy's" tagline, too, emphasizes the exclusivity that is closely associated with the brand.
- Macy's compounded annual revenue growth rate over the last three years prior to October 2011 is only 0.5%, which is pretty low given the nature of its business.
- Not diversified: Macy's and Bloomingdale's are the only two lines of business that Macy's has.
- Online Shopping: E-commerce holds huge potential for the company, as its popularity has surged in recent times with more people transacting over the Internet. Last quarter, Macy's Internet business grew 40%. It even launched a mobile application for the iPhone recently. It can further develop its online platform to generate more revenue.
- Emerging markets: Purchasing power of the growing middle class in emerging markets such as India and China has created demand for lifestyle products in these countries. Taking cues from other lifestyle brands that have successful presence in these countries, Macy's can initiate the process of exploiting them.
- Competition: J.C. Penney is one of Macy's main competitors. Under a new CEO, it recently announced plans to reinvent itself, with a number of new policies such as price reduction to the tune of 40%, and signed an agreement with Macy's ally, Martha Stewart. Macy's should safeguard itself since it might lose customers to J.C. Penney as a result of some of these developments.
- Discount stores: Industry giants such as Wal-Mart (NYS: WMT) and Costco (NAS: COST) are extremely price-competitive in comparison to Macy's. During unfavorable economic conditions, these stores have an edge over exclusive stores like Macy's.
The Foolish bottom line
Macy's opportunities scale higher than its threats and weaknesses as of now. But at the same time, it should be careful of developments taking place in the market. What investors should watch out for: Will Macy's succumb to weakening factors in and around it, or will it make use of its strengths to fight adversities in order to emerge as an even stronger company?
At the time this article was published
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