With online sales gaining faster traction than traditional sales, Macy’s Inc. (M), one of the leading department store retailers in the United States, felt the need to extend its warehouse center near Portland in Robertson County, Tennessee, to better serve the increasing online orders.
Online sales, which include macys.com and bloomingdales.com, jumped approximately 20% in 2009 and climbed 31% in the first half of 2010. During the most recent quarter reported online, sales were up about 28%.
The current online order fulfillment center, which became operational in spring 2007, is a warehouse of 600,000 square feet. Macy’s intends to extend this area around 60%. The construction work will start this fall, and the expanded plant with an aggregate area of 974,000 square feet will become operational in fall 2011.
The warehouse center currently employs 570 permanent workers, and 600 seasonal workers. Once the increased facility is ready, Macy’s will require an additional 250 full and part-time workers.
Apart from Portland, Macy’s also has online order fulfillment centers at Goodyear, Arizona, and Cheshire, Connecticut.
Macy’s products include men’s, women’s, and children’s apparel and accessories, cosmetics, home furnishings and other consumer goods. The company currently operates nearly 850 department stores in 45 states, the District of Columbia, Guam and Puerto Rico.
The company is taking steps to increase sales, profitability and cash flows, which include integration of operations, consolidation of divisions and customer-centric localization initiatives. To help drive traffic, Macy’s continues to focus on price optimization, inventory management and merchandise planning.
However, intense competition and higher debt-to-capitalization ratio remain concerns. Macy’s ended second-quarter 2010 with a long-term debt of $7,493 million, reflecting a debt-to-capitalization ratio of 60.5%.
We have a Neutral rating on Macy’s. Moreover, the Zacks #3 Rank, which translates into a short-term ‘Hold’ rating, correlates with our long-term recommendation.
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