Economic Indicators of Macys - Term Paper Example

26 November Macy’s: Economic Indicators Introduction Macy’s originated as a fancy, dry goods store back in 1858 on thecorner of 14th Street and 6th Avenue in New York City. No one would have ever guessed that over the years that R.H. Macy & Co. would eventually become one of the largest department store retailers in the world. The first day’s sales were $11.06 and the first year would gross almost $90,000. Last year’s gross sales, 2010, were $25.0 Billion. The sales were up from $23.8 Billion in 2009. Macy’s over the years has had a long and eventful history to get where it is today. Macy’s was the first retailer to promote a woman to an executive position, making business history. Furthermore, Macy’s, also, pioneered business practices like the one-price system, one price for an item to sell to everyone, and advertising prices for goods in newspapers. Furthermore, the also were the first store to sell tea bags, the Idaho baked potato, and colored bath towels, even the first store to hold a New York liquor license. By 1918, Macy’s was starting to average $36 million in annual sales. And the immigrant employees, in 1924, to celebrate their new American Heritage, organized the first Christmas Parade which featured floats, bands, animals from the zoo and 10,000 onlookers. This became the Annual Macy’s Thanksgiving Day Parade. Macy’s has grown over the years by acquiring other stores and renaming them Macy’s as a way to expand their brand. Federated Department Stores (now known as Macy’s Inc.) bought R.H. Macy & Co. in 1994, and then renamed all their regional nameplates to Macy’s and in 2006, Macy’s acquired The May Department Store Company and converted all their regional nameplates to Macy’s. These acquisitions, eventually, led Macy’s to grow to over 800 stores covering virtually every major geographic market in the United States, plus they also have their internet sales through macys.com. Control of Economic Indicator The economic indicators are controlled by various governmental agencies, such as the Census Bureau, the Bureau of Economic Analysis, and the Bureau of Labor. Most economists and investors pour over the compilation reports from these agencies, like tea leaves, (Steiner, 2009) for any signs of economic improvement. They are looking for trends that will likely increase consumer spending, especially, since nearly 70% of the GDP of the United States is tied up in consumer spending. There are five main economic indicators that are being looked at to determine if the economy is going to get back on its feet. These five indicators are consumer-related indicators which include: employment, retail sales, personal income and outlays, consumer price index, and new home sales. These five indicators detail consumer spending, sales by retailers, details the amount of inflation or deflation (consumer price index), new residential sales to the public, and the unemployment rate (the higher the unemployment rate, the less likely people are to buy consumer based products, unless they are necessities). The reports are written by the government agencies that compile them, such as the employment situation is written by the Bureau of Labor and has pages upon pages of data showing the amount of employees added to and subtracted from the workforce. Economic Indicator Collection The economic indicators are calculated, after a thorough collection of the appropriate statistical data needed to perform the calculation. For example, the Bureau of Labor receives a report from all employers each month which indicates how many employees that was added to an employer’s payroll as well as how employees were removed from the payroll. Then, to get the unemployment rate, the number of unemployed people is divided by the number of employable people. This gives us the percentage of how many people are unemployed currently. But, this unemployment rate can further be broken down into the various industries to see which industries have a higher unemployment rate than others. The information that the economic indicators are based upon are mostly solid and reliable statistical data that can be easily measured where no flaws would even be found within the raw data. Economic Indicator – Past 2 Years Table 1. Unemployment Rate 2009-2011. Information provided by Bureau of Labor. This graph shows the last two of the employment situation. The unemployment rate of the United State in that time period has, basically been the same. But still it is on a slow and steady decline. The recession that we are in right now is not going to go away soon. But, the unemployment rate on a decline is a great achievement in its own right. Economic Indicator Today The economic indicator today shows us that there are more jobs becoming available with the slow but steady growth in the workforce. Employers who did not have jobs last year, but have experienced some economic growth in the previous year and expanding their workforce, with some expanding their places of employment as well, are seeing a reason to increase their workforce. 12-Month Forecast My twelve month forecast for the economic indicator will still be a slow but steady decline in the unemployment rate, which will help spring our economy. The 9.1% unemployment rate by Oct of 2012 should be between 8.5 -8.7%. Getting as low as 8.5% is probably stretching it a little bit, however, I still see it as possible. If people are willing to get out there and put themselves in the workforce to make any money to help jumpstart the economy, then all they really need to do is look. Jobs are available and employment is out there. People in some instances are just too picky as to what they want to do for employment. I see the opportunities out there for employment. They are posted at your local pizza place, your local grocery store, McDonald’s, etc. Looking at the unemployment rate data for the last two years it is easy to notice a trend. The trend shows us that the rate is slowly but steadily dropping over the years. It tends to drop .1% for every one to two months. Thus, if the economy starts to jump the unemployment rate most likely will be dropping a little quicker on a more regular basis. Truth or Lie: Economic Indicator Some economic indicators could probably be read or interpreted to the benefit of the person reading them. However, there are some economic indicators that cannot be misinterpreted, not misread. And one specific indicator that comes to mind is the unemployment rate. The unemployment rate comes straight from the records of the employers themselves, so there is no way this data can be misinterpreted. Yes, it is possible that some data in the unemployment rate may include freelance work, contract work, temporary work, etc. which is not either a full time or part time employee paid directly by the employer they are working for. But I do not believe that the government is playing political games with these numbers. Economic Indicator relationships Looking at Macy’s, U.S. Consumer Confidence is definitely correlated to the unemployment first off. A consumer is not as likely to buy from Macy’s if he or she does not have the money to purchase their products in the first place. Furthermore, retail sales are in direct correlation with consumer confidence. A consumer needs to see that Macy’s is going to have in stock what they want to buy before even leaving the house to go out and buy the products which they are selling. Also, another indicator I took a look at was Personal Income and Outlays. Personal income and outlays are directly correlated to the unemployment rate. This shows that the basic relationship between the two is simple the personal income and outlays is affect if there is no employment. What this means is the less the income, the less spending. In other words, the decrease in income would greatly affect the economy since the economy thrives on our spending. This shows us the other correlation with personal income and outlays and that is with retail sales. Basically, the same situation applies as it does with the unemployment rate, a decrease in income will decrease retail sales since people would not have as much impulse cash. Impact on Firm Both of my chosen indicators have a heavy impact on Macy’s. If consumer confidence is low, most likely it is because the personal income has dropped which is going to lessen the outlays that people will have to spend at department stores like Macy’s. A drop in income by Macy’s customers correlates, statistically, to a drop in retail sales since the consumer is what drives sales in the first place. Retail sales are, also, one of the top indicators looked at that help economists determine which direction the economy is headed. However, the vice-versa is true as well, if there is a raise in the personal income, the consumer confidence is likely to go up as well as the outlays of the consumer. This, for Macy’s sake, will bring about an increase in retail sales driving the economy on a better track to improvement. Also, the rise in retail sales and revenue would allow for another drop in the unemployment rate by adding more employees into the workforce. Investment Macy’s is a publicly shared company on the New York Stock Exchange (NYSE symbol “M”). Knowing that the past two years Macy’s made almost $50 Billion dollars and that buying any shares of their company would be a benefit rather than a risk, I would probably invest money into their stocks. Although the stock market is a little touchy right now, I know that they are finding ways to cater to their customers to keep them coming back into Macy’s stores on a regular basis to do their shopping. So, in the long-run an investment in the stock of Macy’s is a rather good idea. As the retail sales of Macy’s continue to rise, the price per share of the stocks does as well. Right now would be the time to invest in Macy’s before the stock prices begin to soar. Macy’s may have once been a private company when they begin their ascent in the retail business, but once Federated acquired Macy’s they became publicly traded on the NYSE. Personal Interview Just recently, I spoke with a man in his mid to late 30s who used to work for a department store called Foley’s down in The Woodlands, Texas. However, that store was part of The May Department Store Company which was bought out by Macy’s Inc. in 2006. The stores that were once Foley’s really do not look much different now than we he said he worked at the store. He told me that the only few changes to the store was the change in some of the merchandise and maybe a few of the practices that Macy’s did over the way The may Department Store Company ran their stores. Be he said that a lot of the employees are still that as are a majority of the practices and the equipment that they use on the floor to help merchandise the items that are going to be sold to the consumer. Foley’s he told me stressed having every customer try to open credit cards while in the store. Furthermore, he told me that he asked, but never pressured the customer into trying to open a credit. He felt that if the customer wanted to open a credit after he asked that was awesome, but on the other hand he didn’t really care one way or another whether or not the customer opened a credit with him. I then asked him if there was anything specific that he noticed in the differences between Foley’s and Macy’s. He took his time to answer as he thought it over. The dirty blond gentleman, then, answered that he had noticed that a lot more of the merchandise what celebrity driven. More specialized merchandise designed by celebrities such as Martha Stewart, Mariah Carey, Sean Combs, Justin Bieber, Emeril Lagase, etc. He said that there were not quite as many celebrity driven products in the past as there are now. I proceeded to ask him where he worked in the store and had he been back since he had left Foley’s. He replied rather quickly that he worked in the housewares and luggage departments of Foley’s. As for my other question, he stated that he doesn’t make his way back up to the mall he worked at as often as he used to since leaving Foley’s just before the store name was changed over to Macy’s. He, also, told me that the name change happened just after he left the store to pursue other endeavors of employment. I asked if he liked anything about working at Foley’s. He replied that he enjoyed working alongside some of the other employees of Foley’s. However, he said the best part about working there was the fact that had he never worked at that particular Foley’s he would have never met his wife. That intrigued me. I proceeded to ask him how they met. However he told me that’s a story for another day. And decided to leave our interview wishing me good luck with the work I was doing. Conclusion In conclusion, Macy’s has improved nearly 5% profit wise between the 2009 and 2010 fiscal years. This bodes well for the economy. The unemployment rate is steadily decreasing and this means that more disposable cash will go back into our economy allowing us to slowly creep out of this recession that the United States is in. Thus, with Consumer Confidence on the rise and Personal Income increasing, that means there will be more money to spend on things that are not necessities which means that retail sales will go up. Which is good for the United States since about 70% of the gross domestic product comes from consumers (Steiner, 2009) Works Cited Ackerman, Ruthie “Consumers Discount Macy’s” Forbes.com Forbes. 10 Oct 2008. Web. 27 Nov 2011. Bureau of Labor Statistics Data. “Labor Force Statistics from the Current Population Survey” . Bureau of Labor. Bureau of Labor. N.d. Web. 27 Nov 2011. Lundgren, Terry. "Macy’s 2010 Annual Report." Macy’s Inc. com. Macy’s Inc., 2010. Web. 27 Nov 2011. “Macy’s: A History”. Macy’s Inc.com. Macy’s Inc. n.d. Web. 27 Nov 2011. Steiner, Sheyna. “5 economic indicators to watch.” bankrate.com. bankrate.com. 3 Jun 2009. Web. 27 Nov 2011. Read More