Abstract This paper will focus on the financial analysis that compares Macy’s Inc. and Dillard’s Inc. Common financial metrics will be used to determine which company is ultimately doing better. One will then determine what the company is doing to achieve these number. After determining which company is performing better financially, suggestions will be made to tell how the company could possibly improve some things to better their metrics and their business for the years to come. Introduction In 2016, two-thirds of the United States gross domestic product came from retail shopping, according to Barbara Farfan who wrote the article “2016 U.S. Retail Industry Overview (Farfan).” Two of the nation’s largest fashion retailers, Macy’s and …show more content…
Inventory turnover is the measure of how many times inventory is sold or used during a certain time frame. This ratio is helpful for determining how much inventory a company is going through that way they can have enough inventory to provide to their customers. Normally, the higher the inventory turnover the better; therefore, Macy’s takes this one with a 5.0 turnover rate. Sales per Square foot/Employee and Net Income per Employee Sales per square foot and sales per employee are simple calculations that tell how well employees and the company are doing. Sales per square foot is simply sales divided by the total square footage of a company. Sales per employee is similar; however, this calculation uses the number of employees instead of the square footage of the building. Net income per employee is very similar to sales per employee, but this time instead of using sales we use the net income figure. Macy’s is the leader in all three categories with $190,800 sales per square foot and $171,500 sales per employee, and $6,780 net income per …show more content…
To achieve numbers that are the same or better, Dillard’s needs to focus on keeping their return on invested capital low. They should also look at increasing their inventory turnover ratio. They can do this by promoting products a little more than usual, and they could hold off on buying so much inventory. Another metric they should work on improving would be free cash flow. To do this, they would need to cut back on capital expenditures and increase cash flow from operating activities. This could be done by making sure that they get their payables taken care of, and they could also improve their collection on receivables. Summary All in all, both Macy’s and Dillard’s do not have the best financial metrics. Both companies need to look at improving their operations, and they need to focus on rebalancing their expenses and revenues. Dillard’s has shown that they can manage their money a little better than Macy’s can, making them the more attractive company when looking at the metrics from the table above. By improving their inventory turns and their profit margin, Dillard’s should be able to turn out some solid numbers for next year’s financial