Macy's to Build Distribution Hub - Analyst Blog

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 construct a new distribution center in a 1.3 million square-foot facility near Martinsburg in Berkeley County, West Virginia, to better serve the increasing online orders.

Online sales, which include macys.com and bloomingdales.com, jumped approximately 29% in the first 10 months of fiscal 2010, on top of a 20% growth registered in fiscal 2009. During the most recent quarter online sales were up about 24%.

Macy's informed that the construction work will begin in spring 2011, and the distribution center will be operational in April 2012 with order shipments commencing in summer 2012. The company hinted that it plans to employ 1,200 full and part-time employees and about 700 seasonal workers to better serve its customers during the holiday shopping season.

Earlier, Macy's had announced its plan to extend its warehouse center near Portland in Robertson County, Tennessee. The order fulfillment center, which became operational in spring 2007, is a warehouse of 600,000 square feet. Macy's intends to extend this area by around 62%. The expanded plant with an aggregate area of 974,000 square feet will become operational in fall 2011.

Macy's had also informed that the warehouse center employs 570 permanent workers, and 600 seasonal workers, and once the increased facility is ready, the company 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 department stores sell a wide range of merchandise. Macy's products include men's, women's, and children's apparel and accessories, cosmetics, home furnishings and other consumer goods.

Macy's, which competes with J. C. Penney Company Inc. (JCP), currently operates approximately 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.

Currently, we have a Neutral rating on the stock. Moreover, Macy's holds a Zacks #3 Rank, which translates into a short-term ‘Hold' rating, and correlates with our long-term recommendation.

 
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