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2. Industry Retail Department Store Market $60Bn in US, $400Bn Worldwide Mature and Highly Competitive Compete with discount departmentstores, specialty stores, outletstores, internet, and home shopping network. Sales have declined between 2000-2010 3. Business Overview Macys 150 years old, originally knownas Federated Department Stores Macys Inc. and Bloomingdales Merchandise Mens,Womens, and Childrens Apparel Accessories, Cosmetics, and Jewelry Home Furnishings 850 Stores and Ecommerce 4. Business Overview JCPenney Established beginning of 20th Century 1,100 Stores in all 50 US States andecommerce Merchandise Appareland footwear Accessories, jewelry, and beauty supplies Home Furnishings Services Styling Salon, optical, portrait photography, and custom decorating 5. Major Strategies Macys Private and Exclusive Label Brands Madonna, Martha Stewart, etc Magic Selling Enhance Customer Experience My Macys Localization Strategy Omni-Channel Integration Store-online-mobile device 6. Major Strategies JC Penney Exclusive Brand Portfolio Increase Online Presence Rebranding Image CustomerFIRST program Merchandise at Regular Price 7. Financial Report Macys Impact from Omni-Channel Decrease of Long-Term Debt Repayment Internet Business up 28% 2010 Decrease in Cash and Cash Equivalents Outflow from Investing Activities Increased 8. Financial Report JC Penney Revenue increase from 2009 to 2010 Long term debt decrease Investing activities decreased from 2009 to2010 Capital Expenditures New Stores and Major Renovations New Sephora Section at Existing Stores 9. Accounting Policies Inventory Macys - LIFO $4.7Bn B/S in 2010 JC Penneys - FIFO $3.2Bn B/S in 2010 LIFO to FIFO in 2009 $1.8M increase to grossmargin recorded 10. Accounting Policies Gift CardRecognition Both record Liability at POS and recognizerevenue upon merchandise redemptionBUT, differences in how they treat unredeemedcards Macys Historical Data JC Penney Escheatment After 60 months 11. Accounting Policies RevenueRecognition Macys Time of delivery Estimates are established for futurereturns based on historical return rates JC Penney Merchandise POS/Customer take possession Services Customer receives benefit Online Time of shipment Estimates are established for future returns based onhistorical return rates 12. Measures of SuccessMacys* JC Industry* Penney Avg.ROE*12.28% 17.23%13.4%ROA*3.22%6.02% 6.2%Debt/Equity*2.45 1.742.7Net Profit3.63%3.98% 2.7%Margin**Averages over six years, 2005-2010 ** Averaged over 5 years from 2005-2010, excluding 2008 13. Summary Macys & JC Penney are leaders in theindustry Continue to invest in strategic growthinitiatives Challenges Economy,Housing Market, Inflation Ecommerce and competition Both will need to focus on retaining andgrowing market share in a evolvingmarketplace 14. Questions and Answers