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Article
Macy's Supply Chain and Shareholder Value

Supply Chain techniques have measurable impact on upside revenue and shareholder value, not just on cost cutting.


Full Article Below -
Untitled Document

There should be no doubt by now that supply chain transformational techniques such as technology, mechanizing and assortment management, customer segmentation, and of course, optimization inventory can have an impact on the upside—not just cost cutting.

This posting from the Wall Street Transcript, about Macy’s, caught our eye and really confirmed the upside of Demand Management techniques.  (See Demand Management for Retailers.)

“Again, Macy's, at the $24 level, the free cash flow yield right now is around 12%. We're making a bet that the market will eventually realize that if this company goes back to what they should do normally in their operations; their cash flow yield at these levels makes this a superior investment to a risk-free treasury.

“At the same time Macy's has done a great job. Their same-store sales are starting to turn, they've reategized to customer tastes in different regions, and they've done a remarkable job of controlling their inventories and gross margin. If you control your inventories, you have to do less discounting on merchandise which increases your gross margin, and will increase your earnings. They've also done a terrific job of paying down debt. Right now the company looks like they're only doing $1.60 to $1.65 of earnings per share but there is excess depreciation in there -- depreciation over capital spending, which is a non-cash charge of over $1 per share right now. So you're buying Macy's at a 12% free cash flow yield, which is a very compelling investment.”

Conclusions:

It’s time to re-address the ROI of technology investments on growth, customer acquisition, customer loyalty and shareholder value, something we have been coaching for a decade!


To view other articles from this issue of the brief, click here.




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