What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing in today's video we're going to talk about the story of one of the oldest and most recognized american corporations. Ever macy's macy's has become one of the largest department stores in the world and as of 2015, it was the single largest in the u.s. Its stores, sell high-end clothing, cosmetics, furniture and many other consumer products. For nearly a century and a half macy's dominated the u.s retail space for high-end products, including designer clothing, jewelry, perfumes and colognes, as well as other luxury items, their flagship herald square store in manhattan is one of the largest department stores in the world.

It covers an entire city block in new york and is estimated to be worth billions of dollars. Macy's has made tens of millions of dollars in sales for decades with revenue peaking in the early 2010s, but retail is a highly competitive industry with razor thin margins. The majority of their revenue has always gone to operating expenses, with things like rent and upkeep of their storefronts. In the 2010s, things got desperate for macy's.

Following the rise of online retailers like amazon and the decline of the department store in general, they repeatedly announced store closures and layoffs, as well as considered sales to investment groups. Then the pandemic of 2020 brought what many people thought would be the end of all retail. With powerhouses like jc, penney and neyman, marcus, finally biting the dust but, despite all odds, macy's seems to have survived the pandemic intact, at least so far. In the middle of 2021, the credit ratings agency - s p global, raised their outlook on macy's ability to make their debt payments slashing their projected probability of default with online sales.

Accelerating and physical locations. Recovering macy's has also attracted some old customers from other retailers that have since gone bankrupt. Now it's looking like they just might have a shot at 200 years in business. But such an epic story deserves a more in-depth analysis.

Macy's can trace its roots back to 1851, when roland hussey macy opened a dry goods store in massachusetts. The original store was meant to supply the mill industry in the area, although the first store failed, macy tried again in 1858 this time in new york, the metropolis of new york as a hub of trade and industry was the perfect place to establish such a store. It was almost immediately successful and macy opened more stores. New york would remain an important center for mesa's department stores for a century, and a half by the early 1900s macy's had expanded to become a dominant dry goods store in new york in 1902.

They began construction of their flagship, herald square store. The store is located on 34th street, which gave it the differentiated characteristic of being much farther north than most of their competitors. This allowed the store to be massive after several rounds of construction. The store eventually covered an entire city block, making it the largest store in america.

The story made macy's flagship store throughout the 20th century and into the 21st century undergoing renovations in 2012 totaling nearly half a billion dollars in the early and mid-1900s macy's expanded relentlessly through both organic growth and acquisitions of other department stores. They bought midwest based lasalle and koch, atlanta-based davidsons in the san francisco-based o'connor moffat and company, which would later become macy's west by the middle of the 20th century, they'd expanded to cover the entire us, but in the 1990s macy's expansion attempts ended up being a disaster. They took on massive amounts of debt to finance the new construction of stores, especially in the washington dc area. They wanted to tap into the last major region in the country with wealthy consumers that hadn't already been tapped.

This coincided with unusually weak holiday sales and increasing competition from other stores like nordstrom and bloomingdale's in 1992. It finally missed debt payments and was forced into chapter 11 bankruptcy in 1994. Macy's was able to emerge from bankruptcy just two years later, by merging with the company federated department stores, federated department stores was an ohio-based company that resulted from the combination of a number of smaller stores in the 1920s. This made it one of the largest retailers in the us throughout the 1900s.

In 1988, canadian firm campo corporation executed a leveraged buyout of federated and took over operations. Campo corporation wanted to take over the department store industry in the entire country. To this end, they merged federated with macy's, creating america's largest retailer federated then started rebranding its own stores, as macy's stores to leverage the valuable brand recognition of macy's. They consolidated the macy's headquarters with federated in cincinnati ohio over the next one and a half decades.

The combined entity returned to profitability and re-established itself as the leading department store chain in the country. The strategy of converting acquired department stores into macy's branded stores worked so well with federated's merger with macy's that federated went all in on the same strategy. In 2005., they announced that they would buy the may department stores company for an astonishing 11 billion dollars. After the deal federated proceeded to convert hundreds of regional stores from may and to macy's branded stores.

All sorts of smaller and local chains were converted to macy's all around the country, some of them beloved by their local communities. For example, in pittsburgh, the local department store kaufman's was a central part of the community. It was started in pittsburgh in the 1800s and remained a local chain for a century and a half the flagship store in downtown pittsburgh became a pittsburgh historical landmark, along with its iconic kaufman clock for decades, kaufman sponsored the annual celebrate the season parade. This annual parade was held on the saturday after thanksgiving right when the holiday mood was highest and featured local, marching bands and celebrities.

This helped them become beloved by the community when federated department stores bought may, which kaufmann's was a part of they destroyed the kaufman's brand and converted the stores to macy's stores in 2014. They stopped sponsoring the parade. The whole experience turned many customers against macy's customers. In other cities, such as chicago had similar experiences with their local department stores being converted into macy's, but the consistent branding of macy's worked to increase sales.

At this point, macy's wasn't really a brand owned by federated department stores, anymore, federated department stores was macy's. They changed their corporate name to macy's group inc and converted their stock symbol from fd to m. There is no need to keep the company as federated a name that people didn't recognize when the macy's name was so much more valuable, but by the mid-2010s retail armageddon had started. Retailers like sears and jcpenney declared bankruptcy, while others struggled to keep the lights on.

Macy's was able to resist the wave to some extent as their upscale merchandise and perception allowed them to retain wealthy customers, but by 2017 they had suffered double-digit declines in revenue. These revenue declines threaten to quickly make macy's unprofitable as large retailers require high revenues to cover the enormous fixed cost of running retail locations. In 2016. They closed 100 of their lowest performing stores and laid off 10 000 employees.

These closures were followed almost every year since then, with more closures and layoffs. The company's stock price, plunged from 2015 to 2020, going from 70 a share to less than 15 at the beginning of 2020, and then the covet 19 pandemic hit. The pandemic was the last nail in the coffin for many retailers like macy's. They were already in a precarious financial situation, struggling to pay their bills with stay-at-home orders and their own employees getting sick with the coronavirus.

Many people thought that macy's wouldn't make it through the ratings agency. Fitch ratings downgraded macy's corporate bonds, making it harder for them to raise cash. However, they also acknowledge that macy's, comparatively strong balance sheet would likely see them through the pandemic. Macy's continued rapidly downsizing.

The company closing more stores and laying off more employees to stop the bleeding with significantly fewer stores they successfully reduced the cost base of the company and were even able to close their main headquarters in cincinnati, ohio, consolidating their offices in new york city. In a shock to wall street, they reported a surprise net profit in the first quarter of 2021, saying that shoppers had started to return to their stores. They also hiked their full year. Financial forecast crediting, strengthened sales of luxury items such as jewelry watches and perfume and cologne, unlike other retailers like jcpenney, which had outdated and tired storefronts.

When customers finally emerged from lockdown, they wanted to shop at well-lit, clean, shiny, macy stores with high-end products. Around the same time, s p upgraded, macy's credit rating, citing a positive outlook for the economy. Since the depths of the pandemic, macy's stock has recovered tremendously more than quadrupling in value. Since its lows, it now looks like macy's might be the biggest and one of the only department store companies to survive the pandemic.

One of the reasons they have been able to survive when other retailers haven't is that they maintain an upscale brand and dependent on wealthy customers. When customers are looking for expensive, perfumes or watches, or even just designer clothing, they prefer to see in person before buying rather than buy, online macy's was able to resist succumbing to amazon with this strategy. The higher price point also likely benefited the longevity of their customer base since wealthier customers were not just coming to macy's for cheap deals and discounts. This attracted customers back into their stores as soon as state home orders were lifted.

If macy's can continue to survive through the rest of the pandemic, their phenomenal comeback for retailers, seemingly left for dead, will become one of the greatest lessons in business of the pandemic. Alright guys that wraps it up for this video, what do you think allowed macy's to survive when other retailers didn't? Let us know in the comments section below if you enjoyed this content, make sure to hit the like button and subscribe. So you don't miss future videos in the meantime. Thank you.

So much for watching and we'll see in the next one wall, street millennial signing out.