VS.

GROUP 1: Reja Abraham Parsa Bastami Siye Chen Nargas Haghighi Kunal Karnalkar Duy Mai Niha Razi Anshul Singh

STRENGTHS
MACYS
High market penetration in the US Wide product portfolio Improving profitability Brought in Bloomingdales for upscale merchandise Strong private brands

JCPENNEY
Large amount of real estate and low cost long term leases Strong market position Strong returns on margin Strong distribution network Customer FIRST initiative Wide product and service offerings

WEAKNESSES
MACYS
Declining liquidity position Declining market share in sector Not diversified Low compounded annual revenue growth rate

JCPENNEY
Over dependence on U.S. market Low revenue per employee Low inventory turnover Decline in comparable store sales Continuous product recalls

OPPORTUNITIES
MACYS
Expansion activities Online shopping

JCPENNEY
Growing demand for private label products Increasing online retail expanding Growing global footwear market

Recovering U.S. Economy

Expansion of in-shop Sephora stores

THREATS
MACYS
Intense competition Rising manpower costs

JCPENNEYS
Counterfeit products Increase in retail rentals

Fast changing fashion trends and pricing pressure

Discount stores

Raising wages in the U.S.

Weak financial projection Moderate new store openings

Comparative analysis
COMMON SIZE INCOME STATEMENT
MACYS
Jan-28-11 Jan-28-10 10-K 10-K Revenues 100.00% 100.00% Cost of goods sold 59.30% 59.50% Gross profit 40.70% 40.50% Selling, general and administrative 33.00% 34.30% EBITDA 12.20% 9.70% Depreciation 4.60% 5.20% EBIT 7.60% 4.50% Pre-tax income 5.30% 2.20% Income taxes 1.90% 0.80% Net income 3.40% 1.40%

JCPENNEY
Revenues Cost of goods sold Gross profit Selling, general and administrative EBITDA Depreciation EBIT Pre-tax income Income taxes Net income

Jan-29-11 Jan-30-10 10-K 10-K 100.00% 100.00% 60.80% 60.60% 39.20% 39.40% 30.20% 7.60% 2.90% 4.70% 3.30% 1.10% 2.20% 30.80% 6.60% 2.80% 3.80% 2.30% 0.90% 1.40%

RATIOS

RATIOS

Period Ending MACYS

Total Revenue Cost of Revenue Gross Profit

28-Jan-11
25,003,000 14,824,000 10,179,000

29-Jan-10
23,489,000 13,973,000 9,516,000

INCOME STATEMENT MACYS

Selling General and Administrative

Operating Income or Loss

8,260,000
1,894,000

8,062,000
1,063,000

Total Other Income/Expenses Net

Earnings Before Interest And Taxes Interest Expense Income Before Tax Income Tax Expense Net Income From Continuing Ops Net Income Net Income Applicable To Common Shares

-20,000
1,899,000 579,000 1,320,000 473,000 847,000 847,000 847,000

-385000
1,069,000 562,000 507,000 178,000 329,000 329,000 329,000

Period Ending JCPENNEY Total Revenue Cost of Revenue Gross Profit Selling General and Administrative Non Recurring

28-Jan-11 17,759,000 10,799,000 6,960,000 5,585,000

29-Jan-10

INCOME STATEMENT JCP

17,556,000 10,646,000 6,910,000 5,752,000

32,000 -

Others
Operating Income or Loss Total Other Income/Expenses Net Earnings Before Interest And Taxes Interest Expense Income Before Tax Income Tax Expense Net Income From Continuing Ops Discontinued Operations Net Income Net Income Applicable To Common Shares

511,000
832,000 -20,000 812,000 231,000 581,000 203,000 378,000 11,000 389,000 389,000

495,000
663,000

663,000 260,000 403,000 154,000 249,000 2,000 251,000 251,000

Period Ending JCPENNEYS Assets Current Assets Cash And Cash Equivalents Short Term Investments Net Receivables Inventory Other Current Assets Total Current Assets Property Plant and Equipment Other Assets Total Assets Liabilities Current Liabilities Accounts Payable Short/Current Long Term Debt Total Current Liabilities Long Term Debt Other Liabilities Deferred Long Term Liability Charges Total Liabilities Stockholders' Equity Common Stock Retained Earnings Capital Surplus Other Stockholder Equity

28-Jan-11

29-Jan-10

$169,000.00 2,453,000 334,000 3,213,000 201,000 6,370,000 5,231,000 1467000 13,068,000

$163,000.00 2,848,000 395,000 3,024,000 222,000 6,652,000 5,357,000 572000 12,581,000

BALANCE SHEET JCP

2,647,000

2647000 3,099,000 670,000 1,192,000 7,608,000 $118,000.00 2,222,000 3,925,000 -805,000

2,856,000 393,000 3249000 2,999,000 738,000 817,000 7,803,000 $118,000.00 2,023,000 3,867,000 -1,230,000

Assets Cash And Cash Equivalents Net Receivables Inventory Other Current Assets Total Current Assets Property Plant and Equipment Goodwill Intangible Assets Other Assets Total Assets Liabilities Accounts Payable Short/Current Long Term Debt Total Current Liabilities Long Term Debt Other Liabilities Deferred Long Term Liability Charges Total Liabilities Stockholders' Equity Common Stock Retained Earnings Treasury Stock Capital Surplus Other Stockholder Equity Total Stockholder Equity Net Tangible Assets

28-Jan-11 29-Jan-10 $1,464,000.00 $1,686,000.00 338,000 358,000 4,758,000 4,615,000 339,000 223,000 6,899,000 6,882,000 8,813,000 9,507,000 3,743,000 3,743,000 637,000 678,000 539,000 490,000 20,631,000 21,300,000 4,537,000 454,000 4,991,000 6,971,000 1,939,000 1,200,000 15,101,000 5,000 2,990,000 -2,431,000 5,696,000 -730,000 5,530,000 1,150,000 4,220,000 242,000 4,462,000 8,456,000 2,597,000 1,132,000 16,647,000 5,000 2,227,000 -2,515,000 5,689,000 -753,000 4,653,000 232,000

BALANCE SHEET MACYS

Period Ending JCPENNEY

29-Jan-11

30-Jan-10

Net Income
Depreciation Adjustments To Net Income Changes In Liabilities Changes In Inventories Changes In Other Operating Activities Total Cash Flow From Operating Activities Capital Expenditures

$389,000.00
511,000 -5,000 -141,000 -189,000 27,000 592,000 -499,000

$251,000.00
495,000 436,000 120,000 235,000 36,000 1,573,000 -600,000

CASH FLOWS

Other Cash flows from Investing Activities

Total Cash Flows From Investing Activities Dividends Paid Sale Purchase of Stock Net Borrowings Other Cash Flows from Financing Activities Total Cash Flows From Financing Activities Change In Cash and Cash Equivalents

14,000
-485,000 -189,000 8,000 -301,000 -2000 -496,000 -389,000

13,000
-587,000 -183,000 4,000 -113,000 -3000 -327,000 659,000

Period Ending MACYS Net Income Depreciation Adjustments To Net Income

Changes In Accounts Receivables Changes In Liabilities Changes In Inventories Changes In Other Operating Activities Total Cash Flow From Operating Activities Capital Expenditures Other Cash flows from Investing Activities Total Cash Flows From Investing Activities Dividends Paid Sale Purchase of Stock Net Borrowings Total Cash Flows From Financing Activities Change In Cash and Cash Equivalents

29-Jan-11 30-Jan-10 $847,000.00 $329,000.00 1,125,000 1,187,000 91,000 467,000

-51,000 -596,000 -143,000 233,000 1,506,000 -339,000 -126,000 -465,000 -84,000 42,000 -1,221,000 -1,263,000 -222,000 7,000 -504,000 154,000 110,000 1,750,000 -355,000 -22,000 -377,000 -84,000 7,000 -995,000 -1,072,000 301,000

CASH FLOWS MACYS

RECOMMENDATIONS
Recommend purchasing JC Penney. Just under 1.1 million needed to complete leveraged buyout. Short stock with initial low ball offer of $10 per share Reorganize through divestiture (sell off assets such as Liz Claiborne & Arizona Jeans) Re-Privatize company Recommend doing business with Macys due to good debt to equity ratio.

WORK CITED
Du, Lisa. "WHITNEY TILSON: Here." Business Insider. N.p., 16 2012. Web. 28 Nov 2012. <http://www.businessinsider.com/whitney-tilson-jc-penney-2012-5>. Hoffman, Henry. " J.C. Penney: Valuing A Company Undergoing An Extraordinary Transformation."Seeking Alpha. N.p., 22 2012. Web. 28 Nov 2012. <http://seekingalpha.com/article/608461-j-c-penney-valuing-a-company-undergoing-anextraordinary-transformation>. N/A, . "J.C. Penney Company Inc. Holding Company (JCP)." Barchart. Zacks Investment Research, 20 2012. Web. 28 Nov 2012. <http://barchart.com/profile.php?sym=JCP&view=ratios>. N/A, . "Mac'ys Inc (M)." Barchart. Zacks Investment Research, 20 2012. Web. 28 Nov 2012. <http://barchart.com/profile.php?sym=M&view=ratios>. N/A, . "J.C. PENNEY CO INC (HLDG CO) (NYSE: JCP) ." Forbes. 18 2012: n. page. Web. 28 Nov. 2012. <http://finapps.forbes.com/finapps/jsp/finance/compinfo/IncomeStatement.jsp?tkr=J CP&period=qtr>. N/A, . "MACY'S INC. (NYSE: M)." Forbes. 15 2012: n. page. Web. 28 Nov. 2012. <http://finapps.forbes.com/finapps/jsp/finance/compinfo/IncomeStatement.jsp?tkr=M &period=qtr>. Talley, David. "Buy Mac'ys Over J.C. Penney." The Motley Fool. N.p., 07 2012. Web. 28 Nov 2012. <http://beta.fool.com/dtlly/2012/06/07/buy-macys-over-jc-penny/5481/>.