GROUP 1: Reja AbrahamParsa Bastami Siye ChenNargas HaghighiKunal KarnalkarDuy MaiNiha RaziAnshul SinghVS.

STRENGTHSMACYSHigh market penetration in the USWide product portfolioImproving profitabilityBrought in Bloomingdales for upscale merchandiseStrong private brands JCPENNEYLarge amount of real estate and low cost long term leasesStrong market positionStrong returns on marginStrong distribution networkCustomer FIRST initiativeWide product and service offerings

WEAKNESSESMACYSDeclining liquidity positionDeclining market share in sectorNot diversifiedLow compounded annual revenue growth rate

JCPENNEYOver dependence on U.S. marketLow revenue per employeeLow inventory turnoverDecline in comparable store salesContinuous product recalls

OPPORTUNITIESMACYSExpansion activitiesOnline shoppingRecovering U.S. EconomyJCPENNEYGrowing demand for private label productsIncreasing online retail expandingGrowing global footwear marketExpansion of in-shop Sephora stores

THREATSMACYSIntense competitionRising manpower costsFast changing fashion trends and pricing pressureDiscount stores

JCPENNEYSCounterfeit productsIncrease in retail rentalsRaising wages in the U.S.Weak financial projection Moderate new store openings

Comparative analysisCOMMON SIZE INCOME STATEMENT

JCPENNEYJan-29-11Jan-30-1010-K10-KRevenues 100.00%100.00%Cost of goods sold 60.80%60.60%Gross profit 39.20%39.40%Selling, general and administrative 30.20%30.80%EBITDA 7.60%6.60%Depreciation 2.90%2.80%EBIT 4.70%3.80%Pre-tax income 3.30%2.30%Income taxes 1.10%0.90%Net income 2.20%1.40%

MACYS Jan-28-11Jan-28-1010-K10-KRevenues 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%

RATIOS

RATIOS

INCOME STATEMENT MACYS

Period Ending MACYS28-Jan-1129-Jan-10Total Revenue25,003,00023,489,000Cost of Revenue14,824,00013,973,000Gross Profit10,179,0009,516,000Selling General and Administrative8,260,0008,062,000Operating Income or Loss1,894,0001,063,000Total Other Income/Expenses Net-20,000-385000Earnings Before Interest And Taxes1,899,0001,069,000Interest Expense579,000562,000Income Before Tax1,320,000507,000Income Tax Expense473,000178,000Net Income From Continuing Ops847,000329,000Net Income847,000329,000Net Income Applicable To Common Shares847,000329,000

INCOME STATEMENTJCP

Period Ending JCPENNEY28-Jan-1129-Jan-10Total Revenue17,759,00017,556,000Cost of Revenue10,799,00010,646,000Gross Profit6,960,0006,910,000Selling General and Administrative5,585,0005,752,000Non Recurring32,000 - Others511,000495,000Operating Income or Loss832,000663,000Total Other Income/Expenses Net-20,000 - Earnings Before Interest And Taxes812,000663,000Interest Expense231,000260,000Income Before Tax581,000403,000Income Tax Expense203,000154,000Net Income From Continuing Ops378,000249,000Discontinued Operations11,0002,000Net Income389,000251,000Net Income Applicable To Common Shares389,000251,000

BALANCE SHEETJCP

Period Ending JCPENNEYS28-Jan-1129-Jan-10AssetsCurrent AssetsCash And Cash Equivalents$169,000.00 $163,000.00 Short Term Investments2,453,0002,848,000Net Receivables334,000395,000Inventory3,213,0003,024,000Other Current Assets201,000222,000Total Current Assets6,370,0006,652,000Property Plant and Equipment5,231,0005,357,000Other Assets1467000572000Total Assets13,068,00012,581,000LiabilitiesCurrent LiabilitiesAccounts Payable2,647,0002,856,000Short/Current Long Term Debt - 393,000Total Current Liabilities26470003249000Long Term Debt3,099,0002,999,000Other Liabilities670,000738,000Deferred Long Term Liability Charges1,192,000817,000Total Liabilities7,608,0007,803,000Stockholders' EquityCommon Stock$118,000.00 $118,000.00 Retained Earnings2,222,0002,023,000Capital Surplus3,925,0003,867,000Other Stockholder Equity-805,000-1,230,000

BALANCE SHEETMACYS

Assets28-Jan-1129-Jan-10Cash And Cash Equivalents$1,464,000.00 $1,686,000.00 Net Receivables338,000358,000Inventory4,758,0004,615,000Other Current Assets339,000223,000Total Current Assets6,899,0006,882,000Property Plant and Equipment8,813,0009,507,000Goodwill3,743,0003,743,000Intangible Assets637,000678,000Other Assets539,000490,000Total Assets20,631,00021,300,000LiabilitiesAccounts Payable4,537,0004,220,000Short/Current Long Term Debt454,000242,000Total Current Liabilities4,991,0004,462,000Long Term Debt6,971,0008,456,000Other Liabilities1,939,0002,597,000Deferred Long Term Liability Charges1,200,0001,132,000Total Liabilities15,101,00016,647,000Stockholders' EquityCommon Stock5,0005,000Retained Earnings2,990,0002,227,000Treasury Stock-2,431,000-2,515,000Capital Surplus5,696,0005,689,000Other Stockholder Equity-730,000-753,000Total Stockholder Equity5,530,0004,653,000Net Tangible Assets1,150,000232,000

CASH FLOWS

Period Ending JCPENNEY29-Jan-1130-Jan-10Net Income$389,000.00 $251,000.00 Depreciation511,000495,000Adjustments To Net Income-5,000436,000Changes In Liabilities-141,000120,000Changes In Inventories-189,000235,000Changes In Other Operating Activities27,00036,000Total Cash Flow From Operating Activities592,0001,573,000Capital Expenditures-499,000-600,000Other Cash flows from Investing Activities14,00013,000Total Cash Flows From Investing Activities-485,000-587,000Dividends Paid-189,000-183,000Sale Purchase of Stock8,0004,000Net Borrowings-301,000-113,000Other Cash Flows from Financing Activities-2000-3000Total Cash Flows From Financing Activities-496,000-327,000Change In Cash and Cash Equivalents-389,000659,000

CASH FLOWS MACYS

Period Ending MACYS29-Jan-1130-Jan-10Net Income$847,000.00 $329,000.00 Depreciation1,125,0001,187,000Adjustments To Net Income91,000467,000Changes In Accounts Receivables-51,0007,000Changes In Liabilities-596,000-504,000Changes In Inventories-143,000154,000Changes In Other Operating Activities233,000110,000Total Cash Flow From Operating Activities1,506,0001,750,000Capital Expenditures-339,000-355,000Other Cash flows from Investing Activities-126,000-22,000Total Cash Flows From Investing Activities-465,000-377,000Dividends Paid-84,000-84,000Sale Purchase of Stock42,0007,000Net Borrowings-1,221,000-995,000Total Cash Flows From Financing Activities-1,263,000-1,072,000Change In Cash and Cash Equivalents-222,000301,000

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

WORK CITEDDu, Lisa. "WHITNEY TILSON: Here."Business Insider. N.p., 16 2012. Web. 28 Nov 2012. .

Hoffman, Henry. " J.C. Penney: Valuing A Company Undergoing An Extraordinary Transformation."Seeking Alpha. N.p., 22 2012. Web. 28 Nov 2012. . N/A, . "J.C. Penney Company Inc. Holding Company (JCP)."Barchart. Zacks Investment Research, 20 2012. Web. 28 Nov 2012. . N/A, . "Mac'ys Inc (M)."Barchart. Zacks Investment Research, 20 2012. Web. 28 Nov 2012. . N/A, . "J.C. PENNEY CO INC (HLDG CO) (NYSE: JCP) ."Forbes. 18 2012: n. page. Web. 28 Nov. 2012. . N/A, . "MACY'S INC. (NYSE: M)."Forbes. 15 2012: n. page. Web. 28 Nov. 2012. . Talley, David. "Buy Mac'ys Over J.C. Penney."The Motley Fool. N.p., 07 2012. Web. 28 Nov 2012. .

Macys can expand internationally to increase cash flow and revenue. Online shopping is becoming more popular so Macys can take advantage of the growing market of online shopping. Economy is recovering so macys can take advantage of this opportunity Jcpenny: trying to address by remodeling. Same thing as macys. Has its own line of footwear for all categories; stores side by side with brands from other companies. Positive outlook for the global footwear market would boost the revenue growth of the group. Sephora is a popular franchise and could bring in more customers to jcpenny if they expanded *Jcpenny competitors can undercut their sales and discounts. By offering items on sale before jcpenny does. Rising wages increases labor costs, counterfeit products Macys- Discount stores and outlets (nordstrom rack), supercenters such as wal-mart and target offer similar products at somewhat of a lower price. fast changing fashion trends: short life cycle of products, seasonality of sales, susceptibility to abnormal changes in weather conditions. Fashion is rapidly changing Lack of international presence: lacks international exposure so depends on north american revenue*