Stresses That Its Debt Is Under Control : Macy’s Sends Investors Soothing Letter
With others in the retailing world--notably Campeau Corp. and L. J. Hooker--crumpling from debt, R. H. Macy & Co. has applied some balm to soothe any concerns its own investors might have.
In a letter mailed Monday, the big New York-based merchant sought to emphasize that its own debt is under control. The company borrowed to fund a $3.5-billion buyout by management in July, 1986, and to purchase Bullock’s, Bullocks Wilshire and I. Magnin in May, 1988, for $1.1 billion from Robert Campeau after he bought the chains’ owner, Federated Department Stores.
“In light of the well-publicized difficulties experienced by the Hooker and Campeau corporations . . . we felt it important to reiterate for you the strengths of our company so that you are informed and as comfortable as we are about our financial condition,” Chairman Edward S. Finkelstein and President Mark S. Handler wrote.
The letter precedes the filing of a 10K annual financial report with the Securities and Exchange Commission in mid-October.
Reports Higher Earnings
In stark contrast to Campeau’s own heavily leveraged, $6.6-billion purchase of Federated, Macy’s said its buyout provided that no operating assets had to be sold to meet debt payments, that the company would be protected against interest rate fluctuations and that the business would generate enough cash to cover costs.
The company said sales for the fiscal year ended July 29 were nearly $7 billion, up from the $6.6 billion the company would have had the year before if it had owned Bullock’s and I. Magnin for all of 1988.
Earnings before interest payments, tax and depreciation were $925 million, up from $833.6 million the year before, again assuming full-year ownership of the California chains.
Macy’s, which for months was plagued by poor sales in the Northeast, said the year “ended on a strong trend,” with fourth-quarter revenue rising 10.1%. Sales at stores open at least a year rose a respectable 7.2%.
If cash were needed, the company said, it has several non-retailing assets that could be sold. One, it said, is the eight-story building at 800 S. Hope in downtown Los Angeles that houses the Bullock’s offices. Still called the Federated Building, the 7-year-old structure has about 258,000 square feet of rentable space and, real estate sources said, would probably sell for about $62.5 million.
