Macy Management Hopes the Worst of Times Is Over : Retailing: The chain lost $1.25 billion in the last fiscal year, mostly to the costs of reorganization.
Myron Ullman says these days he tries never to use the words bankruptcy, bankrupt or failed.
“It puts a cloud over our (sales) associates,” said Ullman, the 45-year-old co-chairman and chief executive of R.H. Macy & Co., the department store chain that filed for Chapter 11 bankruptcy protection last January. “It seems like we are forever going to be referred to as the ‘bankrupt’ retailer.”
Despite Ullman’s effort to avoid a negative outlook, Macy’s results continue to tarnish its once-successful image. It lost $1.25 billion in its most recent fiscal year ended Aug. 1, and sales fell to $6.45 billion, compared to $6.761 billion a year ago.
The bulk of the loss--$988 million--was a result of costs associated with the massive reorganization proceedings, including store closings. Macy’s was also hurt by the weak economy, and disasters in two areas where it has a strong presence: Florida, hit by Hurricane Andrew, and Los Angeles, stung by riots.
But the bottom line reflected just the beginning of how much it will cost in coming years to return Macy’s to long-term profitability.
Macy’s is going through its first holiday season since the Chapter 11 filing, the start of a five-year plan that changes its entire system. It has adopted new buying, merchandising and selling strategies that executives hope will redefine its niche and improve its competitive position. It is also attempting to reduce its expenses dramatically to survive into the next century.
“Growth has slowed in retail, and mistakes are more costly,” Ullman said. “Being in Chapter 11 has not been a picnic, but it has forced us to change major aspects of our business to bring it back to health again.”
Ullman, together with co-chairman Mark Handler, 59, has been running the chain since its legendary leader, Edward Finkelstein, retired last April.
Turning Macy’s around would revive one of the best-known names in American retailing, founded in 1858 and made famous by its enormous flagship store on 34th Street in Manhattan and its annual Thanksgiving Day parade there.
As of November, after many stores closed, the chain had 114 Macy’s and Bullock’s department stores, 19 I. Magnins, 70 Charter Club and Aeropostale specialty stores and a dozen Macy’s Closeout clearance stores, with a total of 60,000 employees.
Though it began with a retail strategy of low prices and heavy promotions, today’s Macy’s stores have a medium to upscale image, while Bullock’s and I. Magnin are higher-end retailers. The change was engineered in the 1970s by Finkelstein, under whom Macy’s was considered one of the nation’s most exciting retailers.
After piling on debt in the 1980s through a leveraged buyout and costly acquisitions under Finkelstein’s direction, the company was disabled by the recession, which whacked retail sales and thus cut into Macy’s ability to make its enormous interest payments. Owing billions, pressured by creditors and losing the support of its suppliers, Macy’s ended up in bankruptcy court seeking protection to reorganize.
In many ways, the filing last January was a relief for the company. “It’s nice not having to meet with every credit company in America this year . . . and staying in constant contact with hundreds of vendors,” Ullman said. “Those were desperate hours, when we could not concentrate on operating the stores. . . . This year we are feeling much better.”
In the quarter ended Oct. 31, Macy’s lost a bit less than in the same period last year--$135.9 million compared to $155.4 million. While reorganization and bankruptcy expenses accounted for $82.3 million of that, losses from continuing operations were nearly doubled. Same-store sales also continued to decline.
