Macy's 2004 Annual Report Download - page 7

We also continue to work with the best national brands and designers,
such as Ralph Lauren, Calvin Klein, Tommy Hilfiger and Kenneth Cole,
to bring exclusive and limited product offerings to Bloomingdale’s and
Macy’s stores.
PRICING THAT’S EASIER TO UNDERSTAND
While Macy’s will always be a promotional department store, our
customers prefer us when our pricing is easier to understand. We are
simplifying pricing through several programs, including offering selected
key items at everyday low prices.
We continue to reduce couponing activity and offer better coupons
with fewer exclusions to our best customers, while decreasing the
frequency of “public” coupons that appear, for example, in newspaper ads.
MORE INTERESTING AND LESS CLUTTERED STORES
Based on feedback we receive every day from customers, we are working
to make our stores less cluttered with signs and messages, as well as more
spacious, convenient and inviting. Service standards for all Macy’s stores are
rising to a level that is meeting our customer’s expectations.
We continue to improve our stores with “Reinvent” elements, such
as price checkers, wayfinding signs, shopping buggies and redesigned
vestibules to our fitting rooms. Since 2002, we have allocated about
$100 million per year of our capital spending to reinvent initiatives. By fall
2005, stores representing more than 70 percent of Macy’s sales volume
will have been reinvented.
MARKETING TELLS OUR STORY
Through Marketing, we are communicating to customers that Macy’s
is the “way to shop.” Our advertising is bolder, more compelling and
fashionable, consistent with our lifestyle approach to merchandising.
We’re using more national and broadcast advertising to tell our story.
In early 2005, we launched a new Macy’s Star Rewards customer loyalty
program and issued about 16 million new Macy’s credit cards to customers
nationwide. Those customers who shop us most often and spend the most
will receive the best benefits – all tied to the Macy’s card.
As a company that gives back, Federated is an important member of
the community through donations to charity, employee volunteerism,
national sponsorships, and hosting major events such as the Macy’s
Thanksgiving Day Parade.
In 2004, Macy’s began a three-year national sponsorship of the
American Heart Association’s “Go Red for Women” campaign to battle heart
disease in women. We generated about $4 million in cash contributions
to designated charities during our Thanks for Sharing holiday campaign.
Our employees devoted more than 111,000 hours to community projects
through Federated’s Partners in Time employee volunteerism program.
PROGRESS AT BLOOMINGDALE’S
While much of the strategic action in 2004 and 2005 relates to
development of the Macy’s brand, our Bloomingdale’s brand continues to
do well. This highly successful division generated the highest year-over-
year same-store sales growth within Federated last year, and continued to
make strides delivering distinctive fashion merchandise and a high level
of personalized attention to its upscale clientele.
Bloomingdale’s unique new SoHo location in New York City – as
much a trend-setting boutique as a department store – opened in 2004
to rave reviews from customers and the fashion community. It not only
has cultivated an attractive customer segment for Bloomingdale’s, but it
also has spawned new economic vitality and energy in a previously
stagnant neighborhood.
Simultaneous with advances at Macy’s, we are pursuing plans for
continued growth and development of the Bloomingdale’s brand – in
stores, online and via the Bloomingdale’s By Mail catalog.
BUILDING ON SUCCESS AND FINANCIAL STRENGTH
Federated is a company that’s not afraid of change, and is willing to take
well-calculated risks to grow profitable sales. We are well aware – and, in
fact, quite proud – of the reputation we’ve built for doing things differently
in the quest for growth in sales and shareholder value.
Our confidence is built on the company’s momentum in operating
performance and continued financial strength.
• Sales in fiscal 2004 rose by 2.4 percent, and 2.6 percent on a same-store
basis, reflecting an especially robust Spring season, as well as a strong
finish to the holiday shopping season.
• Operating income rose to $1.40 billion in fiscal 2004 from $1.34 billion
in 2003, even though costs for store closings, centralization and
consolidation activities rose by $40 million in the most recent year.
• Cash flow before financing activities was $780 million in fiscal 2004.
In part, we used cash to repurchase 18.3 million shares of Federated
common stock, to increase our dividend to shareholders by 8 percent
in 2004, and to complete a tender for approximately $274 million of
high-cost debt.
A NEW BEGINNING...
With nostalgia and gratitude, we retired some of the best-known
department store names in early 2005. The Bon Marché, Burdines,
Goldsmith’s, Lazarus and Rich’s excelled at serving generations of
customers. We grew up with these names, and they will live fondly in
our memories.
But department store retailing in the future means new beginnings and
focused energies. Bloomingdale’s and Macy’s are department store brands
associated with today’s America – with the dreams, aspirations and lifestyles
of customers who love to shop, and who are ever-conscious about fashion,
quality, affordable luxury, convenience and service.
Our strength in embracing positive change comes from the women
and men who work together at every level within Federated, as well as in
the encouragement we receive from our customers, shareholders, vendors
and communities.
Federated clearly is moving in the right direction. We believe the year
ahead will be rewarding for the company and our shareholders. Along
with our entire management team and organization, I remain committed
to achieving this result.
P A G E T H R E E