Macy's 2001 Annual Report Download - page 6

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• We will increase prof it abilit y and return on invest ment.
We are commit t ed t o achieving result s in each of t hese areas in t he year ahead, even
as we cont inue t o build on some of t he more not able successes of t he last year.
2001 Progress
Alt hough our successes t end t o be overshadowed by t he year’s larger issues, t hey are
signif icant because t hey bode well f or t he f ut ure of our department st ore operat ions:
• an abilit y t o cont inue generat ing significant amounts of f ree cash f low f rom our
depart ment st ore operations, despit e pressure on sales – approximat ely $775 million
(aft er capit al expendit ures but bef ore t he acquisit ion of Libert y House), compared
t o approximat ely $600 million in t he prior year;
• an encouraging recovery in t he f ourt h quart er, which enabled us t o exceed revised
sales and EBIT f orecast s;
• year- end invent ories t hat were down about 7% on a same- store basis – a dif f icult
f eat t o achieve, but one t hat posit ions t he company well f or t he year ahead;
• an except ionally st rong privat e brand program t hat consistent ly out perf orms t he
indust ry, and t hat has grown t o represent 16% of Federat ed’s t ot al 2001 sales;
• solid progress in growing our junior’s and young men’s businesses, which
signif icant ly out perf ormed t he rest of t he st ore in t he last year;
• opening of a new protot ype department st ore – Lazarus at East on Cent er
in Columbus, OH – where we are t est ing an array of new service and
merchandising concept s;
• t he acquisit ion of Libert y House, wit h st ores in Hawaii and Guam, and it s virt ually
f lawless int egration int o our Macy’s West division;
• t he eliminat ion of Stern’s and t he conversion of 17 stores int o M acy’s in New York
and New Jersey, which f urt her solidif ied M acy’s posit ioning in t hose market s, and
planned conversions of t wo New Jersey St ern’s st ores t o Bloomingdale’s, slat ed f or
t his year.
In January 2002, we announced our int ent t o dispose of Fingerhut , pref erably
t hrough t he sale of it s operat ions as a going concern, or in t he case of t he Fingerhut
cat alog, by closure of t he business. In t ot al, we expect t o realize approximately $1.1 t o
$1.3 billion of af t er- t ax proceeds, net of one- t ime cost s, over t he next f our years as a
result of t his disposit ion.
Federat ed acquired Fingerhut in 1999 primarily f or it s e- commerce pot ent ial. Knowing
what we do now, we cert ainly would have done t hings dif f erent ly t hree years ago.
Our singular goal
for 2002 is to develop
a more compelling
business proposition
for our customers to
drive sales growth.
8.4%
98 99 00 01
OPERATING INCOME
From Continuing Operat ions
As a Percent of Sales
(Excludes Unusual It ems)
9.5%
10.6%
10.6%