Macy's 2005 Annual Report Download - page 4

• Federated entered into a strategic alliance with
Citigroup to buy Federated’s proprietary and
co-branded Visa credit card receivables. Under terms
of the agreement, Citigroup is purchasing (in multiple
separate transactions in 2005 and 2006) all credit
receivables of Federated and May Company for an
upfront premium of approximately 11.5 percent. In
total, these transactions are estimated to produce
after-tax proceeds of approximately $4.6 billion.
• Federated announced plans to invest approximately
$130 million in capital over the next two years in infra-
structure improvements and service enhancements to
support continued growth of its direct-to-consumer
businesses, including macys.com, bloomingdales.com,
Bloomingdale’s By Mail, macysweddingchannel.com
and bloomingdalesweddingchannel.com.
Among the company’s highlights in 2005:
• Following an announcement in February, Federated
acquired The May Department Stores Company in
August in a transaction valued at approximately
$11 billion plus approximately $6 billion in assumed
debt. The company announced plans to convert
about 400 May Company locations to the Macy’s or
Bloomingdale’s nameplate in 2006, strengthening
the reach of both national retailing brands. Another
80 duplicate May Company and Macy’s locations, as
well as Federated’s Bridal Group and Lord & Taylor
divisions, will be divested.
• In March, Federated converted its regional store
nameplates – Burdines, The Bon Marché, Goldsmith’s,
Lazarus and Rich’s – to Macy’s following a period of
hyphenation. This brand conversion coincided with the
launch of Macy’s Star Rewards customer loyalty program.
Financial Highlights
Federated Department Stores, Inc. is one of America’s premier national retailers, operating about
850 stores in 45 states, the District of Columbia, Guam and Puerto Rico. All stores will operate as Macy’s
or Bloomingdale’s by the end of 2006. The company also operates macys.com, bloomingdales.com and
Bloomingdale’s By Mail. Federated’s diverse workforce includes more than 200,000 employees.
2005 2004 2003
Net Sales $22.390 billion $15.776 billion $15.412 billion
Change in same-store sales (Note 1) 1.3 % 2.6 % (0.9)%
Income from Continuing Operations
Before Income Taxes $ 2.044 billion $ 1.116 billion $ 1.084 billion
% of Sales 9.1 % 7.1 % 7.0 %
Diluted Earnings Per Share
Income from Continuing Operations $ 6.32 $ 3.86 $ 3.71
Net Income $ 6.47 $ 3.86 $ 3.71
Cash Flow Before
Financing Activities (Note 2) $ 1.182 billion $ 780 million $ 1.028 billion
Notes: (1) Represents the year-to-year percentage change in net sales from Bloomingdale’s and Macy’s stores in operation throughout
the year presented and the immediately preceding year and all Internet sales and mail order sales from continuing businesses.
(2) Represents net cash provided by continuing operating activities of $1,950 million for 2005, $1,507 million for 2004 and
$1,776 million for 2003 reduced by the net cash used by continuing investing activities of $2,506 million for 2005, $727 million
for 2004 and $748 million for 2003. The 2005 amount has been further adjusted to exclude the effects of $5,321 million of cash
used to acquire The May Department Stores Company and $3,583 million of cash provided by the sale of credit card accounts
and related receivables. Net cash provided by continuing operating activities in 2003 benefited from lower income tax payments
resulting from the use of Fingerhut net operating losses.