Macy's 2006 Annual Report Download - page 4

Our company was quite literally transformed in 2006. We became a more focused, ecient and brand-driven retailer
serving customers nationwide through Macy’s and Bloomingdale’s stores, online sites and catalog.
Coming into 2006, the challenges ahead were signicant as we began integrating The May Department Stores Company,
which we acquired in August 2005, into Federated. But we were condent of success because our combined company
includes an exceptionally talented and motivated organization. In the end, not only did we successfully achieve every
important milestone in the integration process, but we did so while also exceeding our same-store sales and earnings
forecasts for the year.
A Year of Accomplishments
Consider some of the year’s major accomplishments:
• In September 2006, we converted more than 400 stores acquired from May Company to the Macy’s nameplate –
creating a premier fashion retailer with stores across America.
• Behind the scenes of the Federated-May integration, we consolidated divisions, integrated organizations,
realigned our network of distribution centers, converted systems and transitioned merchandise assortments,
including introducing Macy’s iconic private brands to former May Company locations. In the fall season, private
brands accounted for 17.2 percent of sales in new Macy’s stores – nearly to the 18.6 percent penetration level
in legacy Macy’s stores.
• We launched the rst comprehensive national marketing campaign for Macy’s, including national broadcast,
print and online advertising, coordinated events in stores across the country, and an expanded Star Rewards
customer loyalty program.
• Bloomingdale’s extended its unique upscale brand with three new or replacement stores, including a
magnicent new West Coast agship in San Francisco. It also improved the level of attentive customer service
for which it is already well known.
• We raised pre-tax cash proceeds of approximately $4.5 billion in 2006 through the sale of non-strategic assets,
including Lord & Taylor, David’s Bridal/Priscilla of Boston, credit receivables and duplicate store locations. This
allowed us to pay o all short-term borrowings associated with the May Company acquisition.
• The Board of Directors acted to split the stock on a 2-for-1 basis, raise the cash dividend, and further enhance
shareholder value by authorizing the repurchase of Federated shares, which resumed in the second quarter.
In scal 2006, the company repurchased approximately 62 million shares for approximately $2.5 billion.
• The company rationalized its long-term debt structure by repaying approximately $1 billion in debt through
a tender oer, calling $200 million in senior bonds and issuing $1.1 billion of senior notes.
• We invested about $1.4 billion in capital in 2006 – part of a capital plan to spend as much as $4 billion in 2006-2008 –
primarily to convert acquired locations to Macy’s, renovate existing Macy’s and Bloomingdale’s stores, upgrade
systems, build a modest number of new stores, and expand the infrastructure for our direct-to-consumer
businesses, including macys.com, bloomingdales.com and Bloomingdale’s By Mail.
• Macy’s and Bloomingdale’s continued to distinguish themselves by introducing new and dierentiated product
for customers, including an enhanced assortment of private brands. We also announced the development of
a new Martha Stewart Collection of home merchandise, which will debut exclusively at Macy’s in fall 2007,
as well as Oscar de la Renta’s O Oscar line of better sportswear, which launched this spring. T Tahari, a new
collection of better sportswear from designer Elie Tahari, was rolled out to every Macy’s division in 2006.
Dear Fellow Shareholder:
“… we are building
Macy’s and
Bloomingdale’s one
customer at a time,
molding our brands
around the needs,
wants and aspirations
of the diverse
customers who shop
our stores …”
2 | FEDERATED DEPARTMENT STORES, INC.