Macy's 2015 Annual Report Download - page 4

2
| The Agility to Adapt
Reducing Expenses to Fund Growth
Beginning in 2015 an
d
continuing in 2016, t
h
e company is re
d
ucing
e
x
penses
an
d
tig
h
tening capita
l
spen
d
ing so we can reinvest in
growth initiatives. By doing so, we believe we can accelerate the to
p
line while making progress toward the company’s goal of re-attaining
over time an EBITDA rate as a percent
of
t
sales
f
of
14
f
percent.
Our target is to reduce annual SG&A expenses by $500 millio
n
(net of growth initiatives) from previously planned levels by 2018
,
with incremental progress in 2016 and 2017 toward that goal. Goin
g
into 2016, we already have identified and announced approximatel
y
$400 million in annualized reductions. Macy’s, Inc. will reduce capita
l
spending to an estimated $900 million in 2016 from the $1.1 billion
in capital spent in 2015 – which still provides us with ample resource
s
for major investments in technology, digital advancement, physica
l
improvements to top stores and other levers of growth.
Adjusting Our Customer Touchpoints
As customer sho
pp
ing
p
atterns continue to evolve across
stores and digital, we have re
fi
ned our touchpoints
f
or interactin
g
with shoppers.
Our we
b
sites an
d
mo
b
i
l
e apps
h
ave continue
d
to improve,
becoming more robust with merchandise of
ferings, content and
f
f
f
unctionality. Ful
fi
llment capabilities are expanding with nationa
l
availability o
f
Buy Online Pickup in Store and Same Day Delivery in
an increasing number o
f
markets at Macy’s and Bloomingdale’s. In
2015, we opened our
fif
th direct-to-consumer
f
ul
fi
llment megacenter
,
a 1.3 million-square-
f
oot
f
acility in Tulsa, OK.
Meanwhile, we are committed to maintaining a healthy port
f
olio o
f
stores in t
h
e
b
est
l
ocations across America –
b
ot
h
to serve s
h
opper
s
who walk through the door and to
f
ul
fi
ll orders that are shippe
d
d
irect
l
y to customers aroun
d
t
h
e country. T
h
e company c
l
ose
d
4
1
underper
f
orming Macy’s stores (out o
f
a previous total o
f
about 77
0
Mac
y
’s stores) in 2015. We wi
ll
continue to a
dd
stores se
l
ective
ly
w
h
i
l
e
a
l
so
b
eing
d
isci
pl
ine
d
a
b
out c
l
osing stores t
h
at are un
p
ro
d
uctive o
r
no longer robust sho
pp
ing destinations because o
f
changes in th
e
l
oca
l
retai
l
s
h
o
pp
ing
l
an
d
sca
p
e
.
Pursuing Value from Real Estate
The com
p
any also is
p
ursuing the creation of shareholder valu
e
th
r
ough various initiatives to monetize the com
p
any’s significant rea
l
estate assets or through
p
artnershi
p
s or joint venture transaction
s
for the com
p
any’s owned mall-based
p
ro
p
erties, as well as Macy’
s
flagship real estate assets in Manhattan, San Francisco, Chicag
o
an
d
Minneapo
l
is.
In 2015, for example, the company sold the underutilized upper
floors of the Macy’s store in downtown Seattle for $65 million to
a
r
eal estate developer that is converting it to office use. In Brooklyn,
Macy’s, Inc. completed a $270 million deal with Tishman Speyer that
will enable a re-creation of Macy’s Brooklyn store and further enlive
n
one of New York City’s most dynamic neighborhoods.
We believe these types of transactions, as well as the potentia
l
partnerships and joint ventures being explored, can create significan
t
value while also contributing to the success of our retail operations.
Enhancing Returns to Shareholders
Even taking into account the disa
pp
ointment of 2015, Macy’s, Inc. ha
s
at
r
ac
k record of generating an im
p
ressive return for shareholder
s
through
p
rice a
pp
reciation, share re
p
urchases and dividends. Total
Shareholder Return from the be
g
innin
g
of fiscal 2009 throu
g
h the end
of fiscal 2015 was 412
p
ercent, com
p
ared with the Dow Jone
s
Industrial Average’s increase of 148
p
ercent and the S&P 500’
s
increase of 173
p
ercent over that same
p
eriod.
Since resuming our s
h
are re
p
urc
h
ase
p
rogram in August 2011
,
M
acy’s, Inc. has bought back approximately 152.2 million share
s
f
or approximately $7.3 billion through Jan. 30, 2016. In early 2016,
our board of directors increased the com
p
any’s share re
p
urchase
authorization by $1.5 billion. After giving effect to this increase,
t
he remaining authorization outstanding, as of Jan. 30, 2016, was
a
pp
roximately
$
2 billion.
T
h
e Boar
d
a
l
so ex
p
resse
d
its intent to increase t
h
e
q
uarter
ly
d
ividend on Macy's common stock to 37.75 cents
p
er share from
36 cents
p
er share, effective with the July 1, 2016, dividend
p
ayment
.
T
he July dividend will be the sixth increase in the
p
ast five years an
d
re
p
resents a more than seven-fold increase from 5 cents
p
er share i
n
2009 to 37.75 cents
p
er share.
The Agility to Adapt
I
t is clear that our customers are demanding more
f
rom us in bot
h
w
h
a
t
we provide and how we do it, and they expect us to adapt t
o
t
heir changing tastes and pre
f
erences
f
aster than ever. This requires
agility—something not o
f
ten associated with large companies
l
ike ours. But we are intensi
f
ying our
f
ocus on being a more agile
company. It takes cultivating top talent,
f
ostering an environment o
f
innovation and harnessing data analytics to make decisions that wil
l
help us win in this competitive environment. We will go
f
orward b
y
t
esting various concepts and quickly reacting to what we learn. W
e
w
ill let go o
f
initiatives that are not leading to long term returns to
our shareholders. And we will be courageous and try new ideas and
experiences that may lead to growing our business and capturin
g
m
arket share in the
f
uture
.
While we did not ask
f
or the challenges 2015 brought to ou
r
com
p
any, I believe we have been strengthened by our aggressive
strategic res
p
onses. We have a clearer vision of the future of retai
l
and Mac
y
’s, Inc.’s rol
e
i
n
i
t.
Th
e
ke
y
stone
s
of
fashion,
f
v
a
l
ue
a
n
d
convenience remain at our core an
d
our commitment to
d
oing w
h
a
t
is in the best interest of our customers, associates and shareholders
r
e
m
a
in
sou
rf
ocus.
Our focus on agility and our renewed sense of urgency will mak
e
us stronger and more success
f
ul. A setback is just a setu
pf
or
a
comeback. Macy’s, Inc. became a better com
p
any by most measure
s
after the challenging
p
eriods of 2001/2002 and 2008/2009. And we
intend to deliver continuous im
p
rovement in our comeback in the
years ahead
.
T
hank you for your su
pp
ort
.
Sincerely,
Terry J. Lun
d
gren
Chairman and Chief Executive Officer
Cha
irm
an a
nd C
hie
fEx
ecu
tiv
eOf
fice
r
Macy’s
S&P 500
DJ Industrial Average
412%
173%
148%
1/30/09 1/29/10 1/28/11 1/27/12 2/1/13 1/31/14 1/30/15 1/29/16
T
OTAL SHAREHOLDER RETUR
N
1/30/2009 - 1/29/2016