Macy’s Earnings Call Insights: Store Fulfillment and Inventory Growth Management
Matthew Boss – JPMorgan: Karen, could you speak to online growth in the progression of the omnichannel effort as you move closer to 500 doors by year end just what you are seeing today in the overall progression?
Karen M. Hoguet – CFO: What we are seeing is obviously the store fulfillment has been a huge success and has allowed us to greatly increase the amount of online orders that we are able to fulfill and satisfy customers and it’s also enabling us to satisfy demand in stores as we do the (indiscernible) talked about where we utilized store fulfillment to satisfy orders in different stores. So, it is a huge success and it is for sure helping fuel the sales growth we are seeing.
Matthew Boss – JPMorgan: And then second question. Can you just talk a little bit about the mindset as it relates to capital allocation, particularly when I look at your (2.4 to 2.7) debt-to-EBITDA target sitting at the low end and your actions today raising the dividend and buybacks and what’s the best way to think about this going forward?
Karen M. Hoguet – CFO: Well, I think, as we’ve said, maintaining a strong investment grade rating is important to us. We think we are right about there, sort of, in the mid BBB category and that’s the ratings that we are going to aim to maintain as we go forward, possible we may go a bit higher, but I don’t think you are going to see any dramatic change in our behavior as it comes using excess cash. We believe that paying a competitive dividend is important. You saw that this morning with the increase in the dividend and excess cash beyond that will be used to buy back shares.
Inventory Growth Management
Deborah Weinswig – Citi: In terms of inventory growth, I was impressed in terms of your management even with the very difficult quarter from a weather perspective. Can you talk about tools, processes, people you have in place in terms of how you are able to manage that so well?
Karen M. Hoguet – CFO: Well, I mean that’s been a strength of ours, particularly since reorganization. Our merchants are constantly forecasting and reforecasting the business and making sure we’re taking the markdowns we need to keep the right age of inventory because the key to running a retailer is keeping the flow of fresh receipts. So, if you are not maintaining the right inventory level, you get backed up, particularly in periods like we’ve seen with the unseasonably cold weather. So, I think, our merchants have done a terrific job managing the inventories and keeping fresh goods coming into the stores.Regular Posts
Deborah Weinswig – Citi: Then can you talk about the timing of the launch of the 30 millennial brands and I think the expansion of the existing 11 as well?
Karen M. Hoguet – CFO: No, I think we’re probably midway through those launches. I haven’t actually counted which ones, but having seen some of them in the stores they look terrific and so far so good in the stores where we’re testing them.
Deborah Weinswig – Citi: Then last question. Can you talk about the licensing opportunity, and how it’s changing your model and access to product?
Karen M. Hoguet – CFO: Where there is a category or a vendor, but let’s speak category for a minute. Where we don’t think we can get the best product for our customers, a license deal like finish line, makes a huge amount of sense. If you think about it they have access to shoes that we couldn’t get as Macy’s. So it’s obviously greatly enhancing our assortments, which as you know is the key in our mind to being successful in retail. Also they have a great selling model, which I think will also benefit us. So should there be other categories or parts of the business where those – that situation exists. Another one by the way is obviously (indiscernible). We might license something else, but I don’t see it becoming a huge part of the business.
A Closer Look: Macy’s Earnings Cheat Sheet>>