Key questions and answers from the third quarter fiscal 2008 earnings call conducted by Macy’s on November 12, 2008.
Robert Drbul (Barclays Capital): When you look at the current debt, would you expect to use the credit line?
Karen M. Hoguet: It’s a question of cash and the credit markets. We will look to refinance some of that debt or all of it depending on how we’re looking at 2009.
As we come from November into December, that’s when our cash flow is highest. Thus it’s really not until the back half of next year where we need to tap into the credit facility.
Robert Drbul (Barclays Capital): Could you comment on potential store closings?
Karen M. Hoguet: We have always been aggressive at looking at our store base and closing any that are not contributing on a cash basis. We have a comprehensive analysis we do many times during the year, especially in a year like this.
As in all other years, we do expect to close some stores. I do not expect it to be a number any bigger than a typical year’s closings.
Michelle Clark (Morgan Stanley): Are you noticing any change in willingness from vendors to provide markdown support?
Karen M. Hoguet: We have not.
Jeffery Stein (Soleil-Stein Research): Could you talk about seasonal hiring and if you had made any changes with regard to the Q4 plan or you are just going to tough it out and make sure you can serve the customer?
Karen M. Hoguet: In terms of seasonal hiring, we are refining our plans depending on the needs of individual stores but are still doing a significant amount of seasonal hiring. If there is a positive from this environment, it is that we do think we will be able to hire a higher quality person. That could be helpful to us as we hit the fourth quarter.
Jeffery Stein (Soleil-Stein Research): Given that you are making some adjustments to your spring of 2009 receipt plan, that has got to based on some type of sales forecast that you have at this point. Are you willing, and do you think it’s prudent, to plan the spring down to last year?
Karen M. Hoguet: In terms of the sales forecast, yes we are obviously dealing with numbers as we are refining our merchandise receipt orders. It is likely that the spring will be planned down.
Lorraine Maikis (Merrill Lynch): Beside the new store growth capex cuts, what types of projects will be cut?
Karen M. Hoguet: It is a little bit of everything. We are obviously cutting back maintenance that doesn’t have to be done this year. We are cutting back some remodels that aren’t strategically critical. We are cutting back some technology, although we are continuing to fund systems and our Internet business fairly aggressively.
Charles Grom (JP Morgan): How many stores are you planning to open next year?
Karen M. Hoguet: The number is four, of which one is a replacement store.
Charles Grom (JP Morgan): Could you give us a little bit of clarification on how much of the good will is allocated for any private label trademarks that you have, as well as the May acquisition.
Karen M. Hoguet: That’s not part of good will. The good will is allocated across our various operating entities but there is a separate category of intangibles for things like the private brand.
Charles Grom (JP Morgan): If we were to fast-forward Q4 of next year and trends continued to stay weak, and suppose hypothetically you do trip one of your two debt covenants, what could be the ramifications of that scenario?
Karen M. Hoguet: I’m not sure if I agree with your assumptions that that will happen in the fourth quarter of next year. However, let me assume that you are right, even though I would disagree. If that is the case, you go back to the table with the banks and you try to renegotiate the banking facility. My guess is if that would happen, we would be able to renegotiate, possibly a smaller facility than $2.0 billion and for sure more expensive than what we’re paying today.
Deborah Weinswig (Citigroup): With regards to SG&A in the fourth quarter, they are forecast to be up year-over-year. How should we look out to 2009?