Macy's chief executive Terry Lundgren had heard enough from the naysayers and so he recently sent a letter to company managers (the document was made public as a result of a filing with the Securities and Exchange Commission) to let them know that, while others may raise doubts about the retailer's health, there was no reason for employees to be concerned.
Macy's, he wrote, was paying down debt, had a strong cash flow and $2 billion in bank credit lines to help it over any rough patches it might face.
"Our cash flow remains strong," Mr. Lundgren emphasized in the letter. "I realize how distracting the economy is. We'll get through this difficult period. Our company will be poised to win over more customers."
Macy's, along with other department stores and clothing retailers, has seen its share price fall along with a string of discouraging economic reports. Many still point to Macy's having created large numbers of disaffected consumers as a result of its closing of regional chains operated by May Department Stores, particularly Marshall Field's.
Mr. Lundgren got some backing on Wall Street for his view on Macy's health.
Charles Grom, an analyst with J.P. Morgan, upgraded Macy's stock to neutral from underweight in a report to investors. In it, he dismissed concerns about liquidity as being "unwarranted."
Mr. Grom said, however, that Macy's had a number of issues to deal with moving forward. "In addition to tough macro conditions, we believe a number of other challenges remain for Macy's, at least through spring 2009. Macy's decision to forego both monthly [same-store sales] and quarterly guidance has clearly backfired. Transparency is paramount in today's market and (we) hope that management reconsiders its decision."
Discussion Questions: Is Macy's in a better or worse position than its competitors when it comes to the current economic environment? From a retailing standpoint, what challenges do you believe Macy's has to face to become stronger? Has the chain's decision not to regularly release financial data hurt its capitalization and in the process its ability to run its business?