By and  on April 2, 2009

The recession hit Macy’s Inc.’s credit rating Wednesday, as well as the pay package of chairman, president and chief executive officer Terry Lundgren.

Lundgren’s compensation fell 37.2 percent to $5.4 million last year as the retailer posted a $4.8 billion loss. The loss included a $5.38 billion impairment charge to write off part of the value of the May Department Stores Co. acquisition as Macy’s stock price and market capitalization sank.

Lundgren’s package included a salary of $1.5 million, unchanged from a year ago; stock and option awards valued at $2.5 million, and incentive pay of $900,000, as well as $117,406 for aircraft usage and $297,958 for a car and driver, a precaution recommended by a security review, according to a company filing with the Securities and Exchange Commission.

Macy’s filing occurred hours before Moody’s Investors Service lowered debt ratings for the retailer as well as its rival J.C. Penney Co. Inc. and assigned both firms corporate family ratings in speculative, or junk, territory. The corporate family ratings indicate the companies are subject to “substantial credit risk,” according to the debt watchdog’s rating scale.

Moody’s moved its rating on Macy’s senior unsecured notes to “Ba2,” in speculative territory, from “Baa3,” the lowest investment grade rating, and the company was given a corporate family rating of “Ba2.” The outlook is stable.

“The downgrade also reflects Moody’s expectation that Macy’s operating performance will continue to be pressured given the current challenging consumer spending environment,” said Maggie Taylor, vice president and senior credit officer at Moody’s.

The drop-off in Macy’s performance was largely due to weakness in consumer spending and not any fundamental issue with the business, said the rating agency.

Moody’s cut its rating on Penney’s senior unsecured notes to “Ba1” from “Baa3” and assigned the firm a corporate family rating of “Ba1.” The outlook is stable.

“While J.C. Penney’s credit metrics are expected to erode to levels more appropriate for a mid-‘Ba’ rating, its very good liquidity and historically conservative financial policies provide us with comfort that the company will successfully weather the current economic storm,” said Taylor.

Shares of Macy’s rose 1.5 percent to $9.03 on Wednesday, as Penney’s stock increased 2.4 percent to $20.56. Both firms outperformed the S&P Retail Index, which increased 1.4 percent, or 3.99 points, to 297.65. The Dow Jones Industrial Average advanced 2 percent, or 152.68 points for the day, to 7,761.60.

While Macy’s highest-paid executive, Lundgren’s merchandise discounts came to $28,542, below the $31,625 of executive vice president and chief financial officer Karen Hoguet and the $30,058 of vice chair Thomas Cole. Hoguet’s total compensation fell 15.3 percent to $2.4 million as Cole’s dropped 33.7 percent to $2.3 million.

Top executives at Urban Outfitters Inc. and AnnTaylor Stores Corp. booked pay increases last year, according to other proxies filed with the SEC.

Urban Outfitters’ ceo Glen Senk received a 28.7 percent bump in total pay last year to $3.2 million. Senk’s salary rose 33.9 percent to more than $1 million, but his bonus fell to $5,000 from $250,000 last year. The ceo’s non-equity incentive plan compensation more than tripled to $1 million, while his stock rewards were valued at $1.2 million.

Shares of Urban Outfitters fell 6.1 percent to $15.38 Wednesday after the company said in its annual report that its comparable-store sales trend so far this fiscal year had declined from the 3 percent expansion seen in the fourth quarter.

Sterne, Agee & Leach retail analyst Margaret Whitfield said she believes comps for the first two months of the quarter are down 10 to 14 percent, and while first-quarter comparisons are tough for both of its brands, Anthropologie is “likely being impacted by issues in the misses’ market.”

At Ann Taylor, president and ceo Kay Krill saw a 14.4 percent jump in total compensation last year to $7.8 million. Krill’s salary grew $100,000, to almost $1.2 million, but her option rewards shrank 14.1 percent to $2.1 million and her incentive plan compensation was $1.9 million versus $82,500 the year before. Krill, who used $39,374 of $164,077 in other compensation benefits for car service, saw her stock awards decline 19.6 percent to $2.5 million.

Ann Taylor said neither Krill nor any executive associates would receive salary increases in 2009. Including restructuring, goodwill and asset impairment charges, the company posted losses of $333.9 million last year.

Shares of the firm rose 1.5 percent to $5.28 Wednesday.

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