Macy’s Inc. is raising additional funds.
The retailer today announced the proposed offering of $1.1 billion in senior secured notes, which mature in 2025. Macy’s plans to use the funds, along with cash on hand, to repay all amounts outstanding under its revolving credit facility. The department store chain tapped its $1.5 billion revolver in March.
With sales down amid the coronavirus pandemic, Macy’s has taken a number of cost-cutting measures — and has significantly increased its debt load. The retailer expects its Q1 balance sheet to show $5.66 billion in debt — up from $4.72 billion a year prior.
Last week, Macy’s warned that it could lose $1 billion due to the coronavirus crisis. For the first quarter, the retailer said it expects to report a loss in the range of $905 million and $1.11 billion, compared with last year’s net income of $203 million. The company forecasts first-quarter sales of between $3 billion and $3.03 billion — down from $5.50 billion year-on-year. Although Macy’s debt has swelled, the retailer estimates that it will end the first quarter with $1.52 billion in cash on hand, versus $737 million a year ago.
In February, Macy’s unveiled a three-year turnaround plan that included trimming 125 stores from its total footprint, cutting 2,000 jobs — or about 9% of its corporate workforce — and ramping up investments in higher-margin private labels as well off-price through Macy’s Backstage. The department store chain expected these moves to save $1.5 billion annually by the end of fiscal 2022 and forecasted its top 250 stores would account for 78% of sales by 2021.
However, the coronavirus pandemic has thrown a wrench in Macy’s efforts. While the company has begun to reopen its doors in phases, it was forced to temporarily shutter all of its units in mid-March, causing it to lose a “majority” of its sales. Amid the closure period, the chain furloughed the majority of its employees. Additionally, the retailer froze both hiring and spending, and suspended its quarterly dividend. CEO Jeff Gennette also announced he would forgo his salary, with senior members of the management team taking pay reductions.