Fitch Rates Macy's, Inc. New Notes 'BBB'; Outlook Stable

  Fitch Rates Macy's, Inc. New Notes 'BBB'; Outlook Stable

Business Wire

NEW YORK -- November 14, 2012

Fitch Ratings has assigned an expected rating of 'BBB' to Macy's Retail
Holdings, Inc.'s new $800 million 10- and 30-year senior unsecured notes. The
Rating Outlook is Stable. Proceeds will be used to refinance a portion of the
bonds due 2015 and 2016 that are currently being tendered as well as upcoming
2013 debt maturities. A full rating list is shown below.

The ratings reflect Macy's strong comparable store sales (comps) trends and
continued improvement in EBITDA and credit metrics. In addition, the ratings
reflect Macy's strong and growing market share of the department store sector,
above-average operating margins, and the company's ability to generate strong
free cash flow, even in the face of a challenging operating environment.

Given the strong operating performance, Macy's adjusted debt/EBITDAR has
improved to 2.6 times (x) in 2011 from 2.8x in 2010 and 3.6x in 2009, bringing
leverage below pre-recession levels. Fitch expects Macy's to maintain leverage
in the mid-2.0x range assuming low single-digit growth in comps and EBITDA. A
leverage ratio of less than 3.0x or management's target of 2.4x - 2.7x,
combined with the ability to grow market share, is consistent with a 'BBB'
rating profile when compared to other large retailers.

Fitch expects Macy's will continue to take market share over the next three to
five years on top line growth of 2% - 4% relative to Fitch's industry growth
expectation of plus/minus 1%. Macy's is particularly well-positioned in the
mid-tier department store space which has seen a lot of consolidation over the
last decade.

Macy's liquidity remains strong, supported by a cash balance of $1.6 billion
as of July 28, 2012 and a $1.5 billion credit facility. Macy's generated free
cash flow (FCF) of approximately $1.2 billion in 2011 and $900 million in
2010. Fitch expects Macy's to generate annual FCF in the range of $1 billion
over the next three years, and expects the company to direct this mostly
towards share repurchases. Fitch expects the company to refinance debt
maturities of $407 million in calendar 2013 and $453 million in 2014.

WHAT COULD TRIGGER A RATING ACTION?
A negative rating action could result in case of a return to negative
same-store sales trends and/or an aggressive financial strategy leading to
leverage metrics increasing to above 3.0x.
A positive rating action could result if Macy's persists in its comps
outperformance and share gains against increasing pricing competition and
promotional pressure in the middle market and continues to deleverage to the
low 2.0x range.

Fitch rates Macy's as follows:

Macy's, Inc. (Macy's)
--Long-term Issuer Default Rating (IDR) 'BBB'.

Macy's Retail Holdings, Inc. (MRHI)
--Long-term IDR 'BBB';
--$1.5 billion bank credit facility 'BBB';
--Senior unsecured notes and debentures 'BBB';
--Short term IDR 'F2';
--Commercial paper 'F2'.

The Rating Outlook is Stable.

Additional information is available at www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
-- 'Corporate Rating Methodology' (Aug. 8, 2012);
--'Short-Term Ratings Criteria for Non-Financial Corporates' (Aug. 8, 2012).

Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460
Short-Term Ratings Criteria for Non-Financial Corporates
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685553

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Contact:

Fitch Ratings
Primary Analyst:
Monica Aggarwal, CFA, +1-212-908-0282
Senior Director
Fitch Ratings
One State Street Plaza
New York, NY 10004
or
Secondary Analyst:
Isabel Hu, CFA, +1-212-908-0672
Associate Director
or
Committee Chairperson:
Michael Weaver, +1-312-368-3156
Managing Director
or
Media Relations:
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com
 
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