Macy's Inc,, the U.S. based department store chain has recorded a goodwill impairment charge of $5.4 billion in the fourth quarter. The impairment charge follows a sharp decline in the company's market capitalization.
Macy's market cap today is about $4 billion, down from about $20 billion at its peak in 2007.
Macy’s had previosuly warned of the impairment charge and said the estimate is subject to further adjustment when it completes its calculations in the first quarter of 2009.
The non-cash write-down should not affect Macy’s financing covenants and accordingly will not cause defaults in bank credit agreements or bond indentures.
Macy’s reported operating income of $1 billion but the impairment charge brings their fiscal 2008 loss to $4.4 billion.
The goodwill arose on Macys' 2005 acquisition of May Co., the economic downturn and the decline in market capitalization.