Annual earnings guidance raised due to solid
holiday results and federal tax law change
$300MM in annualized cost savings to be
reinvested in the business
Macy’s, Inc. (NYSE:M) today announced that its comparable sales
on an owned basis increased 1.0 percent in the months of November
and December 2017 combined, compared to the same period last year.
On an owned plus licensed basis, comparable sales increased 1.1
percent in the combined November/December period.
“Macy’s had a solid holiday shopping season, and we are pleased
that our November/December performance resulted in positive comp
sales for the period, setting us up for a positive fourth quarter.
Consumers were ready to spend this season, and we delivered with
solid execution, fresher inventory, a curated gift assortment and a
focus on customer experience. We saw improved sales trends in our
stores and continued to see double-digit growth on our digital
platforms. Customers also responded well to our new loyalty
program,” said Jeff Gennette, Macy’s, Inc. chief executive officer.
“We intend to close the fourth quarter in a good position and head
into 2018 with momentum.”
Macy’s, Inc. saw improved holiday sales across Macy’s, Macy’s
Backstage, Bloomingdale’s, Bloomingdale’s The Outlet and
Bluemercury, with exclusive gifts showing strong performance.
Active apparel, shoes, dresses, coats, fine jewelry, men’s tailored
clothing, children's and home were all top performers. Beauty was
also a highlight and showed a marked improvement in trend, with
particular strength in fragrance, prestige skincare and cosmetic
gifting.
“Our primary focus in 2017 has been to continue the strong
growth of digital and mobile, stabilize our brick & mortar
business and set the foundation for future growth. We’ve made good
progress on each, including encouraging trend improvements in our
brick & mortar business. A healthy store base combined with
robust digital capabilities is Macy’s recipe for success,”
continued Gennette. “Looking ahead to 2018, we are focused on
continuous improvement and will take the necessary steps to move
faster, execute more effectively and allocate resources to invest
in growth.”
Cost Management to Reinvest in
Growth
The company is also taking actions intended to continue
improvements in organizational efficiency and to allocate resources
to support its growth strategy. Major components of these
restructuring activities include:
- Staffing adjustments across the stores
organization with reductions in some stores and increases in
others;
- Further streamlining in some non-store
functions; and,
- Closure of 11 stores in early
2018.
The company expects annual expense savings of $300 million from
these actions beginning in fiscal-year 2018, which it intends to
reinvest in the business. Also associated with these actions, the
company anticipates one-time charges of approximately $160 million,
or approximately 33 cents per share, (of which
approximately $115 million is expected to be cash) to be
booked in the fourth quarter of 2017 for restructuring activities,
asset impairment, store closings and other costs.
Update on Store Closures
The company announced the closure of 11 Macy’s stores, 4 of
which were previously disclosed. With these closures, the company
will have completed 81 of the approximately 100 planned store
closures announced in August 2016. The company intends to close
approximately 19 additional stores as leases or operating covenants
expire or sale transactions are completed. These closures are part
of a multi-year effort by the company to ensure the optimal mix of
brick & mortar stores and digital footprint. Including the
stores announced today, Macy’s, Inc. has closed 124 stores since
2015. A list of stores scheduled to close in early 2018 is included
at the end of this news release.
2017 Guidance
Macy’s, Inc. is narrowing the range of its previously provided
full-year sales guidance. The company now expects comparable sales
on an owned basis to decline between 2.4 percent and 2.7 percent,
with comparable sales on an owned plus licensed basis to decline
between 2.0 percent and 2.3 percent. Total sales are expected to be
down between 3.6 percent and 3.9 percent in fiscal 2017. Total
sales for fiscal 2017 reflect a 53rd week, whereas comparable sales
are on a 52-week basis.
Excluding the change in federal tax law, Macy’s, Inc.
anticipates earnings results for full-year 2017 to be in the upper
end of previously disclosed guidance. Additionally, due to the
timing of its fiscal year, the company expects federal tax reform
to result in an effective annual tax rate that is approximately one
point lower than previously expected (approximately 36 percent vs.
approximately 37 percent). As a result, the company is raising its
full-year 2017 earnings guidance. The company now expects adjusted
earnings per diluted share of between $3.59 and $3.69 in 2017,
excluding the impact of the anticipated settlement charges,
restructuring, asset impairments, store closings and other costs
and net premiums and fees associated with debt repurchases.
Excluding the impact of the anticipated fourth quarter gain on the
sale of the Union Square Men’s building in San Francisco, adjusted
earnings per diluted share of between $3.11 and $3.21 are expected
in 2017 on the same basis.
Fiscal-Year 2017 Adjusted Diluted Earnings Per Share (EPS)
Guidance
Prior Guidance Updated
Guidance(Excluding FederalTax Reform)
Updated Guidance(Including FederalTax
Reform)1
FY17 Adjusted EPS $3.38 - $3.63 $3.53 -
$3.63 $3.59 - $3.69 FY17 Adjusted EPS excluding Union
Square gain $2.91 - $3.16 $3.06 - $3.16
$3.11 - $3.21
The recent passage of federal tax reform will also require the
company to re-measure deferred tax balances in fiscal 2017. The
company currently estimates the deferred tax impact of the federal
tax rate reduction from 35 percent to 21 percent will result in a
non-cash tax benefit of approximately $550 million to $650 million.
This is estimated to add between $1.79 and $2.12 to earnings per
diluted share in the fourth quarter and for the full-year 2017.
This one-time tax benefit is not included in guidance and is not
included in the table above.
Fourth Quarter Earnings
Announcement
Macy’s, Inc. is scheduled to report fourth quarter sales and
earnings on February 27, 2018. Additional detail on financial
performance will be provided at that time. The company will webcast
a call with financial analysts and investors at 10 a.m.
ET on February 27, 2018. Macy’s, Inc.’s webcast is
accessible to the media and general public via the company's
website at www.macysinc.com. Analysts and investors may call
in on 800-263-0877, passcode 5302609. A replay of the conference
call can be accessed on the website or by calling 888-203-1112,
passcode 5302609, about two hours after the conclusion of the
call.
Details on Macy’s Store
Closings
The following Macy’s stores will be closing in early
2018. In most cases, clearance sales will begin
on January 8, 2018, and run for approximately 8 to 12
weeks.
Laguna Hills Mall, Laguna Hills, CA *
Westside Pavilion, Los Angeles, CA*
Novato (Furniture), Novato, CA
Stonestown Galleria, San Francisco, CA *
The Oaks, Gainesville, FL
Miami (Downtown), Miami, FL
Magic Valley Mall, Twin Falls, ID*
Honey Creek Mall, Terre Haute, IN
Birchwood Mall, Fort Gratiot Township, MI
Fountain Place, Cincinnati, OH
Burlington Town Center, Burlington, VT
*Previously disclosed closure
About Macy’s, Inc.
Macy’s, Inc. is one of the nation’s premier retailers. With
fiscal 2016 sales of $25.778 billion and approximately 140,000
employees, the company operates more than 700 department stores
under the nameplates Macy’s and Bloomingdale’s, and approximately
160 specialty stores that include Bloomingdale’s The Outlet,
Bluemercury and Macy’s Backstage. Macy’s, Inc. operates stores in
45 states, the District of Columbia, Guam and Puerto Rico, as well
as macys.com, bloomingdales.com and bluemercury.com. Bloomingdale’s
stores in Dubai and Kuwait are operated by Al Tayer Group LLC under
license agreements. Macy’s, Inc. has corporate offices in
Cincinnati, Ohio, and New York, New York.
All statements in this press release that are not statements of
historical fact are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such
statements are based upon the current beliefs and expectations of
Macy’s management and are subject to significant risks and
uncertainties. Actual results could differ materially from those
expressed in or implied by the forward-looking statements contained
in this release because of a variety of factors, including
conditions to, or changes in the timing of, proposed real estate
and other transactions, prevailing interest rates and non-recurring
charges, the effect of federal tax reform, store closings,
competitive pressures from specialty stores, general merchandise
stores, off-price and discount stores, manufacturers’ outlets, the
Internet, mail-order catalogs and television shopping and general
consumer spending levels, including the impact of the availability
and level of consumer debt, the effect of weather and other factors
identified in documents filed by the company with the Securities
and Exchange Commission. Macy’s disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law.
Important Information Regarding
Non-GAAP Financial Measures
The Company reports its financial results in accordance with
U.S. generally accepted accounting principles ("GAAP"). However,
management believes that certain non-GAAP financial measures
provide users of the Company's financial information with
additional useful information in evaluating operating performance.
Management believes that providing supplemental changes in
comparable sales on an owned plus licensed basis, which includes
the impact of growth in comparable sales of departments licensed to
third parties, assists in evaluating the Company's ability to
generate sales growth, whether through owned businesses or
departments licensed to third parties, on a comparable basis, and
in evaluating the impact of changes in the manner in which certain
departments are operated. In addition, management believes that
excluding certain items from diluted earnings per share
attributable to Macy's, Inc. shareholders that are not
associated with the Company’s core operations and that may vary
substantially in frequency and magnitude period-to-period provides
useful supplemental measures that assist in evaluating the
Company's ability to generate earnings and leverage sales and to
more readily compare these metrics between past and future
periods.
The reconciliation of the forward-looking non-GAAP financial
measure of changes in comparable sales on an owned plus licensed
basis to GAAP comparable sales (i.e., on an owned basis) is in the
same manner as illustrated below, where the impact of growth in
comparable sales of departments licensed to third parties is the
only reconciling item. In addition, the Company does not provide
the most directly comparable forward-looking GAAP measure of
diluted earnings per share attributable to Macy’s, Inc.
shareholders because the timing and amount of excluded items (e.g.,
restructuring, asset impairment, store closing, settlement charges,
net premiums and fees associated with debt repurchases, and certain
other benefits/costs) are unreasonably difficult to fully and
accurately estimate.
Non-GAAP financial measures should be viewed as supplementing,
and not as an alternative or substitute for, the Company's
financial results prepared in accordance with GAAP. Certain of the
items that may be excluded or included in non-GAAP financial
measures may be significant items that could impact the Company's
financial position, results of operations or cash flows and should
therefore be considered in assessing the Company's actual and
future financial condition and performance. Additionally, the
amounts received by the Company on account of sales of departments
licensed to third parties are limited to commissions received on
such sales. The methods used by the Company to calculate its
non-GAAP financial measures may differ significantly from methods
used by other companies to compute similar measures. As a result,
any non-GAAP financial measures presented herein may not be
comparable to similar measures provided by other companies.
Change in Comparable Sales
The following is a reconciliation of the non-GAAP financial
measure of changes in comparable sales on an owned plus licensed
basis, to GAAP comparable sales (i.e., on an owned basis), which
the company believes to be the most directly comparable GAAP
financial measure.
9 Weeks EndedDecember 30, 2017
Increase in comparable sales on an owned basis (Note 1)
1.0%
Impact of growth in comparable sales of departments
licensed to third parties (Note 2)
0.1%
Increase in comparable sales on an owned plus licensed basis
1.1%
Notes: (1) Represents the
period-to-period change in net sales from stores in operation
throughout the year presented and the immediately preceding year
and all online sales, excluding commissions from departments
licensed to third parties. (2) Represents the impact of
including the sales of departments licensed to third parties
occurring in stores in operation throughout the year presented and
the immediately preceding year and all online sales in the
calculation of comparable sales. The company licenses third parties
to operate certain departments in its stores and online and
receives commissions from these third parties based on a percentage
of their net sales. In its financial statements prepared in
conformity with GAAP, the company includes these commissions
(rather than sales of the departments licensed to third parties) in
its net sales. The company does not, however, include any amounts
in respect of licensed department sales (or any commissions earned
on such sales) in its comparable sales in accordance with GAAP
(i.e., on an owned basis). The company believes that the amounts of
commissions earned on sales of departments licensed to third
parties are not material to its results of operations.
1Updated Guidance Including Federal Tax Reform does not include
the estimated non-cash tax benefit related to the re-measurement of
deferred tax balances in fiscal 2017.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180104005283/en/
Macy’s, Inc.MediaBlair Fasbender Rosenberg,
646-429-6032media@macys.comorInvestorsMonica Koehler,
513-579-7780investors@macys.com
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