- Comparable sales decline of 3.9% on an owned basis; decline of
3.5% on an owned plus licensed basis
- Diluted EPS of $0.01 and Adjusted Diluted EPS of $0.07
- Company lowered its annual sales and EPS guidance
- Company prepared to execute a strong holiday season
Macy’s, Inc. (NYSE: M) today reported results for the third
quarter 2019. The company also lowered its annual sales and EPS
guidance for fiscal 2019.
Financial Highlights
Third Quarter
Year to Date
(in millions)
2019
2018
2019
2018
Net sales
$
5,173
$
5,404
$
16,223
$
16,516
Comparable sales
Owned
(3.9
)%
3.1
%
(1.0
)%
2.4
%
Owned plus licensed
(3.5
)%
3.3
%
(0.8
)%
2.7
%
53rd week shifted calendar (owned plus
licensed)*
4.1
%
2.6
%
Net income attributable to Macy’s, Inc.
shareholders
$
2
$
62
$
224
$
368
Earnings before interest, taxes,
depreciation and amortization
$
300
$
381
$
1,147
$
1,374
Diluted earnings per share
$
0.01
$
0.20
$
0.72
$
1.18
Adjusted Net income attributable to
Macy’s, Inc. shareholders
$
21
$
83
$
246
$
451
Adjusted Earnings before interest, taxes,
depreciation and amortization
$
325
$
407
$
1,175
$
1,478
Adjusted Diluted earnings per share
$
0.07
$
0.27
$
0.79
$
1.45
*Comparable sales adjusted for the impact of the 53rd week
reflect a shift of the company's 2017 calendar to align with 2018
on a like-for-like basis. Note: Adjusted metrics reflect the
exclusion of certain items from the respective financial measures.
Please see the final pages of this news release for important
information regarding the nature of such excluded amounts and
calculation of the company’s non-GAAP financial measures.
“After seven consecutive quarters of comparable sales growth, we
experienced a deceleration in our third quarter sales. While we
anticipated a negative comp as we were lapping a very strong third
quarter last year, the sales deceleration was steeper than we
expected. However, having cleared the excess inventory we faced
earlier in the year, we were able to take a more balanced approach
to sales and profit in the quarter, resulting in significantly
improved margin compression versus the first half of the year,”
said Jeff Gennette, chairman and chief executive officer of Macy’s,
Inc. “Our third quarter sales were impacted by the late arrival of
cold weather, continued soft international tourism and weaker than
anticipated performance in lower tier malls. We also experienced a
temporary impact on our e-commerce business due in part to work on
the site in preparation for the fourth quarter. The team has
completed that work, the site is upgraded and our customers can
expect an improved experience this holiday season. Based primarily
on the impact of our third quarter sales trend, we are updating our
annual guidance.”
“We have confidence in our holiday strategies. The Macy’s,
Bloomingdales and Bluemercury teams are aligned and committed to
delivering a great experience for our customers in our stores, on
our digital sites and through our mobile apps. We have fully
updated our Growth150 stores and completed the 2019 expansion of
Backstage. We have curated an expanded gift assortment with great
values in all categories and developed a powerful marketing
calendar for both our best and occasional customers. This holiday
season, we also have even more flexible, secure and convenient
fulfillment options for our customers including Pick Up in Store
and Same Day Delivery,” continued Gennette.
Asset Sale Gains
Asset sale gains for the third quarter of 2019 totaled $17
million pre-tax, or $13 million after-tax. This compares to the
third quarter of 2018, when asset sale gains totaled $42 million
pre-tax, or $31 million after-tax.
Asset sale gains for the 39 weeks ended November 2, 2019 totaled
$67 million pre-tax, or $49 million after-tax. This compares to the
39 weeks ended November 3, 2018, when asset sale gains totaled $111
million pre-tax, or $84 million after-tax.
Updated Guidance
Macy's, Inc. is updating its previously provided annual
guidance. Highlights of these revisions include:
Revised 2019 Annual
Guidance
Prior 2019 Annual
Guidance
Comparable sales
(owned plus licensed)
Down 1.5% to down 1.0%
Flat to up 1%
Comparable sales
(owned)
Approximately 20 basis points
below comparable sales on an owned plus licensed basis
Flat to up 1%
Net sales
Down 2.5% to down 2.0%
Approximately flat
Adjusted Diluted earnings per share
$2.57 to $2.77
$2.85 to $3.05
Asset sale gains
Approximately $150 million (or
$0.37 per share)
Approximately $100 million (or
$0.25 per share)
Annual tax rate
23%
23%
Complete guidance can be found in the presentation posted on the
company’s investor relations website at
www.macysinc.com/investors.
Investor Day
Macy’s, Inc. will host an Investor Day at 8:00 a.m. ET on
Wednesday, February 5, 2020, at the New York Stock Exchange. At
that time, the management team will share details of the Macy’s,
Inc. growth strategy and three-year plan.
Macy’s, Inc.’s webcast, along with the associated presentation,
will be accessible to the media and general public via the
company's investor relations website.
About Macy's, Inc.
Macy’s, Inc. is one of the nation’s premier retailers, with
fiscal 2018 sales of $24.971 billion and approximately 130,000
employees. The company operates approximately 680 department stores
under the nameplates Macy’s and Bloomingdale’s, and approximately
190 specialty stores that include Bloomingdale’s The Outlet,
Bluemercury, and Macy’s Backstage. Macy’s, Inc. operates stores in
43 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 headquarters 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 and potential changes to
trade policies, 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 potential for the incurrence of charges in
connection with the impairment of intangible assets, including
goodwill, 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.
NOTE: Additional information on Macy’s, Inc., including past
news releases, is available at www.macysinc.com/pressroom. A
webcast of Macy's, Inc.’s call with analysts and investors will be
held today (November 21, 2019) at 8:00 a.m. ET. The webcast, along
with the associated presentation, is accessible to the media and
general public via the company's investor relations website at
www.macysinc.com/investors. Analysts and investors may call in on
1-888-254-3590, passcode 5793222. A replay of the conference call
and slides can be accessed on the website or by calling
1-888-203-1112 (same passcode) about two hours after the conclusion
of the call.
MACY’S, INC. Consolidated Statements of Income (Unaudited) (Note 1 and
Note 2) (All amounts in millions except percentages and per
share figures)
13 Weeks Ended
13 Weeks Ended
November 2, 2019
November 3, 2018
$
% to Net sales
$
% to Net sales
Net sales
$
5,173
$
5,404
Credit card revenues, net
183
3.5
%
185
3.4
%
Cost of sales
(3,106
)
(60.0
%)
(3,226
)
(59.7
%)
Selling, general and administrative
expenses
(2,202
)
(42.6
%)
(2,255
)
(41.7
%)
Gains on sale of real estate
17
0.3
%
42
0.8
%
Restructuring and other costs
(13
)
(0.2
%)
(3
)
(0.1
%)
Operating income
52
1.0
%
147
2.7
%
Benefit plan income, net
8
9
Settlement charges
(12
)
(23
)
Interest expense, net
(48
)
(59
)
Income before income taxes
—
74
Federal, state and local income tax
benefit (expense)
2
(12
)
Net income
2
62
Net loss attributable to noncontrolling
interest
—
—
Net income attributable to Macy's, Inc.
shareholders
$
2
$
62
Basic earnings per share attributable
to
Macy's, Inc. shareholders
$
0.01
$
0.20
Diluted earnings per share attributable to
Macy's, Inc. shareholders
$
0.01
$
0.20
Average common shares:
Basic
309.9
308.1
Diluted
311.0
312.2
End of period common shares
outstanding
309.0
307.2
Supplemental Financial Measures:
Gross Margin (Note 3)
$
2,067
40.0
%
$
2,178
40.3
%
Depreciation and amortization expense
$
252
$
248
MACY’S, INC. Consolidated Statements of Income (Unaudited) (Note 1 and
Note 2) (All amounts in millions except percentages and per
share figures)
39 Weeks Ended
39 Weeks Ended
November 2, 2019
November 3, 2018
$
% to Net sales
$
% to Net sales
Net sales
$
16,223
$
16,516
Credit card revenues, net
531
3.3
%
528
3.2
%
Cost of sales
(9,905
)
(61.1
%)
(9,927
)
(60.1
%)
Selling, general and administrative
expenses
(6,489
)
(40.0
%)
(6,501
)
(39.4
%)
Gains on sale of real estate
67
0.4
%
111
0.7
%
Impairment, restructuring and other
costs
(16
)
(0.1
%)
(39
)
(0.2
%)
Operating income
411
2.5
%
688
4.2
%
Benefit plan income, net
23
31
Settlement charges
(12
)
(73
)
Interest expense, net
(143
)
(187
)
Losses on early retirement of debt
—
(5
)
Income before income taxes
279
454
Federal, state and local income tax
expense
(55
)
(96
)
Net income
224
358
Net loss attributable to noncontrolling
interest
—
10
Net income attributable to Macy's, Inc.
shareholders
$
224
$
368
Basic earnings per share attributable
to
Macy's, Inc. shareholders
$
0.72
$
1.20
Diluted earnings per share attributable to
Macy's, Inc. shareholders
$
0.72
$
1.18
Average common shares:
Basic
309.6
307.5
Diluted
311.3
311.2
End of period common shares
outstanding
309.0
307.2
Supplemental Financial Measures:
Gross Margin (Note 3)
$
6,318
38.9
%
$
6,589
39.9
%
Depreciation and amortization expense
$
725
$
718
MACY’S, INC. Consolidated Balance Sheets (Unaudited) (Note 2)
(millions)
November 2, 2019
February 2, 2019
November 3, 2018
ASSETS:
Current Assets:
Cash and cash equivalents
$
301
$
1,162
$
736
Receivables
175
400
180
Merchandise inventories
7,256
5,263
7,147
Income tax receivable
1
—
10
Prepaid expenses and other current
assets
568
620
594
Total Current Assets
8,301
7,445
8,667
Property and Equipment – net
6,558
6,637
6,572
Right of Use Assets
2,596
—
—
Goodwill
3,908
3,908
3,908
Other Intangible Assets – net
440
478
481
Other Assets
744
726
733
Total Assets
$
22,547
$
19,194
$
20,361
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Short-term debt
$
6
$
43
$
65
Merchandise accounts payable
3,427
1,655
3,381
Accounts payable and accrued
liabilities
3,046
3,366
2,998
Income taxes
—
168
—
Total Current Liabilities
6,479
5,232
6,444
Long-Term Debt
4,677
4,708
5,469
Long-Term Lease Liabilities
2,819
—
—
Deferred Income Taxes
1,200
1,238
1,185
Other Liabilities
1,315
1,580
1,618
Shareholders' Equity:
Macy's, Inc.
6,057
6,436
5,667
Noncontrolling interest
—
—
(22
)
Total Shareholders' Equity
6,057
6,436
5,645
Total Liabilities and Shareholders’
Equity
$
22,547
$
19,194
$
20,361
MACY’S, INC. Consolidated Statements of Cash Flows (Unaudited) (Note 2
and Note 4) (millions)
39 Weeks Ended
39 Weeks Ended
November 2, 2019
November 3, 2018
Cash flows from operating activities:
Net income
$
224
$
358
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment, restructuring and other
costs
16
39
Settlement charges
12
73
Depreciation and amortization
725
718
Benefit plans
23
25
Stock-based compensation expense
40
48
Gains on sale of real estate
(67
)
(111
)
Deferred income taxes
25
62
Amortization of financing costs and
premium on acquired debt
1
(5
)
Changes in assets and liabilities:
Decrease in receivables
224
163
Increase in merchandise inventories
(1,993
)
(1,969
)
Decrease in prepaid expenses and other
current assets
13
16
Increase in merchandise accounts
payable
1,648
1,664
Decrease in accounts payable and accrued
liabilities
(470
)
(221
)
Decrease in current income taxes
(168
)
(301
)
Change in other assets and liabilities
(81
)
(130
)
Net cash provided by operating
activities
172
429
Cash flows from investing activities:
Purchase of property and equipment
(623
)
(468
)
Capitalized software
(189
)
(209
)
Disposition of property and equipment
73
121
Other, net
10
7
Net cash used by investing activities
(729
)
(549
)
Cash flows from financing activities:
Debt issuance costs
(3
)
—
Debt repaid
(42
)
(361
)
Dividends paid
(349
)
(347
)
Increase in outstanding checks
49
44
Acquisition of treasury stock
(1
)
—
Issuance of common stock
6
41
Proceeds from noncontrolling interest
—
7
Net cash used by financing activities
(340
)
(616
)
Net decrease in cash, cash equivalents and
restricted cash
(897
)
(736
)
Cash, cash equivalents and restricted cash
beginning of period
1,248
1,513
Cash, cash equivalents and restricted cash
end of period
$
351
$
777
MACY’S, INC.
Consolidated Financial
Statements (Unaudited)
Notes:
(1)
As a result of the seasonal
nature of the retail business, the results of operations for the 13
and 39 weeks ended November 2, 2019 and November 3, 2018 (which do
not include the Christmas season) are not necessarily indicative of
such results for the fiscal year.
(2)
The results for the 13 and 39
weeks ended November 2, 2019 reflect the adoption of Accounting
Standards Update 2016-02 (ASU 2016-02), Leases, on February 3,
2019, utilizing the modified retrospective approach which allowed
for transition in the period of adoption.
(3)
Gross margin is defined as net
sales less cost of sales.
(4)
Restricted cash of $50 million
and $41 million have been included with cash and cash equivalents
for the 39 weeks ended November 2, 2019 and November 3, 2018,
respectively. Further, reclassifications were made to certain prior
period's amounts to conform with the classifications of such
amounts in the most recent period.
MACY’S, INC.
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 and changes in
comparable sales on an owned plus licensed basis adjusted for the
53rd week calendar shift, which include adjusting for 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, and in evaluating the impact of changes in the manner in
which certain departments are operated. Earnings before interest,
taxes, depreciation and amortization (EBITDA) is a non-GAAP
financial measure which the company believes provides meaningful
information about its operational efficiency by excluding the
impact of changes in tax law and structure, debt levels and capital
investment. In addition, management believes that excluding certain
items from EBITDA, net income and 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 from period-to-period provides useful
supplemental measures that assist in evaluating the company's
ability to generate earnings 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, except that 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 excluding certain items because the timing and amount
of excluded items 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.
MACY’S, INC. Important Information Regarding Non-GAAP Financial
Measures (All amounts in millions except percentages and per
share figures)
Changes in
Comparable Sales
13 Weeks Ended November 2,
2019
39 Weeks Ended November 2,
2019
Decrease in comparable sales on an owned
basis (Note 5)
(3.9
)%
(1.0
)%
Comparable sales growth impact of
departments licensed to third parties (Note 6)
0.4
%
0.2
%
Decrease in comparable sales on an owned
plus licensed basis
(3.5
)%
(0.8
)%
13 Weeks Ended November 3,
2018
39 Weeks Ended November 3,
2018
Increase in comparable sales on an owned
basis (Note 5)
3.1
%
2.4
%
Comparable sales growth impact of
departments licensed to third parties (Note 6)
0.2
%
0.3
%
Increase in comparable sales on an owned
plus licensed basis
3.3
%
2.7
%
Impact of 53rd Week Shifted Calendar
0.8
%
(0.1
)%
53rd Week Shifted Calendar comparable
sales on an owned plus licensed basis (Note 7)
4.1
%
2.6
%
Notes:
(5)
Represents the period-to-period
percentage 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. Stores impacted by a natural disaster or undergoing
significant expansion or shrinkage remain in the comparable sales
calculation unless the store, or material portion of the store, is
closed for a significant period of time. Definitions and
calculations of comparable sales may differ among companies in the
retail industry.
(6)
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 amounts of commissions earned on
sales of departments licensed to third parties are not material to
its net sales for the periods presented.
(7)
Represents comparable sales on an
owned plus licensed basis that incorporates a shift of the
company's fiscal 2017 calendar to align with fiscal 2018 on a
like-for-like basis as a result of the 53rd week in fiscal
2017.
MACY’S, INC.
Important Information
Regarding Non-GAAP Financial Measures
Earnings before Interest, Taxes,
Depreciation and Amortization, Net Income and Diluted Earnings Per
Share Attributable to Macy's, Inc. Shareholders, Excluding Certain
Items
Non-GAAP financial measures, excluding certain items below, are
reconciled to the most directly comparable GAAP measure as
follows:
- EBITDA and adjusted EBITDA are reconciled to GAAP net income
attributable to Macy’s, Inc. shareholders.
- Adjusted net income attributable to Macy’s, Inc. shareholders
is reconciled to GAAP net income attributable to Macy’s, Inc.
shareholders.
- Adjusted diluted earnings per share attributable to Macy’s,
Inc. shareholders is reconciled to GAAP diluted earnings per share
attributable to Macy’s, Inc.
Adjusted EBITDA
13 Weeks Ended
13 Weeks Ended
November 2, 2019
November 3, 2018
Net income attributable to Macy's, Inc.
shareholders
$
2
$
62
Interest expense, net
48
59
Federal, state and local income tax
expense (benefit)
(2
)
12
Depreciation and amortization
252
248
EBITDA
300
381
Restructuring and other costs
13
3
Settlement charges
12
23
Adjusted EBITDA
$
325
$
407
39 Weeks Ended
39 Weeks Ended
November 2, 2019
November 3, 2018
Net income attributable to Macy's, Inc.
shareholders
$
224
$
368
Interest expense, net
143
187
Losses on early retirement of debt
—
5
Federal, state and local income tax
expense
55
96
Depreciation and amortization
725
718
EBITDA
1,147
1,374
Impairment, restructuring and other costs
(Note 8)
16
31
Settlement charges
12
73
Adjusted EBITDA
$
1,175
$
1,478
Note 8: The above pre-tax adjustments for the 39 weeks ended
November 3, 2018 exclude impairment, restructuring and other costs
attributable to the noncontrolling interest shareholder of $8
million.
MACY’S, INC.
Important Information
Regarding Non-GAAP Financial Measures
Adjusted Net Income and Adjusted Diluted Earnings Per Share
Attributable to Macy's, Inc. Shareholders
13 Weeks Ended
13 Weeks Ended
November 2, 2019
November 3, 2018
Net Income Attributable to
Macy's, Inc. Shareholders
Diluted Earnings Per Share
Net Income Attributable to
Macy's, Inc. Shareholders
Diluted Earnings Per Share
As reported
$
2
$
0.01
$
62
$
0.20
Restructuring and other costs
13
0.04
3
0.01
Settlement charges
12
0.04
23
0.08
Income tax impact of certain items
identified above
(6
)
(0.02
)
(5
)
(0.02
)
As adjusted
$
21
$
0.07
$
83
$
0.27
39 Weeks Ended
39 Weeks Ended
November 2, 2019
November 3, 2018
Net Income Attributable to
Macy's, Inc. Shareholders
Diluted Earnings Per Share
Net Income Attributable to
Macy's, Inc. Shareholders
Diluted Earnings Per Share
As reported
$
224
$
0.72
$
368
$
1.18
Impairment, restructuring and other costs
(Note 9)
16
0.05
31
0.10
Settlement charges
12
0.04
73
0.23
Losses on early retirement of debt
—
—
5
0.02
Income tax impact of certain items
identified above
(6
)
(0.02
)
(26
)
(0.08
)
As adjusted
$
246
$
0.79
$
451
$
1.45
Note 9: The above pre-tax adjustment for the 39 weeks ended
November 3, 2018 exclude impairment, restructuring and other costs
attributable to the noncontrolling interest shareholder of $8
million.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191121005274/en/
Media – Blair Fasbender Rosenberg 646-429-6032
media@macys.com Investors – Mike McGuire
513-579-7780 investors@macys.com
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From Sep 2023 to Sep 2024