Macy’s, Inc. (NYSE: M) today reported results for the second
quarter of 2020.
“Macy’s, Inc. performance for the quarter was stronger than
anticipated across all three brands: Macy’s, Bloomingdale’s and
Bluemercury, driven largely by the sales recovery of our stores.
Restarting our stores’ business was our top priority, and we
successfully accomplished that while also ensuring that our digital
business remained strong. Going into this crisis, we had a
well-developed digital business and we’re seeing that thrive as we
attract new and welcome existing customers back to our brands,”
said Jeff Gennette, chairman and chief executive officer of Macy’s,
Inc. “We’ve put significant focus on enhanced health and safety
standards which has allowed our customers and colleagues to feel
safe in our stores and facilities. I want to thank our colleagues
for the tremendous effort that has been put into recovering our
business.
“We are encouraged by our second quarter performance; however,
we continue to approach the back half of the year conservatively.
Our immediate priority is successfully executing Holiday 2020. We
are also focused on laying the groundwork for 2021 and beyond. We
plan to invest in fashion, digital and omnichannel, work with
agility, and galvanize the resources of the company to serve our
customers and move the Macy’s, Inc. business forward,” Gennette
continued.
Financial Highlights
Second Quarter
First Half
(All amounts in millions, except per share
figures)
2020
2019
2020
2019
Net sales
$
3,559
$
5,546
$
6,576
$
11,050
Net income (loss) (a) (b)
$
(431)
$
86
$
(4,012)
$
223
Earnings (loss) before interest, taxes,
depreciation and amortization (a) (b)
$
(422)
$
400
$
(4,294)
$
846
Diluted earnings (loss) per share (a)
(b)
$
(1.39)
$
0.28
$
(12.91)
$
0.71
Adjusted Net income (loss) (b)
$
(251)
$
88
$
(881)
$
225
Adjusted Earnings (loss) before interest,
taxes, depreciation and amortization (b)
$
(142)
$
402
$
(830)
$
849
Adjusted Diluted earnings (loss) per share
(b)
$
(0.81)
$
0.28
$
(2.83)
$
0.72
(a): The results for the 26 weeks ended
August 1, 2020 include the pre-tax impact of the non-cash goodwill
and long-lived asset impairment charges of $3.1 billion and $80
million, respectively, as well as the related tax impact.
(b): The results for the 13 and 26 weeks
ended August 1, 2020 include benefits of tax law changes resulting
from the Coronavirus Aid, Relief and Economic Security ("CARES")
Act.
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.
Second Quarter Highlights
- Comparable sales were down 34.7% on an owned basis and down
35.1% on an owned plus licensed basis, due to faster paced store
recovery than originally modeled and better than expected growth of
digital business.
- Digital sales remained strong, growing 53% over second quarter
2019. Digital sales penetrated at 54% of total owned comparable
sales.
- Delivered gross margin of 23.6%, an improvement of
approximately 650 basis points from first quarter 2020 due to
improved retail margins from mix and better sell through of
clearance merchandise.
- Inventory was down 29% from a year ago, allowing the company to
exit second quarter in a clean inventory position.
- Selling, general and administrative (“SG&A”) expense of
$1.4 billion, down $779 million from second quarter last year,
illustrating efficient expense management associated with the swift
actions undertaken in response to the COVID-19 pandemic as well as
execution against our Polaris strategy. SG&A expense rate of
39.2%, was relatively consistent with prior year.
- Diluted loss per share of $(1.39) and Adjusted diluted loss per
share of $(0.81).
- Finished the quarter in a strong liquidity position with
approximately $1.4 billion in cash and approximately $3 billion of
untapped capacity in the company’s new asset-based credit
facility.
2020 Guidance
The company previously withdrew its 2020 sales and earnings
guidance and is not currently providing an updated outlook due to
ongoing uncertainty as a result of the COVID-19 pandemic.
A webcast of Macy's, Inc.’s call with analysts and investors to
report its second quarter 2020 sales and earnings will be held
today (September 2, 2020) at 8:00 a.m. EDT. The management team
will also provide an update on the company’s Polaris strategy that
was shared at investor day on February 5, 2020. The 90-minute
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 1-888-394-8218, passcode 5582978. 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. Additional information on Macy’s, Inc.,
including past news releases, is available at
www.macysinc.com/pressroom.
Macy's, Inc. is scheduled to present at the Goldman Sachs Annual
Global Retailing Conference at 7:30 a.m. EDT on Wednesday,
September 9, 2020. Media and investors may access a live audio
webcast of the presentation at www.macysinc.com on September 9,
2020. A replay of the webcast will be available on the company’s
website.
Macy’s, Inc. is scheduled to report its third quarter 2020 sales
and earnings before the opening of financial markets on Thursday,
November 19, 2020.
Important Information Regarding Financial Measures
Please see the final pages of this news release for important
information regarding the calculation of the company’s non-GAAP
financial measures.
About Macy’s, Inc.
Macy’s, Inc. (NYSE: M) is one of the nation’s premier
omni-channel fashion retailers. The company comprises three retail
brands, Macy’s, Bloomingdale’s and Bluemercury. Macy’s, Inc. is
headquartered in New York, New York. For more information, please
visit www.macysinc.com.
Forward-Looking Statements
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 the
effects of the novel coronavirus (COVID-19) on Macy's customer
demand and supply chain, as well as its consolidated results of
operation, financial position and cash flows, Macy’s ability to
successfully implement its Polaris strategy and restructuring,
including the ability to realize the anticipated benefits within
the expected time frame or at all, conditions to, or changes in the
timing of proposed real estate and other transactions, prevailing
interest rates and non-recurring charges, the effect of potential
changes to trade policies, store closings, competitive pressures
from specialty stores, general merchandise stores, off-price and
discount stores, manufacturers’ outlets, the Internet, catalogs and
television shopping and general consumer spending levels, including
the impact of the availability and level of consumer debt, possible
systems failures and/or security breaches, the potential for the
incurrence of charges in connection with the impairment of
intangible assets, including goodwill, Macy’s reliance on foreign
sources of production, including risks related to the disruption of
imports by labor disputes, regional or global health pandemics, and
regional political and economic conditions, the effect of weather
and other factors identified in documents filed by the company with
the Securities and Exchange Commission, including under the
captions “Forward-Looking Statements” and “Risk Factors” in the
Company’s Annual Report on Form 10-K for the year ended February 1,
2020 and Quarterly Report on Form 10-Q for the quarterly period
ended May 2, 2020. 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.
MACY’S, INC.
Consolidated Statements of Operations (Unaudited) (Note
1)
(All amounts in millions except
percentages and per share figures)
13 Weeks Ended
13 Weeks Ended
August 1, 2020
August 3, 2019
$
% to Net sales
$
% to Net sales
Net sales
$
3,559
$
5,546
Credit card revenues, net
168
4.7
%
176
3.2
%
Cost of sales
(2,718
)
(76.4
%)
(3,395
)
(61.2
%)
Selling, general and administrative
expenses
(1,398
)
(39.2
%)
(2,177
)
(39.3
%)
Gains on sale of real estate
—
—
%
7
0.1
%
Restructuring, impairment and other costs
(Note 2)
(242
)
(6.8
%)
(2
)
—
%
Operating income (loss)
(631
)
(17.7
%)
155
2.8
%
Benefit plan income, net
12
8
Settlement charges
(38
)
—
Interest expense, net
(69
)
(47
)
Financing costs
(3
)
—
Income (loss) before income taxes
(729
)
116
Federal, state and local income tax
benefit (expense) (Note 3)
298
(30
)
Net income (loss)
$
(431
)
$
86
Basic earnings (loss) per share
$
(1.39
)
$
0.28
Diluted earnings (loss) per share
$
(1.39
)
$
0.28
Average common shares:
Basic
311.2
309.8
Diluted
311.2
311.6
End of period common shares
outstanding
310.2
308.9
Supplemental Financial Measures:
Gross Margin (Note 4)
$
841
23.6
%
$
2,151
38.8
%
Depreciation and amortization expense
$
235
$
237
MACY’S, INC.
Consolidated Statements of Operations (Unaudited) (Note
1)
(All amounts in millions except
percentages and per share figures)
26 Weeks Ended
26 Weeks Ended
August 1, 2020
August 3, 2019
$
% to Net sales
$
% to Net sales
Net sales
$
6,576
$
11,050
Credit card revenues, net
299
4.5
%
348
3.1
%
Cost of sales
(5,219
)
(79.4
%)
(6,798
)
(61.5
%)
Selling, general and administrative
expenses
(2,995
)
(45.4
%)
(4,287
)
(38.8
%)
Gains on sale of real estate
16
0.2
%
49
0.4
%
Impairment, restructuring and other costs
(Note 2)
(3,426
)
(52.1
%)
(3
)
—
%
Operating income (loss)
(4,749
)
(72.2
%)
359
3.2
%
Benefit plan income, net
21
15
Settlement charges
(38
)
—
Interest expense, net
(117
)
(94
)
Financing costs
(3
)
—
Income (loss) before income taxes
(4,886
)
280
Federal, state and local income tax
benefit (expense) (Note 3)
874
(57
)
Net income (loss)
$
(4,012
)
$
223
Basic earnings (loss) per share
$
(12.91
)
$
0.72
Diluted earnings (loss) per share
$
(12.91
)
$
0.71
Average common shares:
Basic
310.9
309.5
Diluted
310.9
311.5
End of period common shares
outstanding
310.2
308.9
Supplemental Financial Measures:
Gross Margin (Note 4)
$
1,357
20.6
%
$
4,252
38.5
%
Depreciation and amortization expense
$
472
$
472
MACY’S, INC.
Consolidated Balance Sheets (Unaudited) (Note
1)
(millions)
August 1, 2020
February 1, 2020
August 3, 2019
ASSETS:
Current Assets:
Cash and cash equivalents
$
1,395
$
685
$
674
Receivables
184
409
240
Merchandise inventories
3,582
5,188
5,029
Prepaid expenses and other current
assets
470
528
603
Total Current Assets
5,631
6,810
6,546
Property and Equipment – net
6,279
6,633
6,483
Right of Use Assets
3,035
2,668
2,636
Goodwill
828
3,908
3,908
Other Intangible Assets – net
438
439
440
Other Assets
1,403
714
728
Total Assets
$
17,614
$
21,172
$
20,741
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Short-term debt
$
539
$
539
$
6
Merchandise accounts payable
1,409
1,682
1,674
Accounts payable and accrued
liabilities
2,906
3,448
2,739
Income taxes
—
81
20
Total Current Liabilities
4,854
5,750
4,439
Long-Term Debt
4,851
3,621
4,680
Long-Term Lease Liabilities
3,269
2,918
2,836
Deferred Income Taxes
921
1,169
1,206
Other Liabilities
1,395
1,337
1,265
Shareholders' Equity
2,324
6,377
6,315
Total Liabilities and Shareholders’
Equity
$
17,614
$
21,172
$
20,741
MACY’S, INC.
Consolidated Statements of Cash Flows (Unaudited) (Notes
1 and 5)
(millions)
26 Weeks Ended
26 Weeks Ended
August 1, 2020
August 3, 2019
Cash flows from operating activities:
Net income (loss)
$
(4,012
)
$
223
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities:
Impairment, restructuring and other
costs
3,426
3
Settlement charges
38
—
Depreciation and amortization
472
472
Benefit plans
23
15
Stock-based compensation expense
13
28
Gains on sale of real estate
(16
)
(49
)
Deferred income taxes
(265
)
17
Amortization of financing costs and
premium on acquired debt
4
1
Changes in assets and liabilities:
Decrease in receivables
222
160
Decrease in merchandise inventories
1,598
234
Decrease in prepaid expenses and other
current assets
31
19
Increase (decrease) in merchandise
accounts payable
(188
)
55
Decrease in accounts payable and accrued
liabilities
(605
)
(619
)
Decrease in current income taxes
(695
)
(149
)
Change in other assets and liabilities
(53
)
(60
)
Net cash provided (used) by operating
activities
(7
)
350
Cash flows from investing activities:
Purchase of property and equipment
(228
)
(378
)
Capitalized software
(61
)
(123
)
Disposition of property and equipment
31
59
Other, net
(14
)
(12
)
Net cash used by investing activities
(272
)
(454
)
Cash flows from financing activities:
Debt issued
2,780
—
Debt issuance costs
(98
)
(3
)
Debt repaid
(1,504
)
(39
)
Dividends paid
(117
)
(233
)
Decrease in outstanding checks
(111
)
(128
)
Issuance of common stock
—
6
Net cash provided (used) by financing
activities
950
(397
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
671
(501
)
Cash, cash equivalents and restricted cash
beginning of period
731
1,248
Cash, cash equivalents and restricted cash
end of period
$
1,402
$
747
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 26 weeks ended August 1, 2020 and August 3, 2019 (which do not
include the Christmas season) are not necessarily indicative of
such results for the fiscal year.
(2)
The 13 weeks ended August 1, 2020
include cash restructuring charges totaling $169 million primarily
associated with the previously announced reduction in force due to
the impact of COVID-19.
The 26 weeks ended August 1, 2020
also include non-cash impairment charges totaling $3.2 billion,
which consist of a $3.1 billion goodwill impairment charge and an
$80 million impairment charge on long-lived tangible and right of
use assets.
(3)
The income tax benefits of $298
million and $874 million, or 40.9% and 17.9% of pretax loss, for
the 13 and 26 weeks ended August 1, 2020 reflect a different
projected benefit rate as compared to the company's federal income
tax statutory rate of 21% due to the carryback of net operating
losses as permitted under the CARES Act. For the 26 weeks ended
August 1, 2020, the benefit of the available carryback of net
operating losses was offset by the impact of the non-tax deductible
component of the goodwill impairment charge and additional income
tax expense associated with the deferred tax remeasurement
recognized during the first quarter of 2020.
(4)
Gross margin is defined as net
sales less cost of sales.
(5)
Restricted cash of $7 million and
$73 million have been included with cash and cash equivalents for
the 26 weeks ended August 1, 2020 and August 3, 2019,
respectively.
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, which includes
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 (loss) 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 (loss) and diluted earnings (loss) per share 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.
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
26 Weeks Ended
August 1, 2020
August 1, 2020
Decrease in comparable sales on an owned
basis (Note 6)
(34.7
)%
(40.0
)%
Comparable sales growth impact of
departments licensed to third parties (Note 7)
(0.4
)%
(0.2
)%
Decrease in comparable sales on an owned
plus licensed basis
(35.1
)%
(40.2
)%
13 Weeks Ended
26 Weeks Ended
August 3, 2019
August 3, 2019
Increase in comparable sales on an owned
basis (Note 6)
0.2
%
0.4
%
Comparable sales growth impact of
departments licensed to third parties (Note 7)
0.1
%
0.1
%
Increase in comparable sales on an owned
plus licensed basis
0.3
%
0.5
%
Notes:
(6)
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. No stores have been
excluded as a result of the COVID-19 pandemic. Definitions and
calculations of comparable sales may differ among companies in the
retail industry.
(7)
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.
MACY’S, INC.
Important Information
Regarding Non-GAAP Financial Measures (All amounts in
millions except percentages and per share figures)
Earnings (Loss) before Interest, Taxes,
Depreciation and Amortization, Net Income (Loss) and Diluted
Earnings (Loss) Per Share, 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
(loss).
- Adjusted net income (loss) is reconciled to GAAP net income
(loss).
- Adjusted diluted earnings (loss) per share is reconciled to
GAAP diluted earnings (loss) per share.
EBITDA and Adjusted EBITDA
13 Weeks Ended
13 Weeks Ended
August 1, 2020
August 3, 2019
Net income (loss)
$
(431
)
$
86
Interest expense, net
69
47
Financing costs
3
—
Federal, state and local income tax
expense (benefit)
(298
)
30
Depreciation and amortization
235
237
EBITDA
(422
)
400
Restructuring, impairment and other
costs
242
2
Settlement charges
38
—
Adjusted EBITDA
$
(142
)
$
402
26 Weeks Ended
26 Weeks Ended
August 1, 2020
August 3, 2019
Net income (loss)
$
(4,012
)
$
223
Interest expense, net
117
94
Financing costs
3
—
Federal, state and local income tax
expense (benefit)
(874
)
57
Depreciation and amortization
472
472
EBITDA
(4,294
)
846
Impairment, restructuring and other
costs
3,426
3
Settlement charges
38
—
Adjusted EBITDA
$
(830
)
$
849
MACY’S, INC.
Important
Information Regarding Non-GAAP Financial Measures
(All amounts in millions except
percentages and per share figures)
Adjusted Net Income (Loss) and Adjusted
Diluted Earnings (Loss) Per Share
13 Weeks Ended
13 Weeks Ended
August 1, 2020
August 3, 2019
Net Income (Loss)
Diluted Earnings (Loss) Per
Share
Net Income
Diluted Earnings Per Share
As reported
$
(431
)
$
(1.39
)
$
86
$
0.28
Restructuring, impairment and other costs
(Note 8)
242
0.78
2
—
Settlement charges
38
0.12
—
—
Financing costs
3
0.01
—
—
Income tax impact of certain items
identified above
(103
)
(0.33
)
—
—
As adjusted
$
(251
)
$
(0.81
)
$
88
$
0.28
26 Weeks Ended
26 Weeks Ended
August 1, 2020
August 3, 2019
Net Income (Loss)
Diluted Earnings (Loss) Per
Share
Net Income
Diluted Earnings Per Share
As reported
$
(4,012
)
$
(12.91
)
$
223
$
0.71
Impairment, restructuring and other
costs
3,426
11.02
3
0.01
Settlement charges
38
0.12
—
—
Financing costs
3
0.01
—
—
Income tax impact of certain items
identified above (Note 8)
(336
)
(1.07
)
(1
)
—
As adjusted
$
(881
)
$
(2.83
)
$
225
$
0.72
Note 8: The impact during the 13 and 26
weeks ended August 3, 2019 represents a value less than zero for
net income or $0.01 per diluted share.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200902005510/en/
Media media@macys.com
Investors - Mike McGuire investors@macys.com
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