November 17, 2022
(press release)
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Comparable sales down 3.1% on an owned basis and down 2.7% on an owned-plus-licensed basis Inventories up 4% versus 2021, reflecting ongoing planning and supply chain discipline Diluted EPS of $0.39 and Adjusted diluted EPS of $0.52 Reaffirms annual sales guidance and raises Adjusted diluted EPS guidance NEW YORK--(BUSINESS WIRE)-- Macy’s, Inc. (NYSE: M) today reported financial results for the third quarter of 2022 and updated its annual guidance. “Our Polaris strategy is working. In the third quarter, we achieved solid top line results and a strong beat to our bottom line guidance. Macy’s brand position as a style and fashion source resonated with our customers, while luxury continued to outperform at Bloomingdale’s and Bluemercury,” said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc. “Retail is detail, and our talented and agile team are executing well to compete. We know the consumer is under increasing pressure and has choices on where to spend. As a leading gifting destination with fresh inventory across the value spectrum, we are ready to meet our customers’ needs this holiday season.” “We are operating from a position of strong financial health – with appropriate levels of inventory, a strong balance sheet with ample liquidity, investment grade credit metrics and fixed interest rate debt in a rising interest rate environment. We have the tools, data-driven processes and talented teams to manage through this uncertain time and are committed to long-term, profitable growth,” added Adrian Mitchell, chief financial officer of Macy’s, Inc. Third Quarter Highlights Comparisons are to third quarter 2021 unless noted otherwise. Comparisons to 2019 are provided, where appropriate, to benchmark performance given the impact of the pandemic. Financial Highlights All amounts in millions except percentages and per share figures Third Quarter 2022 2021 Net sales $5,230 $5,440 Comparable Sales Owned (3.1%) Owned plus licensed (2.7%) Net Income $108 $239 Earnings before interest, taxes, depreciation and amortization (EBITDA) $392 $757 Diluted earnings per share (EPS) $0.39 $0.76 Adjusted Net income $143 $386 Adjusted EBITDA $439 $765 Adjusted Diluted EPS $0.52 $1.23 2022 Guidance The company is reaffirming its annual 2022 sales guidance and raising its earnings guidance to account for improved expectations for credit card revenue and interest expense, lower benefit plan income, and updated shares outstanding estimates. The full update to guidance can be found in the presentation posted to macysinc.com/investors. Guidance as of Guidance as of Net sales unchanged $24,340 million to $24,580 million Adjusted EBITDA as a percent of sales unchanged Approximately 10.5% Adjusted diluted earnings per share* $4.07 - $4.27 $4.00 - $4.20 * Adjusted diluted EPS does not consider the impact of any potential future share repurchases associated with the company’s current share repurchase authorization. Conference Call and Webcasts A webcast of Macy's, Inc.’s call with analysts and investors to report its third quarter 2022 sales and earnings will be held today (November 17, 2022) at 8:00 a.m. ET. Macy’s, Inc.’s webcast, along with the associated presentation, is accessible to the media and general public via the company's website at www.macysinc.com/investors. Analysts and investors may call 1-866-580-3963, using passcode 2252807. A replay of the conference call will be available on the company’s website or by calling 1-866-583-1035 (using the 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. 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. At Macy’s, Inc. (NYSE: M), we are a trusted source for quality brands at great values from off-price to luxury. Across our iconic nameplates, including Macy’s, Bloomingdale’s and Bluemercury, we help our customers express their unique style and celebrate special moments, big and small. Headquartered in New York City, we operate one of retail’s largest e-commerce businesses integrated with a nationwide footprint to deliver the most convenient and seamless shopping experience. Our purpose is to create a brighter future with bold representation – so we can realize the full potential of every one of us. For more information, visit 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 Macy’s ability to successfully implement its Polaris strategy, 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 and catalogs 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, inflation, labor shortages, the amount and timing of future dividends and share repurchases 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 January 29, 2022. 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 Income (Unaudited) (Note 1) (All amounts in millions except percentages and per share figures) 13 Weeks Ended 13 Weeks Ended % to % to $ Net sales $ Net sales Net sales $ 5,230 $ 5,440 Credit card revenues, net 206 3.9 % 213 3.9 % Cost of sales (3,204 ) (61.3 %) (3,207 ) (59.0 %) Selling, general and administrative expenses (2,057 ) (39.3 %) (1,973 ) (36.3 %) Gains on sale of real estate 32 0.6 % 50 0.9 % Impairment, restructuring and other costs (15 ) (0.3 %) — — Operating income 192 3.7 % 523 9.6 % Benefit plan income, net 7 17 Settlement charges (32 ) (8 ) Interest expense, net (42 ) (53 ) Losses on early retirement of debt — (185 ) Income before income taxes 125 294 Federal, state and local income tax expense (Note 2) (17 ) (55 ) Net income $ 108 $ 239 Basic earnings per share $ 0.40 $ 0.78 Diluted earnings per share $ 0.39 $ 0.76 Average common shares: Basic 272.0 306.9 Diluted 277.7 313.8 End of period common shares outstanding 271.0 299.3 Supplemental Financial Measures: Gross Margin (Note 3) $ 2,026 38.7 % $ 2,233 41.0 % Depreciation and amortization expense $ 225 $ 225 MACY’S, INC. Consolidated Statements of Income (Unaudited) (Note 1) (All amounts in millions except percentages and per share figures) 39 Weeks Ended October 29, 2022 39 Weeks Ended October 30, 2021 % to % to $ Net sales $ Net sales Net sales $ 16,178 $ 15,794 Credit card revenues, net 601 3.7 % 568 3.6 % Cost of sales (9,856 ) (60.9 %) (9,449 ) (59.8 %) Selling, general and administrative expenses (5,918 ) (36.6 %) (5,618 ) (35.6 %) Gains on sale of real estate 74 0.5 % 61 0.4 % Impairment, restructuring and other costs (25 ) (0.2 %) (21 ) (0.1 %) Operating income 1,054 6.5 % 1,335 8.5 % Benefit plan income, net 21 49 Settlement charges (32 ) (90 ) Interest expense, net (131 ) (211 ) Losses on early retirement of debt (31 ) (199 ) Income before income taxes 881 884 Federal, state and local income tax expense (Note 2) (213 ) (197 ) Net income $ 668 $ 687 Basic earnings per share $ 2.43 $ 2.21 Diluted earnings per share $ 2.37 $ 2.17 Average common shares: Basic 275.6 310.3 Diluted 282.0 317.0 End of period common shares outstanding 271.0 299.3 Supplemental Financial Measures: Gross Margin (Note 3) $ 6,322 39.1 % $ 6,345 40.2 % Depreciation and amortization expense $ 638 $ 668 MACY’S, INC. Consolidated Balance Sheets (Unaudited) (Note 1) (millions) October 29, January 29, October 30, ASSETS: Current Assets: Cash and cash equivalents $ 326 $ 1,712 $ 316 Receivables 204 297 212 Merchandise inventories 6,403 4,383 6,141 Prepaid expenses and other current assets (Note 4) 415 366 922 Total Current Assets 7,348 6,758 7,591 Property and Equipment – net 5,831 5,665 5,600 Right of Use Assets 2,699 2,808 2,808 Goodwill 828 828 828 Other Intangible Assets – net 433 435 435 Other Assets 1,091 1,096 1,017 Total Assets $ 18,230 $ 17,590 $ 18,279 LIABILITIES AND SHAREHOLDERS’ EQUITY: Current Liabilities: Short-term debt $ 183 $ — $ 140 Merchandise accounts payable 3,861 2,222 3,796 Accounts payable and accrued liabilities 2,678 3,086 2,735 Income taxes 21 108 — Total Current Liabilities 6,743 5,416 6,671 Long-Term Debt 2,996 3,295 3,295 Long-Term Lease Liabilities 2,988 3,098 3,090 Deferred Income Taxes 884 983 970 Other Liabilities 1,144 1,177 1,245 Shareholders' Equity 3,475 3,621 3,008 Total Liabilities and Shareholders’ Equity $ 18,230 $ 17,590 $ 18,279 MACY’S, INC. Consolidated Statements of Cash Flows (Unaudited) (Notes 1 and 5) (millions) 39 Weeks Ended 39 Weeks Ended Cash flows from operating activities: Net income $ 668 $ 687 Adjustments to reconcile net income to net cash provided by operating activities: Impairment, restructuring and other costs 25 21 Settlement charges 32 90 Depreciation and amortization 638 668 Benefit plans 15 27 Stock-based compensation expense 44 32 Gains on sale of real estate (74 ) (61 ) Deferred income taxes (70 ) 19 Amortization of financing costs and premium on acquired debt 8 66 Changes in assets and liabilities: Decrease in receivables 93 64 Increase in merchandise inventories (2,019 ) (2,367 ) Increase in prepaid expenses and other current assets (56 ) (44 ) Increase in merchandise accounts payable 1,636 1,758 Increase (decrease) in accounts payable and accrued liabilities (300 ) 73 Decrease in current income taxes (73 ) (50 ) Change in other assets and liabilities (79 ) (142 ) Net cash provided by operating activities 488 841 Cash flows from investing activities: Purchase of property and equipment (655 ) (230 ) Capitalized software (328 ) (155 ) Disposition of property and equipment 122 118 Other, net (8 ) 64 Net cash used by investing activities (869 ) (203 ) Cash flows from financing activities: Debt issued 1,891 975 Debt issuance costs (21 ) (9 ) Debt repaid (1,998 ) (2,448 ) Debt repurchase premium and expenses (29 ) (152 ) Dividends paid (130 ) (46 ) Decrease in outstanding checks (117 ) (97 ) Acquisition of treasury stock (601 ) (294 ) Net cash used by financing activities (1,005 ) (2,071 ) Net decrease in cash, cash equivalents and restricted cash (1,386 ) (1,433 ) Cash, cash equivalents and restricted cash beginning of period 1,715 1,754 Cash, cash equivalents and restricted cash end of period $ 329 $ 321 MACY’S, INC. Consolidated Financial Statements (Unaudited) (1) As a result of the seasonal nature of the retail business, the results of operations for the 13 and 39 weeks ended October 29, 2022 and October 30, 2021 (which do not include the Christmas season) are not necessarily indicative of such results for the fiscal year. (2) The income tax expense of $17 million and $213 million, or 13.6% and 24.2% of pretax income, for the 13 and 39 weeks ended October 29, 2022, respectively, and income tax expense of $55 million and $197 million, or 18.7% and 22.3% of pretax income, for the 13 and 39 weeks ended October 30, 2021, respectively, reflect a different effective tax rate as compared to the company’s federal income tax statutory rate of 21%. The income tax effective rates for the 13 and 39 weeks ended October 29, 2022 and October 30, 2021 were impacted primarily by impact of return-to-provision adjustments that were identified in connection with the filing of the U.S. federal income tax return in the current quarter. (3) Gross margin is defined as net sales less cost of sales. (4) Prepaid expenses and other current assets as of October 30, 2021 included an income tax receivable of $590 million. (5) Restricted cash of $3 million and $5 million have been included with cash and cash equivalents for the 39 weeks ended October 29, 2022 and October 30, 2021, 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, which includes adjusting for the impact of 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 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 company does not provide reconciliations of the forward-looking non-GAAP measures of adjusted EBITDA, diluted earnings per share and comparable sales on an owned plus licensed basis to the most directly comparable forward-looking GAAP measures because the timing and amount of excluded items are unreasonably difficult to fully and accurately estimate. For the same reasons, the company is unable to address the probable significance of the unavailable information, which could be material to future results. 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 Comparable Sales vs. 13 Weeks Ended October 30, 2021 Macy's, Inc. Macy's Bloomingdale's Bluemercury Increase (decrease) in comparable sales on an owned basis (Note 6) (3.1 %) (4.4 %) 5.3 % 14.0 % Impact of departments licensed to third parties (Note 7) 0.4 % 0.4 % (1.2 %) 0.0 % Increase (decrease) in comparable sales on an owned plus licensed basis (2.7 %) (4.0 %) 4.1 % 14.0 % Comparable Sales vs. 39 Weeks Ended October 30, 2021 Macy's, Inc. Macy's Bloomingdale's Bluemercury Increase in comparable sales on an owned basis (Note 6) 2.3 % 0.7 % 13.4 % 14.9 % Impact of departments licensed to third parties (Note 7) 0.0 % 0.0 % (1.9 %) 0.0 % Increase in comparable sales on an owned plus licensed basis 2.3 % 0.7 % 11.5 % 14.9 % Comparable Sales vs. 13 Weeks Ended Macy's, Inc. Increase in comparable sales on an owned basis (Note 6) 5.6 % Impact of departments licensed to third parties (Note 7) 0.4 % Increase in comparable sales on an owned plus licensed basis 6.0 % (6) Represents the period-to-period percentage change in net sales from stores in operation during the 13 and 39 weeks ended October 29, 2022, and the 13 and 39 weeks ended October 30, 2021 and the 13 weeks ended November 2, 2019. Such calculation includes all digital sales and excludes 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. (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. Non-GAAP financial measures, excluding certain items below, are reconciled to the most directly comparable GAAP measure as follows: EBITDA and Adjusted EBITDA 13 Weeks Ended 13 Weeks Ended Net income $ 108 $ 239 Interest expense, net 42 53 Losses on early retirement of debt — 185 Federal, state and local income tax expense 17 55 Depreciation and amortization 225 225 EBITDA 392 757 Impairment, restructuring and other costs 15 — Settlement charges 32 8 Adjusted EBITDA $ 439 $ 765 39 Weeks Ended 39 Weeks Ended Net income $ 668 $ 687 Interest expense, net 131 211 Losses on early retirement of debt 31 199 Federal, state and local income tax expense 213 197 Depreciation and amortization 638 668 EBITDA 1,681 1,962 Impairment, restructuring and other costs 25 21 Settlement charges 32 90 Adjusted EBITDA $ 1,738 $ 2,073 Adjusted Net Income and Adjusted Diluted Earnings Per Share 13 Weeks Ended 13 Weeks Ended 13 Weeks Ended Net Diluted Net Diluted Net Diluted As reported $ 108 0.39 $ 239 $ 0.76 $ 2 $ 0.01 Impairment, restructuring and other costs 15 0.05 — — 13 0.04 Settlement charges 32 0.12 8 0.03 12 0.04 Losses on early retirement of debt — — 185 0.59 — — Income tax impact of certain items identified above (12 ) (0.04 ) (46 ) (0.15 ) (6 ) (0.02 ) As adjusted to exclude certain items above $ 143 $ 0.52 $ 386 $ 1.23 $ 21 $ 0.07 39 Weeks Ended 39 Weeks Ended Net Diluted Net Diluted As reported $ 668 2.37 $ 687 $ 2.17 Impairment, restructuring and other costs 25 0.09 21 0.07 Settlement charges 32 0.11 90 0.28 Losses on early retirement of debt 31 0.11 199 0.63 Income tax impact of certain items identified above (22 ) (0.08 ) (73 ) (0.24 ) As adjusted to exclude certain items above $ 734 $ 2.60 $ 924 $ 2.91 View source version on businesswire.com: https://www.businesswire.com/news/home/20221117005347/en/ Media – Chris Grams Investors – Pamela Quintiliano Source: Macy’s, Inc. Released November 17, 2022
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communications@macys.com
investors@macys.com
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