Macy’s Q3 net income falls to US$108M from US$239M last year; net sales down 3.9% to US$5.23B from US$5.44B as digital sales fall 9%, brick-and-mortar sales fall 1%, inventory up 4%

Sample article from our Retail & Omnichannel

November 17, 2022 (press release) –

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.

  • Diluted earnings per share of $0.39 and Adjusted diluted earnings per share of $0.52.
    • This compares to diluted earnings per share of $0.76 and Adjusted diluted earnings per share of $1.23 in the third quarter of 2021.
    • This compares to diluted earnings per share of $0.01 and Adjusted diluted earnings per share of $0.07 in the third quarter of 2019.
  • Net sales of $5.2 billion, down 3.9% versus the third quarter of 2021; up 1.1% versus the third quarter of 2019.
    • Digital sales decreased 9% versus the third quarter of 2021; up 35% versus the third quarter of 2019.
    • Brick-and-mortar sales decreased 1% versus the third quarter of 2021; down 9% versus the third quarter of 2019.
  • Comparable sales down 3.1% on an owned basis and down 2.7% on an owned-plus-licensed basis; up 5.6% and 6.0%, respectively, versus the third quarter of 2019.
  • Highlights of the company's nameplates include:
    • Macy’s comparable sales were down 4.4% on an owned basis and down 4.0%, on an owned-plus-licensed basis.
      • 43.6 million active customers shopped the Macy’s brand, on a trailing twelve-month basis, a 2% increase compared to the prior year.
      • Star Rewards program members made up approximately 70% of the total Macy's brand owned-plus-licensed sales on a trailing twelve-month basis, up approximately 5 percentage points versus the prior year.
      • The company continued to see strength in occasion-based categories, including career and tailored sportswear, fragrances, shoes, dresses and luggage.
    • Bloomingdale’s comparable sales on an owned basis were up 5.3% and on an owned-plus-licensed basis were up 4.1%.
      • 4.1 million active customers shopped the Bloomingdale’s brand, on a trailing twelve-month basis, a 9% increase over the prior year.
      • Results were driven by strength across women’s, men’s and kid’s contemporary and dressy apparel, women’s shoes as well as luggage.
    • Bluemercury comparable sales were up 14.0% on an owned and owned-plus-licensed basis.
      • Approximately 650,000 active customers shopped the Bluemercury brand, on a trailing twelve-month basis, a 15% increase over the prior year.
  • Inventory turnover, on a trailing twelve-month basis, was relatively flat to 2021 and improved 15% over 2019.
    • Inventory was up 4% year-over-year and down 12% versus 2019, reflecting disciplined inventory management in an environment of continued supply chain volatility and industry-wide elevated inventory levels, as well as lean inventory levels experienced in 2021. The company strategically brought in seasonal merchandise earlier to strengthen its competitive position for Holiday and has the added capacity to chase in-season trends.
  • Gross margin for the quarter was 38.7%, down from 41.0% in the third quarter of 2021.
    • Merchandise margin decline was driven by a year-over-year increase in promotional and permanent markdowns within the Macy’s brand, as the company sold through slower moving categories including casual apparel, soft home, and warmer weather seasonal goods.
    • Delivery expense as a percent of net sales was relatively consistent with the prior year. Higher fuel costs more than offset the impact of a 2-percentage point decline in digital penetration and reductions in cost-per-package.
  • Selling, general and administrative (“SG&A”) expense of $2.1 billion, a $84 million increase.
    • SG&A expense as a percent of sales was 39.3%, 300 basis points higher compared to the third quarter of 2021 and an improvement of 330 basis points compared to the third quarter of 2019.
    • The prior year quarter benefited from a significant number of open positions due to the tight labor market. The positions have since largely been filled.
    • The company is adjusting colleague compensation to remain competitive and attract the best talent, while simultaneously remaining disciplined in its SG&A productivity efforts.
  • Net credit card revenue of $206 million, down $7 million.
    • Represented 3.9% of sales, in line with the prior year period.
    • Performance driven by lower-than-expected bad debt levels, larger balances within the portfolio as well as higher-than-expected spend on co-brand credit cards.

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
November 17, 2022

Guidance as of
August 23, 2022

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
October 29, 2022

 

13 Weeks Ended
October 30, 2021

 

 

 

 

 

 

% 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,
2022

 

January 29,
2022

 

October 30,
2021

 

 

 

 

 

 

 

 

 

 

 

 

 

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
October 29, 2022

 

39 Weeks Ended
October 30, 2021

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) 

 
Notes:
   

 

(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
November 2, 2019

 

 

 

 

 

 

 

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

%

Notes:

(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 are reconciled to GAAP net income.
  • Adjusted net income is reconciled to GAAP net income.
  • Adjusted diluted earnings per share is reconciled to GAAP diluted earnings per share.

EBITDA and Adjusted EBITDA

 

 

13 Weeks Ended
October 29, 2022

 

13 Weeks Ended
October 30, 2021

 

 

 

 

 

 

 

 

 

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
October 29, 2022

 

39 Weeks Ended
October 30, 2021

 

 

 

 

 

 

 

 

 

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
October 29, 2022

 

13 Weeks Ended
October 30, 2021

 

13 Weeks Ended
November 2, 2019

 

 

Net
Income

 

Diluted
Earnings
Per Share

 

Net
Income

 

Diluted
Earnings
Per Share

 

Net
Income

 

Diluted
Earnings
Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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
October 29, 2022

 

39 Weeks Ended
October 30, 2021

 

 

Net
Income

 

Diluted
Earnings
Per Share

 

Net
Income

 

Diluted
Earnings
Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Media – Chris Grams
communications@macys.com

Investors – Pamela Quintiliano
investors@macys.com

Source: Macy’s, Inc.

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