Macy’s, Inc. (NYSE:M) today reported results for the first
quarter of 2020. As previously reported, the company had net sales
of $3.017 billion.
Nearly all of the company's stores have now reopened, including
stores in the major metropolitan regions. Stores continued to
perform ahead of expectations through May and June, and the
company's digital business sales remained strong across
geographies. The company continues to expect a gradual sales
recovery.
“The first quarter of 2020 was challenging for the country, the
industry and Macy’s, Inc. While our stores are re-opened, we expect
that the COVID-19 pandemic will continue to impact the country for
the remainder of the year. We do not anticipate another full
shutdown, but we are staying flexible and are prepared to address
increases in cases on a regional level,” said Jeff Gennette,
chairman and chief executive officer of Macy’s, Inc. “We are
meeting our customers how and where they are shopping and have
enhanced our fulfillment options and health precautions to ensure a
safe and welcoming shopping experience.”
“While we continue to see challenges ahead, we’ve taken the
necessary actions to stabilize our business and give us financial
flexibility. We are confident we have the right strategy and plans
in place to navigate the shifting retail landscape,” Gennette
continued.
Primarily as a result of the COVID-19 pandemic, the company’s
long-term projections and market capitalization changed, requiring
interim impairment assessments for its goodwill and long-lived
assets. As a result of these assessments, the company recognized
pre-tax, non-cash goodwill and long-lived asset impairment charges
of $3.1 billion and $80 million, respectively, during the 13 weeks
ended May 2, 2020. The company is now reporting a Diluted loss per
share of $11.53 and Adjusted Diluted loss per share of $2.03.
Financial Highlights
First Quarter
(All amounts in millions except per share
figures)
2020
2019
Net sales
$
3,017
$
5,504
Net income (loss) (a) (b)
$
(3,581
)
$
136
Earnings (loss) before interest, taxes,
depreciation and amortization (a) (b)
$
(3,873
)
$
446
Diluted earnings (loss) per share (a)
(b)
$
(11.53
)
$
0.44
Adjusted Net income (loss) (b)
$
(630
)
$
137
Adjusted Earnings (loss) before interest,
taxes, depreciation and amortization (b)
$
(689
)
$
447
Adjusted Diluted earnings (loss) per share
(b)
$
(2.03
)
$
0.44
(a): The results for the 13 weeks ended May 2, 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
weeks ended May 2, 2020 include the benefit of tax law changes
resulting from the 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.
First Quarter Asset Sale Gains
Asset sale gains for the first quarter of 2020 totaled $16
million pre-tax, or $12 million after-tax and $0.04 per diluted
share. This compares to the first quarter of 2019, when asset sale
gains totaled $43 million pre-tax, or $31 million after-tax and
$0.10 per diluted share.
2020 Guidance
The company previously withdrew its 2020 sales and earnings
guidance and is not currently providing an updated outlook.
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 (July 1, 2020) 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
1-800-458-4148, passcode, 4021974. 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.
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 customer demand, its
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 “COVID-19 Risk Factor” in the Company’s Current Report on
Form 8-K filed on May 26, 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
May 2, 2020
May 4, 2019
$
% to Net sales
$
% to Net sales
Net sales
$
3,017
$
5,504
Credit card revenues, net
131
4.3
%
172
3.1
%
Cost of sales
(2,501
)
(82.9
%)
(3,403
)
(61.8
%)
Selling, general and administrative
expenses
(1,598
)
(52.9
%)
(2,112
)
(38.4
%)
Gains on sale of real estate
16
0.5
%
43
0.8
%
Impairment, restructuring and other costs
(Note 2)
(3,184
)
(105.5
%)
(1
)
—
%
Operating income (loss)
(4,119
)
(136.5
%)
203
3.7
%
Benefit plan income, net
9
7
Interest expense, net
(47
)
(47
)
Income (loss) before income taxes
(4,157
)
163
Federal, state and local income tax
benefit (expense) (Note 3)
576
(27
)
Net income (loss)
$
(3,581
)
$
136
Basic earnings (loss) per share
$
(11.53
)
$
0.44
Diluted earnings (loss) per share
$
(11.53
)
$
0.44
Average common shares:
Basic
310.6
309.1
Diluted
310.6
311.4
End of period common shares
outstanding
310.2
308.9
Supplemental Financial Measures:
Gross Margin (Note 4)
$
516
17.1
%
$
2,101
38.2
%
Depreciation and amortization expense
$
237
$
236
MACY’S, INC.
Consolidated Balance Sheets (Unaudited) (Note
1)
(millions)
May 2, 2020
February 1, 2020
May 4, 2019
ASSETS:
Current Assets:
Cash and cash equivalents
$
1,523
$
685
$
737
Receivables
170
409
237
Merchandise inventories
4,923
5,188
5,498
Prepaid expenses and other current
assets
519
528
633
Total Current Assets
7,135
6,810
7,105
Property and Equipment – net
6,425
6,633
6,499
Right of Use Assets
2,672
2,668
2,631
Goodwill
838
3,908
3,908
Other Intangible Assets – net
439
439
441
Other Assets
1,072
714
712
Total Assets
$
18,581
$
21,172
$
21,296
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Short-term debt
$
739
$
539
$
41
Merchandise accounts payable
2,196
1,682
1,950
Accounts payable and accrued
liabilities
2,757
3,448
2,846
Income taxes
80
81
182
Total Current Liabilities
5,772
5,750
5,019
Long-Term Debt
4,918
3,621
4,680
Long-Term Lease Liabilities
2,923
2,918
2,823
Deferred Income Taxes
944
1,169
1,193
Other Liabilities
1,327
1,337
1,258
Shareholders' Equity
2,697
6,377
6,323
Total Liabilities and Shareholders’
Equity
$
18,581
$
21,172
$
21,296
MACY’S, INC.
Consolidated Statements of Cash Flows (Unaudited) (Notes
1 and 5)
(millions)
13 Weeks Ended
13 Weeks Ended
May 2, 2020
May 4, 2019
Cash flows from operating activities:
Net income (loss)
$
(3,581
)
$
136
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Impairment, restructuring and other
costs
3,184
1
Depreciation and amortization
237
236
Benefit plans
12
8
Stock-based compensation expense
6
14
Gains on sale of real estate
(16
)
(43
)
Deferred income taxes
(225
)
7
Changes in assets and liabilities:
Decrease in receivables
236
163
(Increase) decrease in merchandise
inventories
265
(235
)
(Increase) decrease in prepaid expenses
and other current assets
12
(6
)
Increase in merchandise accounts
payable
629
247
Decrease in accounts payable and accrued
liabilities
(531
)
(516
)
Increase (decrease) in current income
taxes
(353
)
8
Change in other assets and liabilities
(39
)
(58
)
Net cash used by operating activities
(164
)
(38
)
Cash flows from investing activities:
Purchase of property and equipment
(122
)
(204
)
Capitalized software
(38
)
(60
)
Disposition of property and equipment
21
34
Other, net
26
(7
)
Net cash used by investing activities
(113
)
(237
)
Cash flows from financing activities:
Debt issued
1,500
—
Debt repaid
(4
)
(3
)
Dividends paid
(117
)
(116
)
Decrease in outstanding checks
(231
)
(45
)
Issuance of common stock
—
6
Net cash provided (used) by financing
activities
1,148
(158
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
871
(433
)
Cash, cash equivalents and restricted cash
beginning of period
731
1,248
Cash, cash equivalents and restricted cash
end of period
$
1,602
$
815
MACY’S, INC.
Consolidated Financial
Statements (Unaudited)
Notes:
- As a result of the seasonal nature of the retail business, the
results of operations for the 13 weeks ended May 2, 2020 and May 4,
2019 (which do not include the Christmas season) are not
necessarily indicative of such results for the fiscal year.
- The 13 weeks ended May 2, 2020 includes non-cash impairment
charges totaling $3.2 billion, which consists of $3.1 billion of a
non-cash goodwill impairment charge and $80 million impairment
charge on long-lived tangible and right of use assets.
- The income tax benefit of $576 million, or 13.9% of pretax
loss, reflects a higher projected benefit rate for fiscal 2020 due
to the carryback of net operating losses as permitted under the
CARES Act and the impact of the goodwill impairment charge.
- Gross margin is defined as net sales less cost of sales.
- Restricted cash of $79 million and $78 million have been
included with cash and cash equivalents for the 13 weeks ended May
2, 2020 and May 4, 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.
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. 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)
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.
Adjusted EBITDA
13 Weeks Ended
13 Weeks Ended
May 2, 2020
May 4, 2019
Net income (loss)
$
(3,581
)
$
136
Interest expense, net
47
47
Federal, state and local income tax
expense (benefit)
(576
)
27
Depreciation and amortization
237
236
EBITDA
(3,873
)
446
Impairment, restructuring and other
costs
3,184
1
Adjusted EBITDA
$
(689
)
$
447
Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss)
Per Share
13 Weeks Ended
13 Weeks Ended
May 2, 2020
May 4, 2019
Net Income (Loss)
Diluted Earnings (Loss) Per
Share
Net Income
Diluted Earnings Per Share
As reported
$
(3,581
)
$
(11.53
)
$
136
$
0.44
Impairment, restructuring and other
costs
3,184
10.25
1
—
Income tax impact of certain items
identified above
(233
)
(0.75
)
—
—
As adjusted
$
(630
)
$
(2.03
)
$
137
$
0.44
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200701005449/en/
Media - Emily Goldberg media@macys.com
Investors - Mike McGuire investors@macys.com
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