Continued improvement in stores and
double-digit growth in digital business combine for strong profit
and sales performance
Company raises earnings and sales guidance for
fiscal 2018
Macy’s, Inc. (NYSE:M) today reported first quarter 2018 earnings
per diluted share of $0.45, or $0.48 excluding impairment and other
costs. This compares to $0.26 per share in the first quarter of
2017 for both reported and adjusted diluted earnings per share.
Also excluding asset sale gains, earnings per diluted share
attributable to Macy’s, Inc. were $0.42 in the first quarter of
2018. This compares to $0.12 per share in the first quarter of
2017.
The company also reported comparable sales on an owned basis
that were up 3.9 percent in the first quarter of 2018 compared to
the first quarter of 2017. On an owned plus licensed basis,
comparable sales were up 4.2 percent for the first quarter of
2018.
“Macy’s, Inc.'s results for the first quarter of 2018 reflect
continuing momentum in the business. We exceeded our expectations
and saw strong performance across all three brands—Macy’s,
Bloomingdale’s, and Bluemercury—as well as across all geographic
regions and families of business. We are maintaining a healthy
inventory position, which helped us deliver improved gross margin,”
said Jeff Gennette, Macy’s, Inc. chairman and chief executive
officer. “The winning formula for Macy’s, Inc. is a healthy brick
& mortar business, robust e-commerce and a great mobile
experience. While we have more work to do, the continuing
improvement in our stores is encouraging and we once again achieved
double-digit growth in the digital business. Our best customer is
responding well to the improvements we’ve made to her experience in
our stores, on .com and through the Macy’s app.”
“Our first quarter performance reflects solid execution of our
North Star Strategy, including merchandising and marketing
activities. We also saw continued healthy consumer spending
and significant improvements in international tourism. Taken
together, these positive factors give us confidence to raise both
our sales and earnings guidance for the fiscal year,” continued
Gennette. “Heading into the second quarter, we are intensely
focused on laying the foundation for our 2018 strategic initiatives
to support improved performance in the back half of the year.”
Sales
Net sales in the first quarter of 2018 totaled $5.541 billion,
an increase of 3.6 percent, compared with sales of $5.350 billion
in the first quarter of 2017. Comparable sales on an owned basis
were up 3.9 percent in the first quarter and up 4.2 percent on an
owned plus licensed basis.
The company estimates that comparable sales in the first quarter
of 2018 benefited approximately 250 basis points from the shift of
Friends and Family from the second quarter to the first. Excluding
this, the company estimates that comparable sales were up 1.7
percent on an owned plus licensed basis.
Operating Income and Net Income
Macy’s, Inc.’s operating income for the first quarter of 2018
totaled $238 million, or 4.3 percent of sales, compared to $219
million, or 4.1 percent of sales, for the first quarter of 2017.
Operating income for the first quarter of 2018 totaled $257
million, or 4.6 percent of sales, excluding impairment and other
costs of $19 million, which primarily relate to the wind-down of
Macy's China Limited as discussed below. The company anticipates
recognizing additional charges of approximately $10 million related
to the wind-down over the course of fiscal 2018. There were no
impairment and other costs in the first quarter of 2017.
Net income attributable to Macy's, Inc. shareholders for the
first quarter of 2018 totaled $139 million, or 2.5 percent of
sales, compared to $78 million, or 1.5 percent of sales, for the
first quarter of 2017. Net income for the first quarter of 2018
totaled $149 million, or 2.7 percent of sales, excluding impairment
and other costs. This compares to $80 million, or 1.5 percent of
sales, in the first quarter of 2017, excluding premiums on the
early retirement of debt. Also excluding asset sale gains, net
income for the first quarter of 2018 totaled $131 million, or 2.4
percent of sales, compared to $38 million, or 0.7 percent of sales,
in the first quarter of 2017.
Cash Flow
Net cash provided by operating activities was $322 million
in the first quarter of 2018, compared to $237 million in
the first quarter last year. Net cash used by investing activities
in the first quarter of 2018 was $156 million, compared
with $60 million a year ago. Net cash used by financing
activities in the first quarter of 2018 was $99 million,
compared with $273 million last year.
China Update
Macy’s, Inc. has set a new approach to its business in
China. The company has come to a mutual agreement to end the
joint venture with Fung Retailing Limited. Macy’s will remain
active on Alibaba’s e-commerce platform TMall, as well as social
media channels. The Macy’s e-commerce team in San Francisco will
manage the ongoing China business with operational support from
Fung Omni in Shanghai.
Looking Ahead - Raising Earnings and Sales Guidance
Macy's, Inc. is updating its guidance for fiscal 2018. The
company now expects adjusted earnings per diluted share of $3.75 to
$3.95 in fiscal 2018, excluding anticipated settlement charges
related to the company’s defined benefit plans as well as
impairment and other costs. This reflects an increase of 20 cents
compared to the prior guidance. Total sales are expected to range
from a 1 percent decline to a .5 percent increase in fiscal 2018.
Comparable sales on an owned plus licensed basis are expected to
increase between 1 and 2 percent. Comparable sales on an owned
basis are expected to be 20-30 basis points below comparable sales
on an owned plus licensed basis.
Total sales guidance is provided on a 52-week basis in 2018
compared to a 53-week basis in 2017. Comparable sales guidance is
provided on a 52-week basis in both 2018 and 2017.
First quarter 2018 results, first quarter 2017 results and
guidance for fiscal 2018 reflect the new accounting standards
related to revenue recognition and retirement benefits. Macy's,
Inc. has recast its quarterly income statements and balance sheets
for 2016 and 2017 to reflect adoption of these new standards. These
documents can be found on the investor relations page at
www.macysinc.com.
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.
Macy’s, Inc. is one of the nation’s premier retailers. With
fiscal 2017 sales of $24.837 billion and approximately 130,000
employees, the company operates approximately 690 department stores
under the nameplates Macy’s and Bloomingdale’s, and more than 160
specialty stores that include Bloomingdale’s The Outlet,
Bluemercury, Macy’s Backstage and STORY. Macy’s, Inc. operates
stores in 44 states, the District of Columbia, Guam and Puerto
Rico, as well as macys.com, bloomingdales.com and bluemercury.com.
Bloomingdale’s stores in Dubai and Kuwait are operated by Al Tayer
Group LLC under license agreements. Macy’s, Inc. has corporate
offices in Cincinnati, Ohio, and New York, New York.
All statements in this press release that are not statements of
historical fact are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such
statements are based upon the current beliefs and expectations of
Macy’s management and are subject to significant risks and
uncertainties. Actual results could differ materially from those
expressed in or implied by the forward-looking statements contained
in this release because of a variety of factors, including
conditions to, or changes in the timing of, proposed real estate
and other transactions, prevailing interest rates and non-recurring
charges, the effect of federal tax reform, store closings,
competitive pressures from specialty stores, general merchandise
stores, off-price and discount stores, manufacturers’ outlets, the
Internet, mail-order catalogs and television shopping and general
consumer spending levels, including the impact of the availability
and level of consumer debt, the effect of weather and other factors
identified in documents filed by the company with the Securities
and Exchange Commission. Macy’s disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law.
NOTE: Additional information on Macy’s, Inc., including past
news releases, is available at www.macysinc.com/pressroom. A
webcast of Macy's, Inc.’s call with analysts and investors will be
held today (May 16) at 9:30 a.m. ET. The webcast is accessible to
the media and general public via the company's website at
www.macysinc.com. Analysts and investors may call in on
1-800-239-9838, passcode 7668372. A replay of the conference call
can be accessed on the website or by calling 1-888-203-1112 (same
passcode), about two hours after the conclusion of the call.
MACY’S, INC.
Consolidated
Statements of Income (Unaudited) (Note 1)
(All amounts in millions except
percentages and per share figures)
13 weeks ended 13 weeks ended May 5, 2018 April 29, 2017
% to % to $ Net sales $ Net sales
Net sales $ 5,541 $ 5,350 Credit card revenues, net
157 2.8 % 161 3.0 % Cost of sales (3,382 ) (61.0 %)
(3,303 ) (61.7 %) Selling, general and administrative
expenses (2,083 ) (37.6 %) (2,057 ) (38.5 %) Gains on sale
of real estate 24 0.4 % 68 1.3 % Impairment and other costs
(Note 2) (19 ) (0.3 %) — — % Operating income 238 4.3
% 219 4.1 % Benefit plan income, net 11 13 Interest
expense, net (66 ) (84 ) Premiums on early retirement of
debt (Note 3) — (3 ) Income before income taxes 183
145 Federal, state and local income tax expense (Note 4) (52
) (68 ) Net income 131 77 Net loss attributable to
noncontrolling interest 8 1 Net income
attributable to Macy's, Inc. shareholders $ 139 $ 78
Basic earnings per share attributable
to
Macy's, Inc. shareholders
$ .45 $ .26
Diluted earnings per share attributable
to
Macy's, Inc. shareholders
$ .45 $ .26 Average common shares: Basic 306.6
305.0 Diluted 309.4 306.9 End of period common shares
outstanding 306.4 304.5 Depreciation and amortization
expense $ 235 $ 243
MACY’S, INC.
Consolidated
Statements of Income (Unaudited)
Notes: (1) The 13 weeks ended April 29, 2017 have
been recast to reflect the company's retrospective adoption of
Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue from
Contracts with Customers, on February 4, 2018. Further, because of
the seasonal nature of the retail business, the results of
operations for the 13 weeks ended May 5, 2018 and April 29, 2017
(which do not include the Christmas season) are not necessarily
indicative of such results for the fiscal year. (2) For the
13 weeks ended May 5, 2018, impairment and other costs associated
with the wind-down of Macy's China Limited amounted to $19 million
on a pre-tax basis. The after tax effect of these charges during
the 13 weeks ended May 5, 2018 was $10 million after tax or $.03
per diluted share attributable to Macy’s, Inc. (3) The 13
weeks ended April 29, 2017 included $3 million, on a pre-tax basis,
of premium expenses and fees associated with the early retirement
of debt. The after tax impact during the 13 weeks ended April 29,
2017 was $2 million. (4) For the 13 weeks ended May 5, 2018,
federal, state and local income taxes differed from the company's
federal income tax statutory rate of 21% because of the effects of
state and local taxes, including the settlement of various tax
issues and tax examinations. Further, the 13 weeks ended May 5,
2018 and April 29, 2017 included the recognition of approximately
$3 million and $11 million, respectively, of net tax deficiencies
associated with share-based payment awards. These items as well as
the enactment of U.S. federal tax reform in December 2017 resulted
in an effective tax rate for the 13 weeks ended May 5, 2018 of
28.4% as compared to 46.9% for the 13 weeks ended April 29, 2017.
MACY’S,
INC.
Consolidated Balance
Sheets (Unaudited)
(millions)
May 5, February 3, April 29, 2018 2018 2017 ASSETS: Current
Assets: Cash and cash equivalents $ 1,531 $ 1,455 $ 1,201
Receivables 250 363 345 Merchandise inventories 5,291 5,178 5,626
Prepaid expenses and other current assets 638 650 634
Total Current Assets 7,710 7,646 7,806 Property and
Equipment – net 6,575 6,672 6,886 Goodwill 3,908 3,897 3,897 Other
Intangible Assets – net 486 488 496 Other Assets 889 880
793 Total Assets $ 19,568 $ 19,583
$ 19,878 LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities: Short-term debt $ 25 $ 22 $ 313 Merchandise
accounts payable 2,045 1,590 2,028 Accounts payable and accrued
liabilities 2,695 3,271 3,042 Income taxes 312 296
355 Total Current Liabilities 5,077 5,179 5,738
Long-Term Debt 5,857 5,861 6,412 Deferred Income Taxes 1,169 1,148
1,522 Other Liabilities 1,664 1,662 1,846 Shareholders' Equity:
Macy's, Inc. 5,821 5,745 4,362 Noncontrolling interest (20 ) (12 )
(2 ) Total Shareholders' Equity 5,801 5,733 4,360
Total Liabilities and Shareholders’ Equity $ 19,568
$ 19,583 $ 19,878
Note: The prior year's amounts reflect the retrospective
adoption of ASU 2014-09 on February 4, 2018.
MACY’S, INC.
Consolidated
Statements of Cash Flows (Unaudited)
(millions)
13 weeks 13 weeks ended ended May 5, April 29, 2018 2017
Cash flows from operating activities: Net income $ 131 $ 77
Adjustments to reconcile net income to net cash provided by
operating activities: Impairment and other costs 19 — Depreciation
and amortization 235 243 Stock-based compensation expense 17 13
Gains on sale of real estate (24 ) (68 ) Changes in assets and
liabilities: Decrease in receivables 105 170 Increase in
merchandise inventories (115 ) (227 ) Increase in prepaid expenses
and other current assets (20 ) (16 ) Increase in merchandise
accounts payable 415 573
Decrease in accounts payable, accrued
liabilities and
other items not separately identified
(444 ) (545 ) Increase in current income taxes 25 3 Increase in
deferred income taxes 19 41 Change in other assets and liabilities
not separately identified (41 ) (27 ) Net cash provided by
operating activities 322 237 Cash flows from
investing activities: Purchase of property and equipment (132 )
(117 ) Capitalized software (58 ) (60 ) Disposition of property and
equipment 23 96 Other, net 11 21 Net cash used by
investing activities (156 ) (60 ) Cash flows from financing
activities: Debt repaid (3 ) (152 ) Dividends paid (116 ) (115 )
Decrease in outstanding checks (10 ) (10 ) Acquisition of treasury
stock — (1 ) Issuance of common stock 28 2 Proceeds from
noncontrolling interest 2 3 Net cash used by
financing activities (99 ) (273 ) Net increase (decrease) in
cash, cash equivalents and restricted cash 67 (96 ) Cash, cash
equivalents and restricted cash beginning of period 1,513
1,334 Cash, cash equivalents and restricted cash end
of period $ 1,580 $ 1,238
Note: The prior period's amounts reflect the retrospective
adoption of ASU 2014-09, ASU 2016-18 (ASU 2016-18), Restricted
Cash, and ASU 2016-15, Classification of Certain Cash Receipts and
Cash Payments, on February 4, 2018. As a result of the adoption of
ASU 2016-18, restricted cash of $49 million and $37 million have
been included with cash and cash equivalents above for the first
quarters of 2018 and 2017, respectively. Further, certain
reclassifications were made to the prior period's amounts to
conform with the classifications of such amounts in the most recent
period.
MACY’S, INC.
Important Information
Regarding Non-GAAP Financial Measures
The company reports its financial results in accordance with
U.S. generally accepted accounting principles ("GAAP"). However,
management believes that certain non-GAAP financial measures
provide users of the company's financial information with
additional useful information in evaluating operating performance.
Management believes that providing supplemental changes in
comparable sales on an owned plus licensed basis, which includes
adjusting for growth in comparable sales of departments licensed to
third parties and certain promotional events, 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. In addition, management believes that
excluding certain items from operating income, net income and
diluted earnings per share attributable to Macy's, Inc.
shareholders that are not associated with the company’s core
operations and that may vary substantially in frequency and
magnitude period-to-period provides useful supplemental measures
that assist in evaluating the company's ability to generate
earnings and to more readily compare these metrics between past and
future periods.
The reconciliation of the forward-looking non-GAAP financial
measure of changes in comparable sales on an owned plus licensed
basis to GAAP comparable sales (i.e., on an owned basis) is in the
same manner as illustrated below, except that the impact of growth
in comparable sales of departments licensed to third parties is the
only reconciling item. In addition, the company does not provide
the most directly comparable forward-looking GAAP measure of net
income and diluted earnings per share attributable to Macy’s, Inc.
shareholders excluding certain items because the timing and amount
of excluded items are unreasonably difficult to fully and
accurately estimate.
Non-GAAP financial measures should be viewed as supplementing,
and not as an alternative or substitute for, the company's
financial results prepared in accordance with GAAP. Certain of the
items that may be excluded or included in non-GAAP financial
measures may be significant items that could impact the company's
financial position, results of operations or cash flows and should
therefore be considered in assessing the company's actual and
future financial condition and performance. Additionally, the
amounts received by the company on account of sales of departments
licensed to third parties are limited to commissions received on
such sales. The methods used by the company to calculate its
non-GAAP financial measures may differ significantly from methods
used by other companies to compute similar measures. As a result,
any non-GAAP financial measures presented herein may not be
comparable to similar measures provided by other companies.
MACY’S, INC.
Important
Information Regarding Non-GAAP Financial Measures
(All amounts in millions except
percentages and per share figures)
Change in Comparable
Sales
13 Weeks Ended May 5, 2018 Increase in comparable
sales on an owned basis (Note 1) 3.9 % Impact of growth in
comparable sales of departments licensed to third parties (Note 2)
0.3 % Increase in comparable sales on an owned plus licensed
basis 4.2 % Impact of quarterly timing shift associated with
the Spring 2018 Friends and Family promotional event (2.5 )%
Adjusted increase in comparable sales on an owned plus licensed
basis 1.7 % Notes: (1) 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 is closed for a
significant period of time. Definitions and calculations of
comparable sales differ among companies in the retail industry.
(2) 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
Net Income and Diluted Earnings Per Share
Attributable to Macy's, Inc. Shareholders, Excluding Certain
Items
The following is a reconciliation of the non-GAAP financial
measures of net income and diluted earnings per share attributable
to Macy’s, Inc. shareholders, excluding certain items identified
below, to GAAP net income and diluted earnings per share
attributable to Macy’s, Inc., shareholders, which the company
believes to be the most directly comparable GAAP measures.
13 Weeks 13 Weeks Ended Ended May 5, April 29, 2018
2017 Net income attributable to Macy’s, Inc. shareholders $
139 $ 78 Add back the pre-tax impact of impairment and other costs
(Note) 13 — Add back the pre-tax impact of premiums on the early
retirement of debt — 3 Deduct the income tax impact of certain
items identified above (3 ) (1 )
Net income attributable to Macy’s, Inc.
shareholders, excluding certain items identified above
$ 149 $ 80 Deduct the pre-tax impact of gains
on sale of real estate (24 ) (68 ) Add back the income tax impact
of gains on sale of real estate 6 26
Net income attributable to Macy’s, Inc.
shareholders, excluding gains on sale of real estate
and other certain items identified
above
$ 131 $ 38
Note: The above pre-tax adjustment excludes impairment and other
costs attributable to the noncontrolling interest shareholder of $6
million.
13 Weeks 13 Weeks Ended Ended
May 5, April 29, 2018 2017 Diluted earnings per share
attributable to Macy’s, Inc. shareholders $ 0.45 $ 0.26 Add back
the pre-tax impact of impairment and other costs 0.04 — Add back
the pre-tax impact of premiums on the early retirement of debt —
0.01 Deduct the income tax impact of certain items identified above
(0.01 ) (0.01 )
Diluted earnings per share attributable to
Macy’s, Inc. shareholders,
excluding certain items identified
above
$ 0.48 $ 0.26 Deduct the pre-tax impact of
gains on sale of real estate (0.08 ) (0.22 ) Add back the income
tax impact of gains on sale of real estate 0.02 0.08
Diluted earnings per share attributable to
Macy’s, Inc. shareholders,
excluding gains on sale of real estate and
other certain items identified above
$ 0.42 $ 0.12
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180516005654/en/
Macy’s, Inc.MediaBlair Fasbender Rosenberg,
646-429-6032media@macys.comorInvestorsMonica Koehler,
513-579-7780investors@macys.com
Macys (NYSE:M)
Historical Stock Chart
From Mar 2024 to Apr 2024
Macys (NYSE:M)
Historical Stock Chart
From Apr 2023 to Apr 2024