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
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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221117005347/en/
Media – Chris Grams communications@macys.com
Investors – Pamela Quintiliano investors@macys.com
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