Net sales of $5 billion a decline of 7%
year-over-year; merchandise inventories down 7%
Diluted EPS of $0.56 and Adjusted Diluted EPS
of $0.56
$200 million of incremental cost savings
expected to be realized in fiscal 2023
Adjusts full-year sales and earnings
guidance
Macy’s, Inc. (NYSE: M) today reported financial results for the
first quarter of 2023 and updated its annual guidance.
“During the first quarter, we delivered a solid beat on our
gross margin rate and bottom line expectations enabled by our
disciplined teams, strength of our inventory management and
operational efficiencies. We planned the year assuming that the
economic health of the consumer would be challenged, but starting
in late March, demand trends weakened further in our discretionary
categories,” said Jeff Gennette, chairman and chief executive
officer of Macy’s, Inc.
“We have moved quickly to take the appropriate actions to meet
current consumer demand and manage our expenses. Our revised
guidance reflects incremental clearance markdowns to address excess
spring seasonal merchandise in the second quarter, along with
adjustments to the category composition and inventory levels in the
back half of the year. Supported by our solid foundation of
financial health, we remain focused on strengthening our core
business and advancing our five growth vectors – which we believe
will drive sustainable and profitable sales growth in the future,”
continued Gennette.
First Quarter Highlights
Comparisons are to the first quarter of 2022 unless noted
otherwise. Comparisons to 2019 are provided, where appropriate, to
benchmark performance. Please refer to note 2 within the financial
tables regarding reclassifications of certain prior year
metrics.
- Diluted earnings per share of $0.56 and Adjusted diluted
earnings per share of $0.56.
- This compares to diluted earnings per share of $0.98 and
Adjusted diluted earnings per share of $1.08 in the first quarter
of 2022.
- Net sales of $5 billion, down 7% versus the first quarter of
2022.
- Brick-and-mortar sales decreased 6% versus the first quarter of
2022.
- Digital sales decreased 8% versus the first quarter of
2022.
- Comparable sales down 7.9% on an owned basis and down 7.2%
on an owned-plus-licensed basis.
- Highlights of the company's nameplates include:
- Macy’s comparable sales were down 8.7% on an owned basis and
down 7.9%, on an owned-plus-licensed basis.
- 42.2 million active customers shopped the Macy’s brand, on a
trailing twelve-month basis.
- Star Rewards program members made up approximately 70% of
Macy's brand comparable owned-plus-licensed sales on a trailing
twelve-month basis, up approximately 1 percentage point versus the
prior year.
- The nameplate saw strength in beauty, particularly fragrances,
men’s tailored, women’s career sportswear and off-price with
Backstage.
- Bloomingdale’s comparable sales on an owned basis were down
3.9% and on an owned-plus-licensed basis were down 4.3%.
- 4.1 million active customers shopped the Bloomingdale’s brand,
on a trailing twelve-month basis.
- The nameplate saw strength across beauty, particularly
fragrances, women’s and men’s contemporary apparel, housewares and
the outlet locations.
- Bluemercury comparable sales were up 4.3% on an owned
basis.
- Approximately 676,000 active customers shopped the Bluemercury
brand, on a trailing twelve-month basis.
- The nameplate saw strength in the clinical and medical skincare
and color categories during the quarter.
- Other revenue of $191 million, a $26 million decrease.
- Represented 3.8% of net sales, down from 4.1% in the prior year
period.
- Performance driven largely by credit card revenue net which
reflected the impact of higher bad debt within the portfolio.
- Inventory turnover, on a trailing twelve-month basis, was
down 2% to 2022 and up 14% to 2019.
- Merchandise inventories were down 7% year-over-year and down
16% to 2019, reflecting ongoing disciplined inventory
management.
- The company is taking pricing actions in the second quarter to
sell through remaining first-quarter seasonal merchandise
inventories and May receipts at the Macy’s nameplate, and
anticipates end of second-quarter merchandise inventories to be
down low to mid-single digits compared to last year on a percentage
basis.
- Gross margin rate for the quarter was 40.0%, up from 39.6%
in the first quarter of 2022. Versus the first quarter of 2019,
gross margin rate increased 180 basis points from 38.2%.
- Merchandise margin was flat, benefiting from lean
beginning-of-year inventory levels and lower clearance markdowns,
offset by promotions and category mix shifts. Compared to the first
quarter of 2019, merchandise margin improved 310 basis points
primarily as a result of lower markdowns and promotions.
- Delivery expense as a percent of net sales was 40 basis points
better than the prior year primarily due to improvements in our
contracted carrier rates, reductions in packages per order, and a
1-percentage point decline in digital penetration year-over year.
Compared to the first quarter of 2019, delivery expense as a
percent of net sales was 130 bps higher primarily due to increased
digital penetration and higher fuel costs.
- Selling, general and administrative (“SG&A”) expense of
$2.0 billion, a $45 million increase.
- SG&A expense as a percent of total revenue was 37.7%, 350
basis points higher compared to the first quarter of 2022.
- The increase in minimum wage for stores colleagues was fully
implemented on May 1, 2022. The year-over-year dollar and rate
growth includes the impact of these increases.
- SG&A expense also includes continued investments in
colleagues across competitive pay, incentives and benefits.
Financial Highlights
All amounts in millions except percentages
and per share figures
First Quarter
2023
2022
Net sales
$
4,982
$
5,348
Other revenue
$
191
$
217
Comparable Sales
Owned
(7.9
%)
Owned-plus-licensed
(7.2
%)
Gross margin
$
1,994
$
2,117
Gross margin rate
40.0
%
39.6
%
Selling, general and administrative
expenses
$
1,950
$
1,905
Net Income
$
155
$
286
Earnings before interest, taxes,
depreciation and amortization (EBITDA)
$
466
$
676
Diluted earnings per share (EPS)
$
0.56
$
0.98
Adjusted Net income
$
157
$
315
Adjusted EBITDA
$
468
$
684
Adjusted Diluted EPS
$
0.56
$
1.08
Merchandise inventories
$
4,607
$
4,956
Dividend Declaration
On May 31, 2023, the board of directors of Macy's, Inc. declared
its regular quarterly dividend of 16.54 cents per share on Macy's,
Inc.’s common stock, payable July 3, 2023, to shareholders of
record as of the close of business on June 15, 2023.
2023 Guidance
The company is taking a cautious approach to the remainder of
the year and is reducing its annual 2023 sales and earnings
guidance to reflect anticipated macroeconomic impacts to the
consumer. On the low-end, updated guidance assumes macro pressures
on the consumer worsen. The high-end assumes heightened macro
pressures experienced in mid-March through April persist.
Additionally, it incorporates the second quarter markdown actions
the company is taking to clear out spring transitional and early
summer categories to support clean end-of-quarter inventories as
well as higher annual shortage rate than previously
anticipated.
The company’s updated earnings guidance also includes the
benefit of an incremental $200 million of cost savings identified
as part of ongoing expense management that is expected to impact
both gross margin and SG&A expense. The full updated outlook
for 2023, presented on a 53-week basis unless otherwise noted, can
be found in the presentation posted to macysinc.com/investors.
Guidance as of
June 1, 2023
Guidance as of
March 2, 2023
Net sales
$22.8 billion to $23.2
billion
$23.7 billion to $24.2
billion
Comparable owned-plus-licensed sales
change (52 week basis)
Down 7.5% to down 6% versus
2022
Down 4% to down 2% versus
2022
Adjusted diluted earnings per share*
$2.70 - $3.20
$3.67 - $4.11
* Adjusted diluted EPS does not consider
the impact of any potential future share repurchases associated
with the company’s current share repurchase authorization.
The company does not provide reconciliations of the
forward-looking non-GAAP measures of comparable owned plus licensed
sales change and adjusted diluted earnings per share 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. See
Important Information Regarding Financial Measures.
Conference Call and Webcasts
A webcast of Macy's, Inc.’s call with analysts and investors to
report its first quarter of 2023 sales and earnings will be held
today (June 1, 2023) 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. Analysts and investors may call
1-877-407-0832. A replay of the conference call will be available
on the company’s website or by calling 1-877-660-6853, using
passcode 13737454, about three hours after the conclusion of the
call. Additional information on Macy’s, Inc., including past news
releases, is available at www.macysinc.com/newsroom.
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, our ability to execute on our
strategies and achieve expectations related to environmental,
social, and governance matters, 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 28, 2023. 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
April 29, 2023
13 Weeks Ended
April 30, 2022
$
% to Net sales
% to Total revenue
$
% to Net sales
% to Total revenue
Net sales
$
4,982
$
5,348
Other revenue (Note 2)
191
3.8
%
217
4.1
%
Total revenue
5,173
5,565
Cost of sales
(2,988
)
(60.0
%)
(3,231
)
(60.4
%)
Selling, general and administrative
expenses
(1,950
)
(37.7
%)
(1,905
)
(34.2
%)
Gains on sale of real estate
11
0.2
%
42
0.8
%
Impairment, restructuring and other
costs
(2
)
—
%
(8
)
(0.1
%)
Operating income
244
4.7
%
463
8.3
%
Benefit plan income, net
4
7
Interest expense, net
(37
)
(47
)
Losses on early retirement of debt
—
(31
)
Income before income taxes
211
392
Federal, state and local income tax
expense (Note 3)
(56
)
(106
)
Net income
$
155
$
286
Basic earnings per share
$
0.57
$
1.01
Diluted earnings per share
$
0.56
$
0.98
Average common shares:
Basic
273.1
283.6
Diluted
277.8
290.9
End of period common shares
outstanding
272.5
269.7
Supplemental Financial Measures:
Gross Margin (Note 4)
$
1,994
40.0
%
$
2,117
39.6
%
Depreciation and amortization expense
$
218
$
206
MACY’S, INC.
Consolidated Balance Sheets (Unaudited) (Note
1)
(millions)
April 29, 2023
January 28, 2023
April 30, 2022
ASSETS:
Current Assets:
Cash and cash equivalents
$
603
$
862
$
672
Receivables
255
300
233
Merchandise inventories
4,607
4,267
4,956
Prepaid expenses and other current
assets
390
424
372
Total Current Assets
5,855
5,853
6,233
Property and Equipment – net
5,864
5,913
5,601
Right of Use Assets
2,715
2,683
2,736
Goodwill
828
828
828
Other Intangible Assets – net
432
432
434
Other Assets
1,174
1,157
1,140
Total Assets
$
16,868
$
16,866
$
16,972
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Merchandise accounts payable
$
2,415
$
2,053
$
2,865
Accounts payable and accrued
liabilities
2,233
2,750
2,456
Income taxes
134
58
222
Total Current Liabilities
4,782
4,861
5,543
Long-Term Debt
2,996
2,996
2,994
Long-Term Lease Liabilities
2,996
2,963
3,030
Deferred Income Taxes
916
947
968
Other Liabilities
1,008
1,017
1,159
Shareholders' Equity
4,170
4,082
3,278
Total Liabilities and Shareholders’
Equity
$
16,868
$
16,866
$
16,972
MACY’S, INC.
Consolidated Statements of Cash Flows (Unaudited) (Notes
1 and 5)
(millions)
13 Weeks Ended April 29, 2023
13 Weeks Ended April 30, 2022
Cash flows from operating activities:
Net income
$
155
$
286
Adjustments to reconcile net income to net
cash provided by operating activities:
Impairment, restructuring and other
costs
2
8
Depreciation and amortization
218
206
Benefit plans
2
5
Stock-based compensation expense
14
13
Gains on sale of real estate
(11
)
(42
)
Amortization of financing costs and
premium on acquired debt
3
2
Deferred income taxes
(32
)
(17
)
Changes in assets and liabilities:
Decrease in receivables
45
65
Increase in merchandise inventories
(340
)
(573
)
(Increase) decrease in prepaid expenses
and other current assets
32
(13
)
Increase in merchandise accounts
payable
374
639
Decrease in accounts payable and accrued
liabilities
(415
)
(424
)
Increase in current income taxes
82
122
Change in other assets and liabilities
(24
)
(29
)
Net cash provided by operating
activities
105
248
Cash flows from investing activities:
Purchase of property and equipment
(215
)
(171
)
Capitalized software
(81
)
(90
)
Disposition of property and equipment
25
73
Other, net
1
(6
)
Net cash used by investing activities
(270
)
(194
)
Cash flows from financing activities:
Debt issued
—
850
Debt issuance costs
—
(21
)
Debt repaid
(1
)
(1,139
)
Debt repurchase premium and expenses
—
(29
)
Dividends paid
(45
)
(45
)
Decrease in outstanding checks
(13
)
(126
)
Acquisition of treasury stock
(35
)
(584
)
Net cash used by financing activities
(94
)
(1,094
)
Net decrease in cash, cash equivalents and
restricted cash
(259
)
(1,040
)
Cash, cash equivalents and restricted cash
beginning of period
865
1,715
Cash, cash equivalents and restricted cash
end of period
$
606
$
675
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 weeks ended April
29, 2023 and April 30, 2022 (which do not include the Christmas
season) are not necessarily indicative of such results for the
fiscal year. (2)
Other Revenue is inclusive of the following amounts due to the
reclassification of Macy’s Media Network net revenue from SG&A
to Other Revenue. Reclassifications were made to the prior years’
amounts to conform with the classifications of such amounts in the
most recent year.
(millions)
13 Weeks Ended April 29, 2023
13 Weeks Ended April 30, 2022
$
% to Net sales
$
% to Net sales
Credit card revenues, net
$
162
3.3
%
$
191
3.6
%
Macy's Media Network revenue, net
29
0.6
%
26
0.5
%
Other Revenue
$
191
3.8
%
$
217
4.1
%
Net Sales
$
4,982
$
5,348
(3)
The income tax expense of $56 million and $106 million, or 26.5%
and 27.0% of pretax income, for the 13 weeks ended April 29, 2023
and April 30, 2022, 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 weeks ended April
29, 2023 and April 30, 2022 were impacted primarily by the effect
of state and local taxes and the vesting and cancellations of
certain stock-based compensation awards.
(4) Gross margin is defined as net sales less cost of sales. (5)
Restricted cash of $3 million has been included with cash and cash
equivalents for both the 13 weeks ended April 29, 2023 and April
30, 2022.
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 comparable owned plus licensed
sales change and adjusted diluted earnings per share 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. See
Important Information Regarding Financial Measures.
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 April 30, 2022
Macy's, Inc.
Macy's
Bloomingdale's
Increase (decrease) in comparable sales on
an owned basis (Note 6)
(7.9
%)
(8.7
%)
(3.9
%)
Impact of departments licensed to third
parties (Note 7)
0.7
%
0.8
%
(0.4
%)
Increase (decrease) in comparable sales on
an owned-plus-licensed basis
(7.2
%)
(7.9
%)
(4.3
%)
Notes:
(6)
Represents the period-to-period percentage
change in net sales from stores in operation for both the entire 13
weeks ended April 29, 2023 and April 30, 2022. 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. Macy’s and Bloomingdale’s license third parties
to operate certain departments in their stores and online and
receive commissions from these third parties based on a percentage
of their net sales, while Bluemercury does not participate in
licensed businesses. 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 April 29, 2023
13 Weeks Ended April 30, 2022
Net income
$
155
$
286
Interest expense, net
37
47
Losses on early retirement of debt
—
31
Federal, state and local income tax
expense
56
106
Depreciation and amortization
218
206
EBITDA
466
676
Impairment, restructuring and other
costs
2
8
Adjusted EBITDA
$
468
$
684
Adjusted Net Income and Adjusted Diluted
Earnings Per Share
13 Weeks Ended
April 29, 2023
13 Weeks Ended
April 30, 2022
Net Income
Diluted Earnings Per Share
Net Income
Diluted Earnings Per Share
As reported
$
155
$
0.56
$
286
$
0.98
Impairment, restructuring and other
costs
2
—
8
0.03
Losses on early retirement of debt
—
—
31
0.11
Income tax impact of certain items
identified above
—
—
(10
)
(0.04
)
As adjusted to exclude certain items
above
$
157
$
0.56
$
315
$
1.08
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230601005451/en/
Media – Chris Grams communications@macys.com Investors
– Pamela Quintiliano investors@macys.com
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