The May Department Stores Company Announces Fourth Quarter Earnings
Increase, $500 Million Share Repurchase, and $200 Million Debt
Redemption; Increases Dividend to 97 Cents Per Share ST. LOUIS,
Feb. 12 /PRNewswire-FirstCall/ -- The May Department Stores Company
today announced increased earnings per share, net earnings, and net
sales for the 2003 fourth quarter, which ended Jan. 31, 2004.
Fourth quarter 2003 earnings per share were $1.38, compared with
earnings per share of $1.26 in 2002. Earnings were $425 million
versus $387 million a year ago. Earnings for the fourth quarter of
2003 include store divestiture costs of $4 million, or 1 cent per
share. Excluding these costs, 2003 fourth quarter earnings were
$427 million, or $1.39 per share. Fourth quarter 2002 earnings were
$391 million, or $1.28 per share, excluding division combination
charges of $6 million, or 2 cents per share. Fourth quarter 2002
earnings also include a tax credit of 8 cents per share. Net sales
for the 2003 fourth quarter were $4.49 billion, a 2.7% increase,
compared with $4.37 billion in the similar period last year.
Store-for-store sales increased 0.8% for the quarter. "I am pleased
our associates achieved these sales and earnings increases in the
fourth quarter," said Gene S. Kahn, May's chairman and chief
executive officer. "I am hopeful the economy will continue to
strengthen and our sales momentum will extend through the year."
Diluted earnings per share for fiscal 2003 were $1.41, compared
with $1.76 in fiscal 2002. These amounts include tax credits of 10
cents in 2003 and 8 cents in 2002. Earnings were $434 million,
compared with $542 million in the prior year. Earnings for 2003
include store divestiture costs of $328 million, or 67 cents per
share. Excluding these costs, 2003 earnings were $641 million, or
$2.08 per share. Earnings for 2002 were $618 million, or $2.00 per
share, excluding division combination costs of $114 million, or 24
cents per share. Net sales for fiscal 2003 were$13.34 billion, a
1.1% decrease, compared with $13.49 billion in fiscal 2002.
Store-for-store sales decreased 2.8% for the year. Stock
Repurchase, Debt Redemption, and Dividend Increase May's board of
directors approved a special repurchase of up to$500 million of May
common stock. The board also approved continuation of the company's
ongoing common stock repurchase program in connection with the
company's employee benefit plans. The company expects to make the
stock repurchases through open-market transactions based on market
conditions. In addition, the company intends to redeem $200 million
of 8-3/8% debentures due in 2024. Both the stock repurchases and
the debt redemption will be accomplished with internally generated
funds. The company does not expect to issue any long-term debt
during 2004. The board also approved an increase in the annual
dividend rate to 97 cents per share from 96 cents per share. The
board declared a quarterly dividend of 24-1/4 cents per share,
payable March 15, 2004, to shareowners of record as of March 1,
2004. This is the 29th consecutive year of dividend increases and
represents 93 years of uninterrupted cash dividends. Fiscal 2003
Highlights Mr. Kahn noted the following achievements in 2003: * Our
operating cash flow was $1.7 billion, one of the strongest in the
retail industry. This strength enables us to make acquisitions,
build new stores, remodel and expand existing stores, repurchase
stock, and reduce debt. * We opened 10 new department stores in
2003: three Foley's stores, three Kaufmann's stores, and one store
each for Famous-Barr, Filene's, Hecht's, and Meier & Frank. The
new stores added 1.7 million square feet of retail space. * We plan
to open nine department stores in 2004: two Foley's stores, two
Hecht's stores, and one store each for Filene's, Lord & Taylor,
Meier & Frank, Robinsons-May, and The Jones Store. Six stores
will be built as anchors in traditional malls, while three will be
located in "off-mall" retail settings. * Improved fourth quarter
results were achieved by delivering greater value with the right
product and assortments, teamed with our Superior Value merchandise
programs and a strengthened multi-media sales promotion effort.
Newness, fashion, and fun - priced right - fueled sales. We
enhanced the value in our assortments, while growing higher
price-point segments of the business across the store. Upscale
fragrances, prestige skin care products, status handbags, cashmere
sweaters, and designer dress shirts were among the strong
performers. The customer responded to an enhanced selection of
non-apparel gifts; new merchandise categories such as Apple iPods,
DVD players, and home decor items; and newly added resources such
as Izod ladies' sportswear, exclusively ours, and Ecko Red and
Rocawear in juniors. * We continued repositioning Lord & Taylor
during the year to increase its distinctiveness, returning this
franchise to its strength as an upscale retailer. Repositioning
initiatives included improved selections of distinctive merchandise
with style as well as broader appeal; enhanced store design and a
more modern, inviting shopping environment; and more sophisticated
marketing and advertising. * We stepped up our initiatives to
pursuethe younger customer while still serving the needs of our
core customer -- the baby boomer. We also focused on merchandise
for casual, relaxed lifestyles, but remain committed to tailored
and dress-up assortments as well. We pursued the modern and more
fashionable elements of the business with greater intensity, and
began working diligently to provide more distinctive and exclusive
product offerings. * We also made strong inroads in our
fashion-right proprietary brands. This merchandise -- with its
superior price-to-value relationship -- continued to be
well-received in 2003. These high-quality, exclusive products
attracted a broader customer base to our department stores and
differentiated our offerings from the competition. Our goal is to
grow our proprietary merchandise to 20% of total sales within five
years. * Our Bridal Group continued to expand its national presence
by acquiring 225 tuxedo stores, including 125 Gingiss Formalwear
and Gary's Tux Shop stores, 64 Desmonds Formalwear stores, and 25
Modern Tuxedo stores. In addition, we opened 30 David's Bridal
stores and 10 After Hours stores in 2003. We plan to open 30
David's Bridal stores, 20 After Hours stores, and two Priscilla of
Boston stores in 2004. Also during the year, wecontinued to take
steps, including the adjusting of the workforce in our department
stores, to help keep our store expenses aligned with sales. In July
2003, we announced our intention to divest 34 underperforming
department stores, consisting of 32 Lord & Taylor stores, one
Famous-Barr store, and one Jones Store location. We expect annual
savings from these divestitures to be approximately $50 million. By
fiscal year-end, we closed nine of these stores. At the end of
fiscal 2003, The May Department Stores Company operated 444
department stores under the names of Lord & Taylor,
Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, L.S. Ayres,
Meier & Frank, Robinsons-May, Strawbridge's, and The Jones
Store, as well as 210 David's Bridal stores, 460 After Hours
Formalwear stores, and 10 Priscilla of Boston stores in its Bridal
Group. May operates in 46 states, the District of Columbia, and
Puerto Rico. The company discloses earnings and earnings per share
on both a GAAP basis and excluding restructuring costs because it
believes these are important metrics and are presented to enhance
comparability between years. These metrics are used internally to
evaluate results from operations. This release also contains
forward-looking statements as defined by the Private Securities
Litigation Reform Act of 1995. While this release reflects all
available information and management's judgment and estimates of
current and anticipated conditions and circumstances and is
prepared with the assistance of specialists within and outside the
company, there are many factors outside of our control that have an
impact on our operations. Such factors include but are not limited
to competitive changes, general and regional economic conditions,
consumer preferences and spending patterns, availability of
adequate locations for building or acquiring new stores, and our
ability to hire and retain qualified associates. Because of these
factors, actual performance could differ materially from that
described in forward-looking statements. THE MAY DEPARTMENT STORES
COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED RESULTS OF
OPERATIONS (Unaudited) 52 Weeks Ended Jan. 31, 2004 Feb. 1, 2003 %
to % to $ Net Sales $ Net Sales (millions, except per share) Net
sales $ 13,343 $13,491 Cost of sales: Recurring 9,372 70.3% 9,440
70.0% Restructuring markdowns 6 0.0 23 0.2 Selling, general, and
administrative expenses 2,686 20.1 2,772 20.5 Restructuring costs
322 2.4 91 0.7 Interest expense, net 318 2.4 345 2.5 Earnings
before income taxes 639 4.8 820 6.1 Provision for income taxes 205
32.1* 278 33.9* Net earnings $ 434 3.3% $ 542 4.0% Diluted earnings
per share** $1.41 $1.76 Excluding restructuring costs: Net earnings
$ 641 4.8% $ 618 4.6% Diluted earnings per share** $2.08 $2.00
Dividends paid per common share $0.96 $0.95 Diluted average shares
and equivalents 307.0 307.9 13 Weeks Ended Jan. 31, 2004 Feb. 1,
2003 (millions, except % to % to per share) $ Net Sales $ Net Sales
Net sales $4,494 $4,373 Cost of sales: Recurring 3,006 66.9% 2,947
67.4% Restructuring markdowns 5 0.1 - 0.0 Selling, general, and
administrative expenses 731 16.2766 17.5 Restructuring costs (1)
0.0 6 0.2 Interest expense, net 80 1.8 80 1.8 Earnings before
income taxes 673 15.0 574 13.1 Provision for income taxes 248 37.0*
187 32.6* Net earnings $ 425 9.4% $ 387 8.9% Diluted earnings per
share** $1.38 $1.26 Excluding restructuring costs: Net earnings $
427 9.5% $ 391 9.0% Diluted earnings per share** $1.39 $1.28
Dividends paid per common share $0.24 $0.23-3/4 Diluted average
shares and equivalents 307.0 306.2 * Percent represents effective
income tax rate. ** Based on earnings available for common
shareowners. See notes to financial information. Net Sales -
Percent Increase/(Decrease) From Prior Year Net sales include
merchandise sales and lease department income. Store-for-store
sales compare sales of stores open during both years beginning the
first day a new store has prior year sales and excludes sales of
stores closed during both periods. 52 Weeks Ended 13 Weeks Ended
Jan. 31, 2004 Jan. 31, 2004 Store-for- Store-for- Total: Store:
Total: Store: (1.1)% (2.8)% 2.7% 0.8% THE MAY DEPARTMENT STORES
COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and Subject to Reclassification) (millions) Jan. 31,
Feb. 1, ASSETS 2004 2003 Cash and cash equivalents $ 564 $55
Accounts receivable, net 1,715 1,741 Merchandise inventories 2,737
2,857 Other current assets 69 82 Total Current Assets 5,085 4,735
Property and equipment, net 5,149 5,466 Goodwill and other
intangibles 1,672 1,617 Other assets 133 131 Total Assets $12,039
$11,949 LIABILITIES AND Jan. 31, Feb. 1, SHAREOWNERS' EQUITY 2004
2003 Notes payable $ - $ 150 Current maturities of long-term debt
239 139 Accounts payable and accrued expenses 2,388 2,260 Total
Current Liabilities 2,627 2,549 Long-term debt 3,797 4,035 Deferred
income taxes 773 710 Other liabilities 507 507 ESOP preference
shares 235 265 Unearned compensation (91) (152) Shareowners' equity
4,191 4,035 Total Liabilities and Shareowners' Equity $12,039
$11,949 THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and
Subject to Reclassification) (millions) 52 Weeks Ended Jan. 31,
Feb. 1, 2004 2003 Operating activities: Net earnings $434 $542
Depreciation and amortization 564 557 Store divestiture asset
impairments 317 - Decrease in working capital and other 371 361
Total operating activities 1,686 1,460 Investing activities: Net
additions to property and equipment, and business combinations
(630) (790) Total investing activities (630) (790) Financing
activities: Net issuances (payments) of notes payable and long-term
debt (228) (362) Net (purchases) issuances of common stock (26)
(14) Dividend payments (293) (291) Total financing activities (547)
(667) Increase in cash and cash equivalents 509 3 Cash and cash
equivalents, beginning of year 55 52 Cash and cash equivalents, end
of year $564 $55 THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION Cost of Sales
-- For the 52 weeks ended Jan. 31, 2004, recurring cost of sales as
a percent of net sales increased 0.3% because of a 0.3% increase in
occupancy costs. For the 13 weeks ended Jan. 31, 2004, recurring
cost of sales as a percent of net sales decreased 0.5% because of a
0.3% decrease in occupancy costs and a 0.2% decrease in the cost of
merchandise. In 2003, restructuring markdowns of $6 million were
incurred on inventory liquidation sales as stores to be divested
were closed. Restructuring markdowns of $23 million were incurred
in 2002 related to division combinations to conform merchandise
assortments and synchronize pricing and promotional strategies.
Selling, General, and Administrative Expenses (SG&A) -- The
decrease in SG&A expenses as a percent of net sales from 20.5%
in 2002 to 20.1% in 2003 is due to a 0.3% decrease in payroll, a
0.3% decrease incredit costs, and a 0.2% decrease in advertising
costs, offset by a 0.4% increase in pension and other costs. The
decrease in SG&A expenses as a percent of net sales from 17.5%
in the fourth quarter of 2002 to 16.2% in the fourth quarter of
2003 is due to a 0.5% decrease in payroll, a 0.3% decrease in
advertising costs, a 0.3% decrease in credit expense, and a 0.4%
decrease in other expenses, offset by a 0.2% increase in pension
costs. Restructuring Costs -- Store Divestitures - In the second
quarter of 2003, the company announced its intention to divest 34
underperforming department stores. These divestitures will result
in total estimated charges of approximately $380 million,
consisting of asset impairments of $317 million, inventory
liquidation losses of $25 million, severance benefits of $23
million, and other charges of approximately $15 million.
Approximately $50 million of the $380 million represents the cash
cost of the store divestitures, not including the benefit from
future tax credits. Of the $380 million of expected total charges,
$4 million was recognized in the fourth quarter of 2003 and $328
million was recognized in fiscal 2003. Asset impairment charges
were recorded to reduce store assets to their estimated fair value
due to the shorter period over which they will be used. Estimated
fair values were based on estimated market values for similar
assets. The company will continue to fulfill its obligations under
existing agreements to operate each store until satisfactory
arrangements are negotiated for divestiture. For certain stores,
this process may take three or more years to complete. Through the
end of the 2003 fourth quarter, nine stores have been closed.
Severance benefits of $6 million for approximately 900 associates
and inventory liquidation and other costs of $5 million have been
incurred to date. Remaining amounts will be recognized as each
store is divested. Division Combination Costs - In 2002,
restructuring charges of $114 million were recognized, of which
$102 million resulted from the Filene's/Kaufmann's and
Robinsons-May/Meier & Frank division combinations and $12
million resulted from the closure of the Arizona Credit Center and
realignment of the company's data centers. Of the total charges, $6
million was recognized in the fourth quarter of 2002. As of Jan.
31, 2004, severance benefits of $2 million are payable to former
associates whose jobs were eliminated in these combinations. All
severance will be paid by the end of 2004. Income Taxes -- The
effective tax rate for 2003 was 32.1%, compared with 33.9% in 2002.
The 2003 and 2002 effective tax rates include the effect of income
tax credits recorded upon the resolution of various federal and
state tax issues: $31 million in the first quarter of 2003 and $25
million in the fourth quarter of 2002. Excluding the tax credits,
the 2003 and 2002 effective tax rates were 37.0%. Interest Expense
-- For the 52 weeks ended Jan. 31, 2004, the interest expense
decrease of $27 million was due to favorable interest on long-term
debt and a $10 million decrease in redemption costs, offset by a $7
million decrease in the amount of capitalized interest. Impact of
New Accounting -- In May 2003, FASB issued SFAS No. 150,
"Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity." SFAS No. 150 establishes standards
that require companies to classify certain financial instruments as
liabilities that were previously classified as equity. The company
did not reclassify any financial instruments as a result of
adopting SFAS No. 150. Reclassifications -- Certain prior-year
amounts have been reclassified to conform with the current-year
presentation. THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (millions, except per share) 2003* 2002** 2001
2000 1999 1998 Net sales $13,343 $13,491 $13,883 $14,210 $13,562
$12,792 Operating earnings $ 957 $ 1,165 $ 1,493 $ 1,747 $ 1,810 $
1,673 Memo: LIFO credit included in operating earnings - - (30)
(29) (30) (28) Percent of sales 7.2% 8.6% 10.8% 12.3% 13.3% 13.1%
Memo: LIFO credit 0.0% 0.0% (0.2)% (0.2)% (0.2)% (0.2)% Interest
expense, net (318) (345) (354) (345) (287 (278) Earnings before
income taxes 639 8201,139 1,402 1,523 1,395 Provision for income
taxes (205) (278) (436) (544) (596) (546) Net earnings $ 434 $ 542
$ 703 $ 858 $ 927 $ 849 Diluted earnings per share $ 1.41 $ 1.76 $
2.21 $ 2.62 $ 2.60 $ 2.30 Net earnings as a percent of sales 3.3%
4.0% 5.1% 6.0% 6.8% 6.6% Return on beginning net assets 9.7% 11.8%
15.5% 19.5% 20.7% 19.8% Returnon shareowners' beginning equity
10.7% 14.1% 18.2% 21.0% 24.1% 22.2% Dividends paid per common share
$ 0.96 $ 0.95 $ 0.94 $ 0.93 $ 0.89 $ 0.85 Annual dividend rate per
common share effective March 15, 2004 $ 0.97 All years are 52-week
fiscal years except 2000, which included 53 weeks. * Amounts
include restructuring costs for store divestitures of $328 million
($207 million after-tax), or $0.67 per share. ** Amounts include
restructuring costs for division combinations of $114 million ($76
million after-tax), or $0.24 per share. CONTACT: Sharon Bateman The
May Department Stores Company (314) 342-6494 DATASOURCE: The May
Department Stores Company CONTACT: Sharon Bateman of The May
Department Stores Company, +1-314-342-6494
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