Macy’s, Inc. Reports Second Quarter Earnings and Reaffirms Full-Year Guidance
The company also reaffirmed its sales and earnings guidance for full-year 2017.
“Macy’s, Inc.’s results for the second quarter were in line with our expectations, and we are on track to meet 2017 sales and earnings guidance. We saw a notable contribution from the full execution of our new women’s shoe and jewelry models and the continued successful testing of Backstage in store. We are excited about plans for fall, including the launch of a new loyalty program and the new marketing strategy, which we anticipate will further improve our sales trend in the back half of the year,” said
Sales
Sales in the second quarter of 2017 totaled $5.552 billion, a decrease of 5.4 percent, compared with sales of $5.866 billion in the second quarter of 2016. The year-over-year decline in total sales reflects, in part, the closure of stores previously announced by the company. Comparable sales on an owned basis were down 2.8 percent in the second quarter and down 2.5 percent on an owned plus licensed basis.
Year to date,
Operating Income
For the first half of 2017,
Operating income for the second quarter included
Cash Flow
Net cash provided by operating activities was
The company repurchased approximately
During the quarter, the company repaid at maturity
Store Openings/Closings
In the second quarter, the company opened 16 new freestanding
Looking Ahead
Important Information Regarding Financial Measures
Please see the final pages of this news release for important information regarding the calculation of the company’s non-GAAP financial measures.
All statements in this press release that are not statements of historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of
NOTE: Additional information on
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Consolidated Statements of Income (Unaudited) (Note 1) |
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(All amounts in millions except percentages and per share figures) |
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13 Weeks Ended | 13 Weeks Ended | |||||||||||||||||
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$ |
% to |
$ |
% to |
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Net sales | $ | 5,552 | $ | 5,866 | ||||||||||||||
Cost of sales (Note 2) | 3,313 | 59.7 | % | 3,468 | 59.1 | % | ||||||||||||
Gross margin | 2,239 | 40.3 | % | 2,398 | 40.9 | % | ||||||||||||
Selling, general and administrative expenses | (1,934 | ) | (34.8 | %) | (2,026 | ) | (34.5 | %) | ||||||||||
Impairments and other costs (Note 3) | - | - | % | (249 | ) | (4.3 | %) | |||||||||||
Settlement charges (Note 4) | (51 | ) | (0.9 | %) | (6 | ) | (0.1 | %) | ||||||||||
Operating income | 254 | 4.6 | % | 117 | 2.0 | % | ||||||||||||
Interest expense – net | (79 | ) | (97 | ) | ||||||||||||||
Net premiums on early retirement of debt (Note 5) | 2 | - | ||||||||||||||||
Income before income taxes | 177 | 20 | ||||||||||||||||
Federal, state and local income tax expense (Note 6) | (64 | ) | (11 | ) | ||||||||||||||
Net income | 113 | 9 | ||||||||||||||||
Net loss attributable to noncontrolling interest | 3 | 2 | ||||||||||||||||
Net income attributable to |
$ | 116 | $ | 11 | ||||||||||||||
Basic earnings per share attributable to
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$ | .38 | $ | .03 | ||||||||||||||
Diluted earnings per share attributable to
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$ | .38 | $ | .03 | ||||||||||||||
Average common shares: | ||||||||||||||||||
Basic |
305.5 | 309.4 | ||||||||||||||||
Diluted | 306.5 | 311.3 | ||||||||||||||||
End of period common shares outstanding | 304.6 | 308.5 | ||||||||||||||||
Depreciation and amortization expense | $ | 244 | $ | 260 | ||||||||||||||
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Consolidated Statements of Income (Unaudited) |
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Notes: | ||
(1) | Because of the seasonal nature of the retail business, the results of operations for the 13 weeks ended |
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(2) | Merchandise inventories are valued at the lower of cost or market using the last-in, first-out (LIFO) retail inventory method. Application of the LIFO retail inventory method did not result in the recognition of any LIFO charges or credits affecting cost of sales for the 13 weeks ended |
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(3) | For the 13 weeks ended |
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(4) | For the 13 weeks ended |
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(5) | The 13 weeks ended |
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(6) | Federal, state and local income taxes differ from the federal income tax statutory rate of 35%, principally because of the effect of state and local taxes, including the settlement of various tax issues and tax examinations as well as the recognition of approximately |
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Consolidated Statements of Income (Unaudited) (Note 1) |
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(All amounts in millions except percentages and per share figures) |
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26 Weeks Ended | 26 Weeks Ended | |||||||||||||||||
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$ |
% to |
$ |
% to |
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Net sales | $ | 10,890 | $ | 11,637 | ||||||||||||||
Cost of sales (Note 2) | 6,619 | 60.8 | % | 6,984 | 60.0 | % | ||||||||||||
Gross margin | 4,271 | 39.2 | % | 4,653 | 40.0 | % | ||||||||||||
Selling, general and administrative expenses | (3,746 | ) | (34.3 | %) | (3,992 | ) | (34.3 | %) | ||||||||||
Impairments and other costs (Note 3) | - | - | % | (249 | ) | (2.1 | %) | |||||||||||
Settlement charges (Note 4) | (51 | ) | (0.5 | %) | (19 | ) | (0.2 | %) | ||||||||||
Operating income | 474 | 4.4 | % | 393 | 3.4 | % | ||||||||||||
Interest expense – net | (163 | ) | (195 | ) | ||||||||||||||
Net premiums on early retirement of debt (Note 5) | (1 | ) | - | |||||||||||||||
Income before income taxes | 310 | 198 | ||||||||||||||||
Federal, state and local income tax expense (Note 6) | (127 | ) | (74 | ) | ||||||||||||||
Net income | 183 | 124 | ||||||||||||||||
Net loss attributable to noncontrolling interest | 4 | 3 | ||||||||||||||||
Net income attributable to |
$ | 187 | $ | 127 | ||||||||||||||
Basic earnings per share attributable to
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$ | .61 | $ | .41 | ||||||||||||||
Diluted earnings per share attributable to
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$ | .61 | $ | .41 | ||||||||||||||
Average common shares: | ||||||||||||||||||
Basic | 305.2 | 310.0 | ||||||||||||||||
Diluted | 306.7 | 312.4 | ||||||||||||||||
End of period common shares outstanding | 304.6 | 308.5 | ||||||||||||||||
Depreciation and amortization expense | $ | 487 | $ | 520 | ||||||||||||||
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Consolidated Statements of Income (Unaudited) |
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Notes: | ||
(1) | Because of the seasonal nature of the retail business, the results of operations for the 26 weeks ended |
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(2) | Merchandise inventories are valued at the lower of cost or market using the last-in, first-out (LIFO) retail inventory method. Application of the LIFO retail inventory method did not result in the recognition of any LIFO charges or credits affecting cost of sales for the 26 weeks ended |
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(3) | For the 26 weeks ended |
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(4) | For the 26 weeks ended |
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(5) | The 26 weeks ended |
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(6) | Federal, state and local income taxes differ from the federal income tax statutory rate of 35%, principally because of the effect of state and local taxes, including the settlement of various tax issues and tax examinations as well as the recognition of approximately |
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Consolidated Balance Sheets (Unaudited) |
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(millions) |
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2017 | 2017 | 2016 | ||||||||||||
ASSETS: | ||||||||||||||
Current Assets: | ||||||||||||||
Cash and cash equivalents | $ | 783 | $ | 1,297 | $ | 1,000 | ||||||||
Receivables | 382 | 522 | 423 | |||||||||||
Merchandise inventories | 4,980 | 5,399 | 5,322 | |||||||||||
Prepaid expenses and other current assets | 412 | 408 | 471 | |||||||||||
Total Current Assets |
6,557 |
7,626 | 7,216 | |||||||||||
Property and Equipment – net | 6,822 | 7,017 | 7,187 | |||||||||||
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3,897 | 3,897 | 3,897 | |||||||||||
Other Intangible Assets – net | 493 | 498 | 502 | |||||||||||
Other Assets | 810 | 813 | 904 | |||||||||||
Total Assets | $ | 18,579 | $ | 19,851 | $ | 19,706 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | ||||||||||||||
Current Liabilities: | ||||||||||||||
Short-term debt | $ | 16 | $ | 309 | $ | 1,063 | ||||||||
Merchandise accounts payable | 1,669 | 1,423 | 1,877 | |||||||||||
Accounts payable and accrued liabilities | 2,873 | 3,563 | 2,514 | |||||||||||
Income taxes | 52 | 352 | 23 | |||||||||||
Total Current Liabilities | 4,610 | 5,647 | 5,477 | |||||||||||
Long-Term Debt | 6,301 | 6,562 | 6,567 | |||||||||||
Deferred Income Taxes | 1,512 | 1,443 | 1,448 | |||||||||||
Other Liabilities | 1,773 | 1,877 | 2,164 | |||||||||||
Shareholders’ Equity: | ||||||||||||||
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4,388 | 4,323 | 4,046 | |||||||||||
Noncontrolling interest | (5 | ) | (1 | ) | 4 | |||||||||
Total Shareholders’ Equity | 4,383 | 4,322 | 4,050 | |||||||||||
Total Liabilities and Shareholders’ Equity | $ | 18,579 | $ | 19,851 | $ | 19,706 |
Note: Certain reclassifications were made to prior year’s amounts to conform with the classifications of such amounts in the most recent years.
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Consolidated Statements of Cash Flows (Unaudited) |
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(millions) |
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26 Weeks Ended |
26 Weeks Ended |
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Cash flows from operating activities: | ||||||||||
Net income | $ | 183 | $ | 124 | ||||||
Adjustments to reconcile net income to net cash |
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Impairment and other costs | - | 249 | ||||||||
Settlement charges | 51 | 19 | ||||||||
Depreciation and amortization | 487 | 520 | ||||||||
Stock-based compensation expense | 31 | 37 | ||||||||
Gains on sale of real estate | (111 | ) | (35 | ) | ||||||
Amortization of financing costs and premium on |
(10 | ) | (1 | ) | ||||||
Changes in assets and liabilities: | ||||||||||
Decrease in receivables | 119 | 99 | ||||||||
Decrease in merchandise inventories | 419 | 184 | ||||||||
Increase in prepaid expenses and other current assets | (13 | ) | (40 | ) | ||||||
Increase in merchandise accounts payable | 261 | 307 | ||||||||
Decrease in accounts payable, accrued liabilities |
(540 | ) | (634 | ) | ||||||
Decrease in current income taxes | (301 | ) | (204 | ) | ||||||
Increase (decrease) in deferred income taxes | 24 | (26 | ) | |||||||
Decrease in other liabilities not separately identified | (64 | ) | (39 | ) | ||||||
Net cash provided by operating activities | 536 | 560 | ||||||||
Cash flows from investing activities: | ||||||||||
Purchase of property and equipment | (247 | ) | (293 | ) | ||||||
Capitalized software | (125 | ) | (151 | ) | ||||||
Disposition of property and equipment | 150 | 67 | ||||||||
Other, net | 9 | 39 | ||||||||
Net cash used by investing activities | (213 | ) | (338 | ) | ||||||
Cash flows from financing activities: |
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Debt repaid | (550 | ) | (3 | ) | ||||||
Financing costs | - | (3 | ) | |||||||
Dividends paid | (230 | ) | (228 | ) | ||||||
Increase (decrease) in outstanding checks | (64 | ) | 2 | |||||||
Acquisition of treasury stock | (1 | ) | (130 | ) | ||||||
Issuance of common stock | 2 | 27 | ||||||||
Proceeds from noncontrolling interest | 6 | 4 | ||||||||
Net cash used by financing activities | (837 | ) | (331 | ) | ||||||
Net decrease in cash and cash equivalents | (514 | ) | (109 | ) | ||||||
Cash and cash equivalents at beginning of period | 1,297 | 1,109 | ||||||||
Cash and cash equivalents at end of period | $ | 783 | $ | 1,000 |
Note: Certain reclassifications were made to prior year’s amounts to conform with the classifications of such amounts in the most recent years.
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Important Information Regarding Non-GAAP Financial Measures |
The Company reports its financial results in accordance with
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, where 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 diluted earnings per share attributable to
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.
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Important Information Regarding Non-GAAP Financial Measures |
Change in Comparable Sales
The following is a reconciliation of the 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), which the Company believes to be the most directly comparable GAAP financial measure.
13 Weeks |
26 Weeks |
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Decrease in comparable sales on an owned basis (Note 1) | (2.8 | )% | (4.0 | )% | ||||
Impact of growth in comparable sales of departments
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0.3 | % | 0.4 | % | ||||
Decrease in comparable sales on an owned plus licensed basis | (2.5 | )% | (3.6 | )% | ||||
Notes: | ||
(1) | Represents the period-to-period 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. | |
(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 via the |
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Important Information Regarding Non-GAAP Financial Measures |
Diluted Earnings Per Share Attributable to
The following is a reconciliation of the non-GAAP financial measure of diluted earnings per share attributable to
13 Weeks |
13 Weeks |
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Diluted earnings per share attributable to
|
$ | 0.38 | $ | 0.03 | |||||||
Add back the pre-tax impact of impairments and other costs | - | 0.80 | |||||||||
Add back the pre-tax impact of settlement charges | 0.17 | 0.02 | |||||||||
Deduct the pre-tax impact of net premiums associated with
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- | - | |||||||||
Deduct the income tax impact of certain items identified above | (0.07 | ) | (0.31 | ) | |||||||
Diluted earnings per share attributable to |
$ | 0.48 | $ | 0.54 | |||||||
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26 Weeks |
26 Weeks |
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Diluted earnings per share attributable to
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$ | 0.61 | $ | 0.41 | ||||||
Add back the pre-tax impact of impairments and other costs | - | 0.80 | ||||||||
Add back the pre-tax impact of settlement charges | 0.17 | 0.06 | ||||||||
Add back the pre-tax impact of net premiums associated with
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- | - | ||||||||
Deduct the income tax impact of certain items identified above | (0.07 | ) | (0.33 | ) | ||||||
Diluted earnings per share attributable to |
$ | 0.71 | $ | 0.94 | ||||||
Note: | |
(1) | The impacts during the 13 and 26 weeks ended |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170810005557/en/
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