Macy’s, Inc. Reports Third Quarter 2017 Earnings Above Prior Year and Re-affirms Full-Year Guidance

CINCINNATI--(BUSINESS WIRE)-- Macy’s, Inc. (NYSE:M) today reported third quarter 2017 earnings per diluted share of 12 cents, or 23 cents per share excluding restructuring and other costs and non-cash retirement plan settlement charges. This compares with 5 cents per share in the third quarter of 2016, or 17 cents excluding non-cash retirement plan settlement charges.

The company also reaffirmed its sales and earnings guidance for full-year 2017.

“Overall, we're pleased with the results for the third quarter and we remain on track to meet our full-year sales and earnings guidance for 2017. Importantly, we also saw better gross margin performance primarily due to our tightly controlled inventory position. A highlight of the third quarter was the launch of the new Star Rewards loyalty program - our best customers are responding positively. We also saw continued double-digit growth in digital and are encouraged by the potential of Backstage in Macy’s stores,” said Jeff Gennette, Macy’s, Inc. chief executive officer.

“We are excited about our plans for holiday, which is when Macy’s truly shines as a gifting destination. The loyalty program, special in-store experiences and a strong mobile and online presence will help drive holiday sales. We are bringing our fashion authority to bear on holiday trends and have a strong product assortment. Our best customer will also find the convenience she expects and the holiday experiences she loves. Macy’s remains intensely focused on executing all aspects of our North Star Strategy. We expect continued improvement in our trends in the fourth quarter, including a solid lift from loyalty and digital, and intend to head into 2018 with momentum,” continued Gennette.

Sales

Sales in the third quarter of 2017 totaled $5.281 billion, a decrease of 6.1 percent, compared with sales of $5.626 billion in the third 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 4.0 percent in the third quarter and down 3.6 percent on an owned plus licensed basis.

Operating Income

Macy’s, Inc.’s operating income for the third quarter of 2017 totaled $121 million, or 2.3 percent of sales, compared to $107 million, or 1.9 percent of sales, for the third quarter of 2016. Operating income for the third quarter of 2017 totaled $176 million, or 3.3 percent of sales, excluding restructuring and other costs of $33 million and non-cash retirement plan settlement charges of $22 million. Operating income for the third quarter of 2016 totaled $169 million, or 3.0 percent of sales, excluding non-cash retirement plan settlement charges of $62 million.

Operating income for the third quarter included $65 million in book gains related to the sales of real estate compared to $41 million in the third quarter of 2016.

Cash Flow

Net cash provided by operating activities was $389 million in the first three quarters of 2017, compared with $308 million in the first three quarters of 2016. Net cash used by investing activities in the first three quarters of 2017 was $346 million, compared with $491 million in the first three quarters of 2016. Operating cash inflows net of investing were $43 million in the first three quarters of 2017, compared with cash outflows of $183 million in the first three quarters of 2016.

Store Openings/Closings

In the third quarter of 2017, the company opened eight new freestanding Bluemercury beauty specialty stores for a total of 135 stores and seven new Macy’s Backstage off-price stores within existing Macy’s stores for a total of 45 locations. During the quarter, the company announced that it will close the following stores in early 2018: Laguna Hills Mall in Laguna Hills, CA; Stonestown Galleria in San Francisco, CA; and Westside Pavilion in Los Angeles, CA.

Looking Ahead

Macy’s, Inc. reaffirms its previously provided guidance for full-year 2017. The company expects comparable sales on an owned basis to decline between 2.2 percent and 3.3 percent, with comparable sales on an owned plus licensed basis to decline between 2.0 percent and 3.0 percent. Total sales are expected to be down between 3.2 percent and 4.3 percent in fiscal 2017. Total sales for fiscal 2017 reflect a 53rd week, whereas comparable sales are on a 52-week basis. As previously announced in August, the company expects a 1 cent increase in adjusted earnings per diluted share due to the restructuring of our merchandising operations. Macy’s, Inc. now expects adjusted earnings per diluted share of between $3.38 and $3.63 in 2017, excluding the impact of the anticipated settlement charges, restructuring and other costs and net premiums and fees associated with debt repurchases. Excluding the impact of the anticipated fourth quarter gain on the sale of the Union Square Men’s building in San Francisco and the anticipated settlement charges, restructuring and other costs and net premiums and fees associated with debt repurchases, adjusted earnings per diluted share of $2.91 to $3.16 are expected in 2017.

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 2016 sales of $25.778 billion and approximately 140,000 employees, the company operates more than 700 department stores under the nameplates Macy’s and Bloomingdale’s, and approximately 160 specialty stores that include Bloomingdale’s The Outlet, Bluemercury and Macy’s Backstage. Macy’s, Inc. operates stores in 45 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, 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 (November 9) at 10 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 1-888-394-8218, passcode 3593887. 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. is scheduled to present at the Morgan Stanley Annual Global Consumer & Retail Conference at 8:40 a.m. ET on Tuesday, November 14, in New York City. Media and investors may access a live audio webcast of the presentation at www.macysinc.com/ir on November 14. A replay of the webcast will be available on the company's website.

Note: Certain reclassifications were made to prior year’s amounts to conform with the classifications of such amounts in the most recent years.

Note: Certain reclassifications were made to prior year’s amounts to conform with the classifications of such amounts in the most recent years.

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 the impact of growth in 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. In addition, management believes that excluding certain items from operating income or 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 leverage sales and to more readily compare these metrics between past and future periods. Further, providing cash flow from operating activities net of cash used in investing activities is a useful measure in evaluating the Company’s ability to generate cash from operations after giving effect to cash used by investing activities.

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 Macy’s, Inc. shareholders because the timing and amount of excluded items (e.g., asset impairment charges, restructuring and other costs, retirement plan settlement charges and net premiums on the early retirement of debt) 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

Diluted Earnings Per Share Attributable to Macy's, Inc. Shareholders, Excluding Certain Items

The following is a reconciliation of the non-GAAP financial measure of diluted earnings per share attributable to Macy’s, Inc. shareholders, excluding certain items identified below, to GAAP diluted earnings per share attributable to Macy’s, Inc., shareholders, which the Company believes to be the most directly comparable GAAP measure.

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Macy’s, Inc.

Media

Blair Fasbender Rosenberg, 646-429-6032

[email protected]

or

Investors

Monica Koehler, 513-579-7780

[email protected]

Source: Macy’s, Inc.