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Macy's Reports Positive Holiday Sales

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  • File photo courtesy of Macy's

Annual earnings guidance raised due to solid holiday results and federal tax law change

$300MM in annualized cost savings to be reinvested in the business

CINCINNATI--(BUSINESS WIRE)--Jan. 4, 2018-- Macy’s, Inc. (NYSE:M) today announced that its comparable sales on an owned basis increased 1.0 percent in the months of November and December 2017 combined, compared to the same period last year. On an owned plus licensed basis, comparable sales increased 1.1 percent in the combined November/December period.

“Macy’s had a solid holiday shopping season, and we are pleased that our November/December performance resulted in positive comp sales for the period, setting us up for a positive fourth quarter. Consumers were ready to spend this season, and we delivered with solid execution, fresher inventory, a curated gift assortment and a focus on customer experience. We saw improved sales trends in our stores and continued to see double-digit growth on our digital platforms. Customers also responded well to our new loyalty program,” said Jeff Gennette, Macy’s, Inc. chief executive officer. “We intend to close the fourth quarter in a good position and head into 2018 with momentum.”

Macy’s, Inc. saw improved holiday sales across Macy’s, Macy’s Backstage, Bloomingdale’s, Bloomingdale’s The Outlet and Bluemercury, with exclusive gifts showing strong performance. Active apparel, shoes, dresses, coats, fine jewelry, men’s tailored clothing, children's and home were all top performers. Beauty was also a highlight and showed a marked improvement in trend, with particular strength in fragrance, prestige skincare and cosmetic gifting.

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“Our primary focus in 2017 has been to continue the strong growth of digital and mobile, stabilize our brick & mortar business and set the foundation for future growth. We’ve made good progress on each, including encouraging trend improvements in our brick & mortar business. A healthy store base combined with robust digital capabilities is Macy’s recipe for success,” continued Gennette. “Looking ahead to 2018, we are focused on continuous improvement and will take the necessary steps to move faster, execute more effectively and allocate resources to invest in growth.”

Cost Management to Reinvest in Growth

The company is also taking actions intended to continue improvements in organizational efficiency and to allocate resources to support its growth strategy. Major components of these restructuring activities include:

  • Staffing adjustments across the stores organization with reductions in some stores and increases in others;
  • Further streamlining in some non-store functions; and,
  • Closure of 11 stores in early 2018.

The company expects annual expense savings of $300 million from these actions beginning in fiscal-year 2018, which it intends to reinvest in the business. Also associated with these actions, the company anticipates one-time charges of approximately $160 million, or approximately 33 cents per share, (of which approximately $115 million is expected to be cash) to be booked in the fourth quarter of 2017 for restructuring activities, asset impairment, store closings and other costs.

Update on Store Closures

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The company announced the closure of 11 Macy’s stores, 4 of which were previously disclosed. With these closures, the company will have completed 81 of the approximately 100 planned store closures announced in August 2016. The company intends to close approximately 19 additional stores as leases or operating covenants expire or sale transactions are completed. These closures are part of a multi-year effort by the company to ensure the optimal mix of brick & mortar stores and digital footprint. Including the stores announced today, Macy’s, Inc. has closed 124 stores since 2015. A list of stores scheduled to close in early 2018 is included at the end of this news release.

2017 Guidance

Macy’s, Inc. is narrowing the range of its previously provided full-year sales guidance. The company now expects comparable sales on an owned basis to decline between 2.4 percent and 2.7 percent, with comparable sales on an owned plus licensed basis to decline between 2.0 percent and 2.3 percent. Total sales are expected to be down between 3.6 percent and 3.9 percent in fiscal 2017. Total sales for fiscal 2017 reflect a 53rd week, whereas comparable sales are on a 52-week basis.

Excluding the change in federal tax law, Macy’s, Inc. anticipates earnings results for full-year 2017 to be in the upper end of previously disclosed guidance. Additionally, due to the timing of its fiscal year, the company expects federal tax reform to result in an effective annual tax rate that is approximately one point lower than previously expected (approximately 36 percent vs. approximately 37 percent). As a result, the company is raising its full-year 2017 earnings guidance. The company now expects adjusted earnings per diluted share of between $3.59 and $3.69 in 2017, excluding the impact of the anticipated settlement charges, restructuring, asset impairments, store closings 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, adjusted earnings per diluted share of between $3.11 and $3.21 are expected in 2017 on the same basis.

 

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