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Macy's Affirms Full Year Guidance

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Macy’s, Inc. Reports Second Quarter Earnings and Reaffirms Full-Year Guidance

CINCINNATI--(BUSINESS WIRE)--Aug. 10, 2017-- Macy’s, Inc. (NYSE:M) today reported second quarter 2017 earnings per diluted share of 38 cents, or 48 cents per share excluding non-cash retirement plan settlement charges and net premiums and fees associated with debt repurchases. This compares with 3 cents per share in the second quarter of 2016, or 54 cents excluding asset impairment and other charges primarily related to store closings and non-cash settlement charges.

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 Jeff Gennette, Macy’s president and chief executive officer. “We are working with a mindset of continuous improvement and will adapt our business in order to reach our goal of stabilizing the brick-and-mortar business while investing for accelerated growth in digital and mobile. Key to this strategy is engaging our customers with an improved experience that includes more elevated and exclusive assortments, a better integration of technology both online and in the store, and additional enhancements intended to drive traffic and sales. There is still work ahead of us, however, I’m encouraged by the progress we’re making on overall performance.”

Macy's, Inc.'s earnings per diluted share in the first half of 2017 were 61 cents, or 71 cents excluding non-cash settlement charges and net premiums and fees associated with debt repurchases, compared with 41 cents per share, or 94 cents excluding asset impairment and other charges primarily related to store closings and non-cash settlement charges, in the first half of 2016.

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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, Macy’s, Inc.’s sales totaled $10.890 billion, down 6.4 percent from total sales of $11.637 billion in the first half of 2016. Comparable sales on an owned basis were down 4.0 percent in the first half of 2017 and down 3.6 percent on an owned plus licensed basis.

Operating Income

Macy’s, Inc.’s operating income totaled $254 million or 4.6 percent of sales for the second quarter of 2017 compared to $117 million, or 2.0 percent of sales for the second quarter of 2016. Excluding non-cash settlement charges of $51 million, operating income for the second quarter of 2017 totaled $305 million or 5.5 percent of sales. Excluding asset impairment and other charges primarily related to store closings of $249 million and non-cash settlement charges of $6 million, operating income for the second quarter of 2016 totaled $372 million or 6.4 percent of sales.

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For the first half of 2017, Macy’s, Inc.’s operating income totaled $474 million or 4.4 percent of sales compared to $393 million or 3.4 percent of sales for the first half of 2016. Excluding non-cash settlement charges of $51 million, operating income for the first half of 2017 totaled $525 million or 4.8 percent of sales. Excluding asset impairment and other charges of $249 million and non-cash settlement charges of $19 million, operating income for the first half of 2016 totaled $661 million or 5.7 percent of sales.

Operating income for the second quarter included $43 million in book gains related to the sales of real estate compared to $21 million in the second quarter of 2016. For the first half of 2017, operating income included $111 million in book gains related to the sales of real estate compared to $35 million in the first half of 2016.

Cash Flow

Net cash provided by operating activities was $536 million in the first half of 2017, compared with $560 million in the first half of 2016. Net cash used by investing activities in the first half of 2017 was $213 million, compared with $338 million in the first half of 2016. Operating cash flows net of investing were $323 million in the first half of 2017, compared with $222 million in the first half of 2016.

The company repurchased approximately $101 million face value of senior notes and debentures in the second quarter of 2017. The debt repurchases were made in the open market for a total cost of approximately $108 million, including expenses related to the transactions. For the first half of 2017, the company repurchased approximately $247 million face value of senior notes and debentures at a total cost of approximately $257 million.

During the quarter, the company repaid at maturity $300 million of 7.45 percent senior debentures, due July 2017.

Store Openings/Closings

In the second quarter, the company opened 16 new freestanding Bluemercury beauty specialty stores and 12 new Macy’s Backstage off-price stores within existing Macy’s stores. As previously announced, the company closed two Macy’s stores in Temple, TX, and Dublin, OH, in the quarter. Subsequent to the end of the second quarter, the company announced that it will close the Macy’s store at Magic Valley Mall in Twin Falls, ID, in early 2018.

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. Adjusted earnings per diluted share of between $3.37 and $3.62 are expected in 2017, excluding the impact of the anticipated settlement charges 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 and net premiums and fees associated with debt repurchases, adjusted earnings per diluted share of $2.90 to $3.15 are expected in 2017.

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 150 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.

 

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