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Macy's Inc
(NYSE: M) Add to Portfolio
$22.30
+0.38 (+1.73%)
as of Jun 21, 2019

Macy's, Inc. Reports First Quarter 2019 Earnings

--EPS and adjusted EPS of $0.44

--2019 strategic initiatives on track to deliver sales growth

--Company reaffirms annual 2019 sales and earnings guidance

Macy's, Inc. (NYSE:M) today reported results for the first quarter 2019 and reaffirmed annual sales and earnings guidance for fiscal 2019.

Financial Highlights
                                                                                       First Quarter
                                                                                  ----------------------
(in millions)                                                                         2019       2018
-------------------------------------------------------------------------------   ------------ ---------
Net sales                                                                          $ 5,504      $ 5,541
-------------------------------------------------------------------------------   -- -----     -- -----
Comparable sales
--------------------------------------------------------------------------------------------------------
Owned                                                                                  0.6  %
-------------------------------------------------------------------------------   -----------
Owned plus licensed                                                                    0.7  %
-------------------------------------------------------------------------------   -----------
As reported
--------------------------------------------------------------------------------------------------------
Net income attributable to Macy's, Inc. shareholders    $   136      $   139
-------------------------------------------------------------------------------   -- -----     -- -----
Earnings before interest, taxes, depreciation and amortization                     $   446      $   492
-------------------------------------------------------------------------------   -- -----     -- -----
Diluted earnings per share                                                         $  0.44      $  0.45
-------------------------------------------------------------------------------   -- -----     -- -----
As adjusted*
--------------------------------------------------------------------------------------------------------
Net income attributable to Macy's, Inc. shareholders    $   137      $   149
-------------------------------------------------------------------------------   -- -----     -- -----
Earnings before interest, taxes, depreciation and amortization                     $   447      $   505
-------------------------------------------------------------------------------   -- -----     -- -----
Diluted earnings per share                                                         $  0.44      $  0.48
-------------------------------------------------------------------------------   -- -----     -- -----

*As adjusted reflects the exclusion of certain items from the respective financial measures. Please see the final pages of this news release for important information regarding the nature of such excluded amounts and calculation of the company's non-GAAP financial measures.

"Macy's, Inc. is off to a solid start this year, delivering our sixth consecutive quarter of comparable sales growth and making progress against the North Star Strategy. As an omnichannel retailer, we are focused on growing our customer base by providing a great experience across all channels and taking market share category by category.Our brick & mortar sales trend improved sequentially in the first quarter, supported by the Growth50 stores and Backstage. We had another quarter of double-digit growth in our digital business, and mobile continues to be our fastest-growing channel," said Jeff Gennette, Macy's, Inc. chairman & chief executive officer."We are pleased with the progress we are making on our strategic initiatives as they continue to drive top-line growth, keeping us on track to reach our 2019 goals. We believe these initiatives, coupled with productivity improvements, position our company well for long-term profit growth."

Asset Sale Gains

Asset sale gains for the first quarter of 2019 totaled $43 million pre-tax, or $31 million after-tax and $0.10 per diluted share attributable to Macy's, Inc. shareholders. This compares to the first quarter of 2018, when asset sale gains totaled $24 million pre-tax, or $18 million after-tax and $0.06 per diluted share attributable to Macy's, Inc. shareholders.

Extended and Amended Bank Credit Facility

On May 9, 2019, the company entered into a new $1.5 billion, five-year Credit Agreement that will mature on May 9, 2024. This agreement replaces a previous $1.5 billion facility, which was set to expire in May 2021. Macy's, Inc. maintains a strong balance sheet, enabling the company to extend the maturity of the agreement on similar terms.

Looking Ahead

Macy's, Inc. is reaffirming its previously provided annual guidance for 2019.

2019 Annual Guidance
                                                                       -----------------------------------------------
Comparable sales                                                                                         Flat to up 1%
(owned plus licensed)
--------------------------------------------------------------------   -----------------------------------------------
Comparable sales                                                                                         Flat to up 1%
(owned)
--------------------------------------------------------------------   -----------------------------------------------
Net sales                                                                                           Approximately flat
--------------------------------------------------------------------   -----------------------------------------------
Diluted EPS excluding settlement charges, impairment and other costs                                    $3.05 to $3.25
--------------------------------------------------------------------   -----------------------------------------------
Asset sale gains                                                       Approximately $100 million (or $0.25 per share)
--------------------------------------------------------------------   -----------------------------------------------
Annual tax rate                                                                                                    23%
--------------------------------------------------------------------   -----------------------------------------------

About Macy's, Inc.

Macy's, Inc. is one of the nation's premier retailers, with fiscal 2018 sales of $24.971 billion and approximately 130,000 employees. The company operates approximately 680 department stores under the nameplates Macy's and Bloomingdale's, and nearly 190 specialty stores that include Bloomingdale's The Outlet, Bluemercury, and Macy's Backstage. Macy's, Inc. operates stores in 43 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, the effect of federal tax reform and potential changes to trade policies, 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 (May 15, 2019) at 9:30 a.m. ET. The webcast, along with the associated presentation, is accessible to the media and general public via the company's website at www.macysinc.com. Analysts and investors may call in on 1-888-254-3590, passcode 7241409. A replay of the conference call and slides 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.
                                                    Consolidated Statements of Income
                                                     (Unaudited) (Note 1 and Note 2)
                                                             (All amounts in
                                           millions except percentages and per share figures)
-------------------------------------------------------------------------------------------------------------------------
                                                                                  13 Weeks Ended                     13 Weeks Ended
                                                                                    May 4, 2019                        May 5, 2018
                                                                     ----------------------------------------- --------------------------
                                                                               $                  % to                $          % to
                                                                                                Net sales                      Net sales
                                                                     -----------------    ------------------   -----------    ---------
Net sales                                                                  $   5,504                             $ 5,541
Credit card revenues, net                                                        172                 3.1 %           157        2.8 %
Cost of sales                                                                 (3,403 )             (61.8 %)       (3,382 )    (61.0 %)
Selling, general and administrative expenses                                  (2,112 )             (38.4 %)       (2,083 )    (37.6 %)
Gains on sale of real estate                                                      43                 0.8 %            24        0.4 %
Impairment and other costs                                                        (1 )    -- %           (19 )     (0.3 %)
                                                                                     ---                       -------------
Operating income                                                                 203                 3.7 %           238        4.3 %
Benefit plan income, net                                                           7                                  11
Interest expense, net                                                            (47 )                               (66 )
                                                                     -------------------                       -------------
Income before income taxes                                                       163                                 183
Federal, state and local income tax expense                                      (27 )                               (52 )
                                                                     -------------------                       -------------
Net income                                                                       136                                 131
Net loss attributable to noncontrolling interest                      --                                   8
                                                                     ----------------                          ----------
Net income attributable to Macy's, Inc. shareholders                       $     136                             $   139
                                                                     ======= =======                           === =====
Basic earnings per share attributable to Macy's, Inc. shareholders         $    0.44                             $  0.45
                                                                     ======= ======= ===                       === ===== ===
Diluted earnings per share attributable to Macy's, Inc.                    $    0.44                             $  0.45
shareholders
                                                                     ======= ======= ===                       === ===== ===
Average common shares:
    Basic                                                                      309.1                               306.6
    Diluted                                                                    311.4                               309.4
End of period common shares outstanding                                        308.9                               306.4
Supplemental Financial Measures:
  Gross Margin (Note 3)                                                    $   2,101                38.2 %       $ 2,159       39.0 %
  Depreciation and amortization expense                                    $     236                             $   235
MACY'S, INC.
                                                 Consolidated Balance Sheets (Unaudited)
                                                                (Note 2)
                                                               (millions)
--------------------------------------------------------------------------------------------------------------------------
                                                                                      May 4,          February 2,          May 5,
                                                                                       2019              2019               2018
                                                                                 --------------    --------------    ----------------
ASSETS:
   Current Assets:
      Cash and cash equivalents                                                        $     737         $   1,162         $   1,531
      Receivables                                                                            237               400               250
      Merchandise inventories                                                              5,498             5,263             5,291
      Prepaid expenses and other current assets                                              633               620               638
                                                                                 ----------------  ----------------  ----------------
         Total Current Assets                                                              7,105             7,445             7,710
   Property and Equipment - net                                               6,499             6,637             6,575
   Right of Use Assets                                                                     2,631    --    --
   Goodwill                                                                                3,908             3,908             3,908
   Other Intangible Assets - net                                                441               478               486
   Other Assets                                                                              712               726               889
                                                                                 ----------------  ----------------  ----------------
         Total Assets                                                                  $  21,296         $  19,194         $  19,568
                                                                                 ======= =======   ======= =======   ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
   Current Liabilities:
      Short-term debt                                                                  $      41         $      43         $      25
      Merchandise accounts payable                                                         1,950             1,655             2,045
      Accounts payable and accrued liabilities                                             2,846             3,366             2,695
      Income taxes                                                                           182               168               312
                                                                                 ----------------  ----------------  ----------------
         Total Current Liabilities                                                         5,019             5,232             5,077
   Long-Term Debt                                                                          4,680             4,708             5,857
   Long-Term Lease Liability                                                               2,823    --    --
   Deferred Income Taxes                                                                   1,193             1,238             1,169
   Other Liabilities                                                                       1,258             1,580             1,664
 Shareholders' Equity:
   Macy's, Inc.                                                                            6,323             6,436             5,821
   Noncontrolling interest                                                        --    --               (20 )
                                                                                 ----------------  ----------------  ------------------
     Total Shareholders' Equity                                                            6,323             6,436             5,801
                                                                                 ----------------  ----------------  ----------------
         Total Liabilities and Shareholders' Equity         $  21,296         $  19,194         $  19,568
                                                                                 ======= =======   ======= =======   ======= =======
MACY'S, INC.
                                      Consolidated Statements of Cash Flows
                                         (Unaudited) (Note 2 and Note 4)
                                                   (millions)
------------------------------------------------------------------------------------------------------
                                                                                   13 Weeks          13 Weeks
                                                                                     Ended             Ended
                                                                                  May 4, 2019       May 5, 2018
                                                                             -------------------- --------------
Cash flows from operating activities:
   Net income                                                                      $     136        $   131
   Adjustments to reconcile net income to net cash provided (used) by
   operating activities:
      Impairment and other costs                                                           1             19
      Depreciation and amortization                                                      236            235
      Stock-based compensation expense                                                    14             17
      Gains on sale of real estate                                                       (43 )          (24 )
      Deferred income taxes                                                                7             19
      Benefit plans                                                                        8              9
      Changes in assets and liabilities:
          Decrease in receivables                                                        163            105
          Increase in merchandise inventories                                           (235 )         (115 )
          Increase in prepaid expenses and other current assets                           (6 )          (20 )
          Increase in merchandise accounts payable                                       247            415
          Decrease in accounts payable and accrued liabilities                          (516 )         (453 )
          Increase in current income taxes                                                 8             25
          Change in other assets and liabilities not separately identified               (58 )          (41 )
                                                                             -------------------  -------------
            Net cash provided (used) by operating activities                             (38 )          322
                                                                             -------------------  ----------
Cash flows from investing activities:
   Purchase of property and equipment                                                   (204 )         (132 )
   Capitalized software                                                                  (60 )          (58 )
   Disposition of property and equipment                                                  34             23
   Other, net                                                                             (7 )           11
                                                                             -------------------  ----------
            Net cash used by investing activities                                       (237 )         (156 )
                                                                             -------------------  -------------
Cash flows from financing activities:
   Debt repaid                                                                            (3 )           (3 )
   Dividends paid                                                                       (116 )         (116 )
   Decrease in outstanding checks                                                        (45 )          (10 )
   Issuance of common stock                                                                6             28
   Proceeds from noncontrolling interest                                      --              2
                                                                             ----------------     ----------
            Net cash used by financing activities                                       (158 )          (99 )
                                                                             -------------------  -------------
Net increase (decrease) in cash, cash equivalents and restricted cash                   (433 )           67
Cash, cash equivalents and restricted cash beginning of period                         1,248          1,513
                                                                             ----------------     ----------
Cash, cash equivalents and restricted cash end of period                           $     815        $ 1,580
                                                                             ======= =======      === =====

MACY'S, INC.

Consolidated Financial Statements (Unaudited)

Notes:

(1)  As a result of the seasonal nature of the retail business, the
     results of operations for the 13 weeks ended May 4, 2019 and May 5,
     2018 (which do not include the Christmas season) are not necessarily
     indicative of such results for the fiscal year.
(2)  The results for the 13 weeks ended May 4, 2019 reflect the adoption
     of Accounting Standards Update 2016-02 (ASU 2016-02), Leases, on
     February 3, 2019, utilizing the modified retrospective approach
     which allowed for transition in the period of adoption.
(3)  Gross margin is defined as net sales less cost of sales.
(4)  Restricted cash of $78 million and $49 million have been included
     with cash and cash equivalents for the 13 weeks ended May 4, 2019
     and May 5, 2018, respectively. Further, reclassifications were made
     to certain prior period's amounts to conform with the
     classifications of such amounts in the most recent period.

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 adjusting for 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. Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure which the company believes provides meaningful information about its operational efficiency by excluding the impact of changes in tax law and structure, debt levels and capital investment. In addition, management believes that excluding certain items from EBITDA, net income and 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 from period-to-period provides useful supplemental measures that assist in evaluating the company's ability to generate earnings and to more readily compare these metrics between past and future periods.

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, except that 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 excluding certain items because the timing and amount of excluded items 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
                          (All amounts in millions except
                        percentages and per share figures)
-----------------------------------------------------------------------------
Changes in Comparable Sales
-----------------------------------------------------------------------------
                                                                   13 Weeks Ended
                                                                     May 4, 2019
                                                                   --------------
Increase in comparable sales on an owned basis (Note 5)                      0.6%
Comparable sales growth impact of departments licensed to third              0.1%
parties (Note 6)
                                                                   --------------
Increase in comparable sales on an owned plus licensed basis                 0.7%
                                                                   ==============

Notes:

(5)  Represents the period-to-period percentage 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. Stores
     impacted by a natural disaster or undergoing significant expansion
     or shrinkage remain in the comparable sales calculation unless the
     store, or material portion of the store, is closed for a significant
     period of time. Definitions and calculations of comparable sales may
     differ among companies in the retail industry.
(6)  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 all online
     sales in the calculation of comparable sales. The company licenses
     third parties to operate certain departments in its stores and
     online and receives commissions from these third parties based on a
     percentage of their net sales. In its financial statements prepared
     in conformity with GAAP, the company includes these commissions
     (rather than sales of the departments licensed to third parties) in
     its net sales. The company does not, however, include any amounts in
     respect of licensed department sales (or any commissions earned on
     such sales) in its comparable sales in accordance with GAAP (i.e.,
     on an owned basis). The amounts of commissions earned on sales of
     departments licensed to third parties are not material to its net
     sales for the periods presented.

MACY'S, INC.

Important Information Regarding Non-GAAP Financial Measures

Earnings before Interest, Taxes, Depreciation and Amortization, Net Income and Diluted Earnings Per Share Attributable to Macy's, Inc. Shareholders, Excluding Certain Items

Non-GAAP financial measures, excluding certain items below, are reconciled to the most directly comparable GAAP measure as follows:

-- EBITDA and adjusted EBITDA are reconciled to GAAP net income attributable to Macy's, Inc. shareholders.

-- Adjusted net income attributable to Macy's, Inc. shareholders is reconciled to GAAP net income attributable to Macy's, Inc. shareholders.

-- Adjusted diluted earnings per share attributable to Macy's, Inc. shareholders is reconciled to GAAP diluted earnings per share attributable to Macy's, Inc. shareholders.

Adjusted EBITDA
                                                        13 Weeks Ended   13 Weeks Ended
                                                          May 4, 2019      May 5, 2018
                                                        --------------- ----------------
Net income attributable to Macy's, Inc. shareholders       $  136             $     139
  Interest expense, net                                        47                    66
  Federal, state and local income tax expense                  27                    52
  Depreciation and amortization                               236                   235
                                                        ----------      ----------------
EBITDA                                                        446                   492
  Impairment and other costs (Note 7)                           1                    13
                                                        ----------      ----------------
Adjusted EBITDA                                            $  447             $     505
                                                        ==== ====       ======= =======
Adjusted Net Income and Adjusted Diluted Earnings Per Share
Attributable to Macy's, Inc. Shareholders
                                                     13 Weeks Ended                    13 Weeks Ended
                                                       May 4, 2019                       May 5, 2018
                                           ----------------------------------- ------------------------------
                                              Net Income          Diluted         Net Income       Diluted
                                            Attributable to      Earnings       Attributable to   Earnings
                                             Macy's, Inc.        Per Share       Macy's, Inc.     Per Share
                                             Shareholders                        Shareholders
                                           --------------    --------------    -------------    ----------
As reported                                      $     136         $    0.44       $   139        $ 0.45
  Impairment and other costs (Note 7)                    1    --            13          0.04
  Income tax impact                         --    --            (3 )       (0.01 )
                                           ----------------  ----------------  ---------------  ------------
As adjusted to exclude certain item above        $     137         $    0.44       $   149        $ 0.48
                                           ======= =======   ======= =======   ===== =====      === ====

Note 7: The above pre-tax adjustment for the 13 weeks ended May 5, 2018 excludes impairment and other costs attributable to the noncontrolling interest shareholder of $6 million.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190515005482/en/

SOURCE: Macy's, Inc.

Media - Blair Fasbender Rosenberg646-429-6032media@macys.comInvestors - Mike McGuire513-579-7780investors@macys.com
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