The May Department Stores Company Reports Results for the Second
Quarter and First Six Months of Fiscal 2004 ST. LOUIS, Aug. 10
/PRNewswire-FirstCall/ -- The May Department Stores Company
(NYSE:MAY) today announced results for the second quarter of fiscal
2004. For the 13 weeks ended July 31, 2004, earnings per share were
33 cents, compared with a net loss per share of 39 cents in the
similar period a year ago. Net earnings were $101 million, compared
with a net loss of $110 million the prior year. Second quarter 2004
earnings included store divestiture costs of $15 million, or 3
cents per share. Excluding these costs, 2004 second quarter
earnings were $110 million, or 36 cents per share. Second quarter
2003 earnings included store divestiture costs of $318 million, or
69 cents per share. Excluding these costs, second quarter 2003
earnings were $92 million, or 30 cents per share. Net sales for the
second quarter 2004 were $2.96 billion, a decrease of 1.5%,
compared with $3.00 billion in the 2003 second quarter.
Store-for-store sales decreased 2.2% for the quarter.
Store-for-store sales for the second quarter decreased 1.6%,
excluding the remaining 15 stores May previously announced it will
divest. For the six months ended July 31, 2004, earnings per share
were 57 cents, compared with a net loss per share of 16 cents in
2003. Net earnings were $177 million versus a net loss of $38
million a year ago. Earnings for the first six months of 2004
include store divestiture costs of $22 million, or 5 cents per
share. Results for the first six months of 2003 include store
divestiture costs of $318 million, or 69 cents per share, and a $31
million, or 10 cents per share, tax credit recorded following the
resolution of various federal and state income tax issues. Net
sales for the first six months of 2004 were $5.92 billion, an 0.8%
increase, compared with $5.87 billion in the similar 2003 period.
Store-for- store sales decreased 0.2% for the first half of fiscal
2003. Excluding the remaining 15 stores May previously announced it
will divest, year-to-date store-for-store sales increased 0.4%.
Effective July 31, 2004, May completed its acquisition of the
Marshall Field's department store group. The acquisition includes
substantially all the assets that comprise Marshall Field's,
including 62 department stores, inventory, customer receivables,
and distribution centers. Despite good sales in a number of
merchandise categories, our overall sales performance did not meet
our expectations in second quarter. Sales of casual sandals,
shorts, and other seasonal apparel were not as strong as last year,
and apparel clearance - which is a key July sales driver - was less
than anticipated. Home furnishings lagged the balance of the
store's performance. Fashion accessories, led by handbags, small
leathers, jewelry, and sunglasses, however, continued to perform
well. Dressier ladies' sportswear, ladies' suits, and men's
furnishings and tailored clothing also experienced sales increases,
as did young men's. Apparel in petite and women's sizes, dresses,
and children's were weaker merchandise categories. Early Fall
selling had a good start, reflecting the resurgence in demand for
career looks in both ladies' and men's, as well as the importance
of denim and premium denim. During the second quarter, May's Bridal
Group opened seven David's Bridal stores and four After Hours
Formalwear stores. The Bridal Group plans to open an additional 20
David's Bridal stores and 13 After Hours Formalwear stores by
year-end. Year-to-date, May has opened one new department store: a
Hecht's store in Wilmington, N.C. In the second half of 2004, seven
additional department stores are planned: two Foley's stores in
Houston and El Paso, Texas; a Filene's store in Dartmouth, Mass.; a
Hecht's store in Nashville, Tenn.; a Meier & Frank store in
Portland, Ore.; a Robinsons-May store in Rancho Cucamonga, Calif.;
and a store for The Jones Store in Kansas City, Kan. With its
acquisition of Marshall Field's, May now operates 497 department
stores under the names of Famous-Barr, Filene's, Foley's, Hecht's,
Kaufmann's, Lord & Taylor, L.S. Ayres, Marshall Field's, Meier
& Frank, Robinsons-May, Strawbridge's, and The Jones Store, as
well as 220 David's Bridal stores, 454 After Hours Formalwear
stores, and 10 Priscilla of Boston stores. May currently operates
in 46 states, the District of Columbia, and Puerto Rico. For more
information, contact Sharon Bateman at (314) 342-6494. The company
discloses earnings and earnings per share on both a GAAP basis and
excluding restructuring costs because it believes these are
important metrics, and they are presented to enhance comparability
between years. These metrics are used internally to evaluate
results from operations. This release also contains forward-looking
statements as defined by the Private Securities Litigation Reform
Act of 1995. While this release reflects all available information
and management's judgment and estimates of current and anticipated
conditions and circumstances and is prepared with the assistance of
specialists within and outside the company, there are many factors
outside of our control that have an impact on our operations. Such
factors include but are not limited to competitive changes, general
and regional economic conditions, consumer preferences and spending
patterns, availability of adequate locations for building or
acquiring new stores, our ability to hire and retain qualified
associates, and those risks generally associated with the
integration of Marshall Field's with May. Because of these factors,
actual performance could differ materially from that described in
forward-looking statements. PLEASE NOTE: May's second quarter
earnings conference call will be accessible in a listen-only format
at 10:30 a.m. CT today at http://www.maycompany.com/ at the
"Webcast" link on the Investor Relations page. Those unable to
access the Webcast may listen to the conference call by dialing
1-800-265-0241 and entering pass code #57361632. THE MAY DEPARTMENT
STORES COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED RESULTS OF
OPERATIONS (Unaudited) 13 Weeks Ended July 31, 2004 Aug. 2, 2003 %
to % to (millions, except per share) $ Net Sales $ Net Sales Net
sales $ 2,956 $ 3,000 Cost of sales: Recurring 2,065 69.9% 2,118
70.6% Restructuring markdowns 6 0.2 - 0.0 Selling, general, and
administrative expenses 634 21.4 657 21.9 Restructuring costs 9 0.3
318 10.6 Interest expense, net 82 2.8 80 2.7 Earnings (loss) before
income taxes 160 5.4 (173) (5.8) Provision (credit) for income
taxes 59 37.0* (63) 37.0* Net earnings (loss) $ 101 3.4% $ (110)
(3.6)% Diluted earnings (loss) per share $ 0.33 $ (0.39) Excluding
restructuring costs: Net earnings $ 110 3.7% $ 92 3.1% Diluted
earnings per share $ 0.36 $ 0.30 Dividends paid per common share $
0.24-1/4 $ 0.24 Diluted average shares and equivalents 307.9 289.8
* Percent represents effective income tax rate. 26 Weeks Ended July
31, 2004 Aug. 2, 2003 % to % to (millions, except per share) $ Net
Sales $ Net Sales Net sales $ 5,919 $ 5,873 Cost of sales:
Recurring 2,065 4,185 70.7% 4,206 71.6% Restructuring markdowns 11
0.2 - 0.0 Selling, general, and administrative expenses 1,273 21.5
1,297 22.1 Restructuring costs 11 0.2 318 5.4 Interest expense, net
158 2.7 160 2.7 Earnings (loss) before income taxes 281 4.7 (108)
(1.8) Provision (credit) for income taxes 104 37.0* (70) 65.4* Net
earnings (loss) $ 177 3.0% $ (38) (0.6)% Diluted earnings (loss)
per share $ 0.57 $ (0.16) Excluding restructuring costs: Net
earnings $ 191 3.2% $ 163 2.8% Diluted earnings per share $0.62 $
0.53 Dividends paid per common share $ 0.48-1/2 $ 0.48 Diluted
average shares and equivalents 308.1 289.8 * Percent represents
effective income tax rate. Net Sales - Percent Increase (Decrease)
From Prior Year Net sales include merchandise sales and lease
department income. Store- for-store sales compare sales of stores
open during both periods beginning the first day a new store has
prior year sales and excludes sales of stores closed during both
periods. 13 Weeks Ended 26 Weeks Ended July 31, 2004 July 31, 2004
Store-for- Store-for- Total Store Total Store (1.5)% (2.2)% 0.8 %
(0.2)% THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited and Subject to
Reclassification) (millions) July 31, Aug. 2, LIABILITIES AND July
31, Aug. 2, 2004 2003 SHAREOWNERS' EQUITY 2004 2003 ASSETS Cash and
cash equivalents $ 267 $ 77 Notes payable $ 547 $ 138 Accounts
Current receivable, net 2,011 1,510 maturities of Merchandise
long-term debt 347 164 inventories 3,170 2,926 Other current
Accounts payable assets 103 104 and accrued Total Current expenses
2,680 2,014 Assets 5,551 4,617 Total Current Liabilities 3,574
2,316 Property and equipment, net 6,145 5,209 Goodwill and other
intangibles 3,299 1,627 Long-term debt 5,794 3,934 Other assets 139
131 Deferred income taxes 792 816 Other liabilities 511 504 ESOP
preference shares 222 249 Unearned compensation - (91) Shareowners'
equity 4,241 3,856 Total Liabilities and Shareowners' Total Assets
$15,134 $ 11,584 Equity $ 15,134 $ 11,584 THE MAY DEPARTMENT STORES
COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited and Subject to Reclassification) (millions) 26
Weeks Ended July 31, Aug. 2, 2004 2003 Operating activities: Net
earnings (loss) $ 177 $ (38) Depreciation and amortization 285 280
Asset impairment - 315 Net decrease in working capital and other
103 1 Total operating activities 565 558 Investing activities: Net
additions to property and equipment (226) (333) Business
combinations (3,200) (16) Total investing activities (3,426) (349)
Financing activities: Net issuances (payments) of notes payable and
long-term debt 2,692 (28) Net issuances (purchases) of common stock
21 (13) Dividend payments (149) (146) Total financing activities
2,564 (187) Increase (decrease) in cash and cash equivalents (297)
22 Cash and cash equivalents, beginning of period 564 55 Cash and
cash equivalents, end of period $ 267 $ 77 THE MAY DEPARTMENT
STORES COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED
FINANCIAL INFORMATION Interim Results -- The unaudited condensed
consolidated results of operations have been prepared in accordance
with the company's accounting policies as described in the 2003
Annual Report to Shareowners and should be read in conjunction with
that report. In the opinion of management, this information is
fairly presented and all adjustments (consisting only of normal
recurring adjustments) necessary for a fair statement of the
results for the interim periods have been included; however,
certain items are included in this statement based on estimates for
the entire year. Operating results of periods, which exclude the
Christmas season, may not be indicative of the operating results
that may be expected for the fiscal year. Reclassifications --
Certain prior period amounts have been reclassified to conform with
current year presentation. Business Combinations -- Effective July
31, 2004, the company completed its acquisition of the Marshall
Field's department store group. Marshall Field's operates 62
department stores primarily in the Chicago, Detroit, and
Minneapolis metropolitan areas. The company acquired substantially
all of the assets that comprise Marshall Field's, including stores,
inventory, customer receivables, and distribution centers, and
assumed certain liabilities, including accounts payable and accrued
expenses. The company also is acquiring the real estate associated
with nine Mervyn's store locations in the Twin Cities area. The
Mervyn's locations are expected to be transferred during the third
quarter 2004. The acquisition is being financed through $2.2
billion of long-term debt and $1.0 billion of short-term borrowings
and cash on hand. The long-term debt was issued on July 20, 2004,
resulting in additional second quarter interest expense of $4
million, or 1 cent per share. Marshall Field's results of
operations will be included in the company's consolidated statement
of earnings beginning August 1, 2004. The company's July 31, 2004,
consolidated balance sheet includes the assets acquired and the
liabilities assumed using a preliminary purchase price allocation.
The purchase price allocation is based on preliminary estimates and
is subject to final third-party valuations. The following amounts
for Marshall Field's are included in the July 31, 2004,
consolidated balance sheet (millions): Cash $ 3 Accounts receivable
559 Merchandise inventories 375 Property and equipment 1,055
Goodwill and other intangibles 1,628 Assumed liabilities/other
(420) Net purchase price $ 3,200 Cost of Sales -- For the 13 weeks
ended July 31, 2004, recurring cost of sales as a percent of net
sales decreased 0.7%, principally because of a 1.2% decrease in the
cost of merchandise, offset by a 0.3% increase in buying and
occupancy costs. For the 26 weeks ended July 31, 2004, recurring
cost of sales as a percent of net sales decreased 0.9%, principally
because of a 1.1% decrease in the cost of merchandise. In addition,
$6 million and $11 million of restructuring markdowns were incurred
in the second quarter and first six months of 2004, respectively,
to liquidate inventory as stores to be divested were closing.
Selling, General, and Administrative Expenses (SG&A) --
SG&A expenses as a percent of net sales decreased from 21.9% in
the second quarter 2003 to 21.4% in the second quarter 2004 because
of a 0.5% decrease in payroll. SG&A expenses as a percent of
net sales decreased from 22.1% in the first six months of 2003 to
21.5% in the first six months of 2004 because of a 0.6% decrease in
payroll. Restructuring Costs -- In July 2003, the company announced
its intention to divest 34 underperforming department stores. These
divestitures will result in total estimated charges of $380
million, consisting of asset impairments of $317 million, inventory
liquidation losses of $35 million, severance benefits of $23
million, and other charges of $5 million. Approximately $50 million
of the $380 million represents the cash cost of the store
divestitures, not including the benefit from future tax credits. Of
the $380 million of expected total charges, $350 million has been
recognized to date. The company recognized $15 million and $22
million in the second quarter and first six months of 2004,
respectively, and $318 million was recognized in the second quarter
and first six months of 2003. Asset impairment charges were
recorded to reduce store assets to their estimated fair value
because of the shorter period over which they will be used.
Estimated fair values were based on estimated market values for
similar assets. The company is negotiating agreements with
landlords and developers for each store divestiture. Through the
end of the second quarter 2004, 19 stores have been closed.
Severance benefits are recognized as each store is closed.
Severance benefits of $10 million for approximately 1,600
associates and inventory liquidation and other costs of $22 million
have been incurred to date. Remaining amounts will be recognized as
each store is divested. Income Taxes -- The effective tax rate for
the first six months of 2004 was 37.0%, compared with 65.4% for the
first six months of 2003. The change is due to a $31 million tax
credit recorded in the first quarter 2003 upon the resolution of
various federal and state income tax issues. Excluding the $31
million tax credit, the company's estimated effective income tax
rate for the first six months of 2003 was 37.0%. Diluted Earnings
(Loss) Per Share -- The following tables reconcile net earnings and
weighted average shares outstanding to amounts used to calculate
basic and diluted earnings (loss) per share ("EPS") for the periods
shown (millions, except per share). 13 Weeks Ended July 31, 2004
Aug. 2, 2003 Earnings Shares EPS Earnings Shares EPS Net earnings
(loss) $101 $(110) ESOP preference shares' dividends (4) (4) Basic
EPS 97 292.1 $0.33 (114) 289.8 $(0.39) ESOP preference shares 3
15.0 - - Assumed exercise of options (treasury stock method) - 0.8
- - Diluted EPS $100 307.9 $0.33 $(114) 289.8 $(0.39) 26 Weeks
Ended July 31, 2004 Aug. 2, 2003 Earnings Shares EPS Earnings
Shares EPS Net earnings (loss) $177 $(38) ESOP preference shares'
dividends (8) (8) Basic EPS 169 291.7 $0.58 (46) 289.8 $(0.16) ESOP
preference shares 7 15.2 - - Assumed exercise of options (treasury
stock method) - 1.2 - - Diluted EPS $176 308.1 $0.57 $(46) 289.8
$(0.16) Early Debt Redemption -- On August 1, 2004, the company
redeemed its $200 million 8-3/8% debentures due in 2024.
Accordingly, the $200 million principal repayment is classified as
current maturities of long-term debt on the company's consolidated
balance sheet as of July 31, 2004. Early redemption costs of $10
million, or 2 cents per share, will be recorded in the 2004 third
quarter. Trailing Years' Results Operating results for the trailing
years were as follows (millions, except per share): 52 Weeks Ended
July 31, Aug. 2, 2004 2003 Net sales $ 13,389 $ 13,238 Net earnings
$ 649 $ 365 Diluted earnings per share $ 2.14 $ 1.15 DATASOURCE:
The May Department Stores Company CONTACT: Sharon Bateman,
+1-314-342-6494, for The May Department Stores Company
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