Company revises annual EPS guidance to $4.25
to $4.35 per diluted share
Macy’s, Inc. (NYSE:M) today reported that its third quarter
earnings per diluted share rose by 30 percent to 61 cents in the
third quarter of 2014, ended Nov. 1, 2014. This compares with 47
cents per share in last year’s third quarter.
For the first three quarters of 2014, Macy’s, Inc.’s diluted
earnings per share were $2.01, an increase of 15 percent compared
with earnings of $1.74 per diluted share in the first three
quarters of 2013.
“We are very pleased with our third quarter earnings, even
though the sales performance fell short of our expectations. On a
two-year basis, our third quarter sales trend was essentially
unchanged from the first half of 2014. We knew we were up against
very strong third quarter sales growth for our company last year,
and thus we had anticipated that our year-over-year comparison
would be lower in the third quarter than in the fourth quarter.
Even so, sales did not live up to our expectations in the quarter.
However, we were able to maintain gross margin flat to last year
and reduced SG&A expense, even excluding the timing benefit of
some items, including the sale of certain assets. All in all, it
was a solid quarter for earnings,” said Terry J. Lundgren, chairman
and chief executive officer of Macy’s, Inc.
“Going forward, we remain optimistic for the fourth quarter
based on several factors. First, we have developed an outstanding
merchandise assortment for holiday gift-giving and self-purchase
rooted in great style, exclusive offerings and outstanding value
during this key shopping period. Second, we have enhanced our
transition to fresh post-holiday vacation and resort assortments.
Third, we have new store, omnichannel and marketing strategies in
place that we believe will drive incremental business throughout
the fourth quarter. This includes Buy Online Pickup in Store now
rolled out to all full-line Macy’s and Bloomingdale’s locations,
Same Day Delivery pilots up and running in eight major Macy’s
markets and four Bloomingdale’s markets, and improved functionality
and usability in upgraded mobile apps. And fourth, we are poised to
capitalize on a return to more normalized weather patterns after
the unusually severe snowstorms in the fourth quarter last year,”
Lundgren said. “This adds up to a strong opportunity to continue to
grow our business this holiday, a time of year when customers
naturally gravitate to Macy’s and Bloomingdale’s as primary
shopping destinations.”
Sales
Comparable sales together with comparable sales of departments
licensed to third parties were down 0.7 percent in the third
quarter of 2014 over 2013. Third quarter comparable sales exclusive
of licensed businesses were down 1.4 percent in 2014 compared with
2013. Total sales in the third quarter of 2014 were $6.195 billion,
down 1.3 percent from total sales of $6.276 billion in the third
quarter of 2013.
Comparable sales together with comparable sales of departments
licensed to third parties were up 0.8 percent in first three
quarters of 2014 over 2013. Year-to-date comparable sales exclusive
of licensed businesses were up 0.1 percent in 2014 compared with
2013. For the year to date, Macy’s, Inc. total sales were $18.741
billion, up slightly from total sales of $18.729 billion in the
first three quarters of 2013.
Please see the last page of this news release for important
information regarding the calculation of the company’s comparable
sales and comparable sales together with comparable sales of
departments licensed to third parties.
In the third quarter of 2014, the company opened three new
Macy’s stores in Sarasota, FL, Las Vegas, NV, and The Bronx in New
York City, and closed Macy’s stores in Bradenton, FL, and York, PA.
In Torrance, CA, three Macy’s stores were consolidated into two as
part of a mall redevelopment. A new Bloomingdale’s replacement
store opened in the third quarter in Palo Alto, CA.
Operating Income
Macy’s, Inc.’s operating income totaled $422 million or 6.8
percent of sales for the quarter ended Nov. 1, 2014, compared with
operating income of $360 million or 5.7 percent of sales for the
same period last year. For the first three quarters of 2014,
Macy’s, Inc.’s operating income totaled $1.436 billion or 7.7
percent of sales, compared with operating income of $1.329 billion
or 7.1 percent of sales for the same period last year.
Cash Flow
Net cash provided by operating activities was $777 million in
the first three quarters of 2014, compared with $819 million in the
first three quarters of 2013. Net cash used by investing activities
in the first three quarters of 2014 was $596 million, compared with
$541 million a year ago. Net cash used by financing activities in
the first three quarters of 2014 was $1.406 billion, compared with
net cash used by financing activities in the first three quarters
of 2013 of $943 million.
The company repurchased approximately 9.0 million shares of its
common stock for a total of approximately $534 million in the third
quarter of 2014. In the fiscal year to date, the company
repurchased approximately 25.3 million shares of its common stock
for approximately $1.48 billion. At Nov. 1, 2014, the company had
remaining authorization to repurchase up to approximately $1.45
billion of its common stock.
Looking Ahead
The company has revised its 2014 guidance. Earnings per diluted
share for the full-year 2014 now are expected in the range of $4.25
to $4.35, compared with previous guidance in the range of $4.40 to
$4.50. Guidance is for full-year 2014 comparable sales together
with comparable sales of departments licensed to third parties to
increase by 1.2 percent to 1.5 percent (0.7 percent to 1 percent on
a comparable sales basis exclusive of licensed businesses),
compared to previous guidance for growth of 2 percent to 2.5
percent (1.5 percent to 2 percent on a comparable sales basis
exclusive of licensed businesses). In the fourth quarter,
comparable sales together with comparable sales of departments
licensed to third parties are expected to grow by approximately 2
percent to 3 percent (1.8 percent to 2.8 percent on a comparable
sales basis exclusive of licensed businesses).
Credit Card Program Agreement
Renewal
Macy’s, Inc. has entered into a multi-year renewal agreement
with Citi Retail Services for operation of the Macy’s and
Bloomingdale’s proprietary and co-branded American Express credit
card business. The new agreement, with substantially similar
financial terms, will run through March 2025.
Investor Conference
Macy’s, Inc. management will present at the Morgan Stanley
Global Consumer & Retail Conference at 1:50pm on Wednesday,
Nov. 19, 2014, in New York City. Media and investors may access the
live webcast of the presentation at www.macysinc.com/ir at that
time. The webcasts will be available for replay.
Macy’s, Inc., with corporate offices in Cincinnati and New York,
is one of the nation’s premier retailers, with fiscal 2013 sales of
$27.931 billion. The company operates about 840 stores in 45
states, the District of Columbia, Guam and Puerto Rico under the
names of Macy’s and Bloomingdale’s, as well as the macys.com and
bloomingdales.com websites. The company operates 13 Bloomingdale’s
Outlet stores. Bloomingdale’s in Dubai is operated by Al Tayer
Group LLC under a license agreement.
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 transactions,
prevailing interest rates and non-recurring charges, 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. In light of these risks and uncertainties,
readers are cautioned not to place undue reliance on
forward-looking statements. Except as may be required by applicable
law, Macy’s disclaims any obligation to update its forward-looking
statements for any reason.
(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 (Nov. 12) at 10:30 a.m. (ET). Macy’s, Inc.’s 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
1-888-600-4862, passcode 1762797. A replay of the conference call
can be accessed on the Web site 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)
(All amounts in millions except
percentages and per share figures)
13 Weeks Ended 13 Weeks Ended
November 1, 2014
November 2, 2013 % to % to
$ Net sales $ Net sales Net sales $ 6,195 $ 6,276
Cost of sales (Note 2)
3,766
60.8 % 3,817
60.8 % Gross margin 2,429 39.2 %
2,459 39.2 % Selling, general and administrative expenses
(2,007 )
(32.4 %)
(2,099 )
(33.5 %)
Operating income 422 6.8 % 360 5.7 % Interest expense
– net
(96 )
(96 )
Income before income taxes 326 264 Federal, state and
local income tax expense (Note 3)
(109 )
(87 ) Net income
$
217 $ 177
Basic earnings per share
$ .62
$ .47 Diluted
earnings per share
$ .61
$ .47 Average common
shares: Basic 351.6 374.8 Diluted 357.7 380.2 End of period
common shares outstanding 346.0 368.1 Depreciation and
amortization expense $ 263 $ 257
MACY’S, INC.
Consolidated
Statements of Income (Unaudited)
Notes:
(1) Because of the seasonal nature of the retail business,
the results of operations for the 13 weeks ended November 1, 2014
and November 2, 2013 (which do not include the Christmas season)
are not necessarily indicative of such results for the fiscal year.
(2) Merchandise inventories are valued at the lower of cost
or market using the last-in, first-out (LIFO) retail inventory
method. Application of the LIFO retail inventory method did not
result in the recognition of any LIFO charges or credits affecting
cost of sales for the 13 weeks ended November 1, 2014 or November
2, 2013. (3) Federal, state and local income taxes differ
from the federal income tax statutory rate of 35%, principally
because of the effect of state and local taxes, including the
settlement of various tax issues and tax examinations.
MACY’S, INC.
Consolidated
Statements of Income (Unaudited) (Note 1)
(All amounts in millions except
percentages and per share figures)
39 Weeks Ended 39 Weeks Ended
November 1, 2014 November 2, 2013
% to % to $ Net sales $ Net sales Net
sales $ 18,741 $ 18,729 Cost of sales (Note 2)
11,274 60.2 %
11,261 60.1 %
Gross margin 7,467 39.8 % 7,468 39.9 % Selling, general and
administrative expenses
(6,031 )
(32.1 %)
(6,139 )
(32.8 %) Operating income 1,436
7.7 % 1,329 7.1 % Interest expense – net
(296 )
(289 ) Income before
income taxes 1,140 1,040 Federal, state and local income tax
expense (Note 3)
(407 )
(365 ) Net income
$
733 $ 675
Basic earnings per share
$ 2.04
$ 1.77 Diluted
earnings per share
$ 2.01
$ 1.74 Average common
shares: Basic 358.9 381.8 Diluted 365.2 388.0 End of period
common shares outstanding 346.0 368.1 Depreciation and
amortization expense $ 770 $ 761
MACY’S, INC.
Consolidated
Statements of Income (Unaudited)
Notes: (1)
Because of the seasonal nature of the
retail business, the results of operations for the 39 weeks ended
November 1, 2014 and November 2, 2013 (which do not include the
Christmas season) are not necessarily indicative of such results
for the fiscal year.
(2)
Merchandise inventories are valued at the
lower of cost or market using the last-in, first-out (LIFO) retail
inventory method. Application of the LIFO retail inventory method
did not result in the recognition of any LIFO charges or credits
affecting cost of sales for the 39 weeks ended November 1, 2014 or
November 2, 2013.
(3) Federal, state and local income taxes differ from the
federal income tax statutory rate of 35%, principally because of
the effect of state and local taxes, including the settlement of
various tax issues and tax examinations.
MACY’S, INC.
Consolidated Balance
Sheets (Unaudited)
(millions)
November 1, February 1,
November 2,
2014 2014 2013
ASSETS: Current Assets: Cash and cash equivalents $ 1,048 $ 2,273 $
1,171 Receivables 292 438 276 Merchandise inventories 7,789 5,557
7,716 Prepaid expenses and other current assets
424 420 397
Total Current Assets 9,553 8,688 9,560 Property and
Equipment – net 7,787 7,930 7,950 Goodwill 3,743 3,743 3,743 Other
Intangible Assets – net 504 527 535 Other Assets
838 746 658
Total Assets
$ 22,425
$ 21,634 $
22,446 LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities: Short-term debt $ 483 $ 463 $ 465 Merchandise
accounts payable 3,814 1,691 3,897 Accounts payable and accrued
liabilities 2,563 2,810 2,323 Income taxes 114 362 78 Deferred
income taxes
396 400
423 Total Current Liabilities 7,370 5,726 7,186
Long-Term Debt 6,736 6,728 6,732 Deferred Income Taxes 1,314 1,273
1,225 Other Liabilities 1,654 1,658 1,861 Shareholders’ Equity
5,351 6,249
5,442 Total Liabilities and Shareholders’
Equity
$ 22,425 $
21,634 $ 22,446
MACY’S, INC.
Consolidated
Statements of Cash Flows (Unaudited)
(millions)
39 Weeks Ended 39 Weeks Ended November
1, 2014 November 2, 2013 Cash flows from operating activities: Net
income $ 733 $ 675
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 770 761 Stock-based compensation
expense 55 48
Amortization of financing costs and
premium on acquired debt
(4 ) (7 ) Changes in assets and liabilities: Decrease in
receivables 154 102 Increase in merchandise inventories (2,232 )
(2,408 )
Increase in prepaid expenses and other
current assets
(4 ) (25 )
(Increase) decrease in other assets not
separately identified
(46 ) 1 Increase in merchandise accounts payable 1,935 2,155
Decrease in accounts payable and accrued
liabilities not separately identified
(363 ) (320 ) Decrease in current income taxes (247 ) (277 )
Increase (decrease) in deferred income taxes 29 (43 )
Increase (decrease) in other liabilities
not separately identified
(3 )
157
Net cash provided by operating
activities
777 819
Cash flows from investing activities: Purchase of property
and equipment (483 ) (381 ) Capitalized software (190 ) (180 )
Disposition of property and equipment 79 30 Other, net
(2 )
(10 ) Net cash used by
investing activities
(596 )
(541 )
Cash flows from financing activities:
Debt issued 500 400 Financing costs (5 ) (10 ) Debt repaid (462 )
(121 ) Dividends paid (314 ) (267 ) Increase in outstanding checks
123 73 Acquisition of treasury stock (1,456 ) (1,228 ) Issuance of
common stock
208 210
Net cash used by financing activities
(1,406 )
(943 ) Net
decrease in cash and cash equivalents (1,225 ) (665 ) Cash and cash
equivalents at beginning of period
2,273
1,836 Cash and cash equivalents
at end of period
$ 1,048
$ 1,171
MACY’S, INC.
Important Information
Regarding Non-GAAP Financial Measures
The Company reports its financial results in accordance with
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.
See the table below for supplemental financial data and a
corresponding reconciliation to the most directly comparable GAAP
financial measures. This non-GAAP financial measure 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 this
non-GAAP financial measure may be significant items that could
impact the Company's financial position, results of operations and
cash flows and should therefore be considered in assessing the
Company's actual 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. believes that providing changes in comparable sales
including the impact of growth in comparable sales of departments
licensed to third parties supplementally to its results of
operations calculated in accordance with GAAP assists in evaluating
the Company's ability to generate sales growth, whether through
owned businesses or departments licensed to third parties, on a
comparable basis, and in evaluating the impact of changes in the
manner in which certain departments are operated (e.g. the
conversion in 2013 of most of the Company's previously owned
athletic footwear business to licensed Finish Line shops).
Guidance Range 13 Weeks 39 Weeks 13 Weeks 52 Weeks
Ended Ended Ended Ended November 1, November 1, January 31, January
31,
2014
2014
2015
2015
Increase (decrease) in comparable sales
(Note 1)
(1.4)%
0.1%
1.8 to
2.8%
0.7% to
1.0%
Impact of growth in comparable sales of
departments licensed to third parties (Note 2)
0.7%
0.7%
0.2%
0.5%
Increase (decrease) in comparable sales
including the impact of growth in comparable sales of departments
licensed to third parties
(0.7)%
0.8%
2.0% to
3.0%
1.2% to
1.5%
Notes: (1) Represents the
period-to-period change in net sales from stores in operation
throughout 2014 and 2013 and all net Internet sales, excluding
commissions from departments licensed to third parties.
(2)
Represents the impact on comparable sales of including the sales of
departments licensed to third parties occurring in stores in
operation throughout 2014 and 2013 and via the Internet in the
calculation. 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. (3) See the
cautionary statements set forth under the caption “Looking Ahead”
in this press release and in the documents referred to therein for
important information regarding the risks and uncertainties
associated with forward-looking statements. Amounts shown for the
52 weeks ended January 31, 2015 supersede previous guidance of 1.5%
to 2% increase in comparable sales, 0.5% impact of growth in
comparable sales of departments licensed to third parties and 2.0%
to 2.5% of comparable sales growth including the impact of growth
in comparable sales of departments licensed to third parties.
Macy’s, Inc.Media:Jim Sluzewski, 513-579-7764orInvestor:Matt
Stautberg, 513-579-7780
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