CINCINNATI--(BUSINESS WIRE)--Nov. 12, 2008--Macy's, Inc. (NYSE: M)
today reported a loss of 10 cents per diluted share for the third
quarter of 2008, ended Nov. 1, 2008, compared with diluted earnings
per share of 8 cents for the same 13-week period last year. Excluding
division consolidation costs of $16 million ($10 million after tax or
2 cents per diluted share), the third quarter 2008 loss was 8 cents
per diluted share. The third quarter of 2007 included May Company
merger integration costs of $17 million ($10 million after tax or 2
cents per diluted share). Excluding these items, diluted earnings per
share from continuing operations were 10 cents for the third quarter
of 2007.
The company also reiterated its guidance for fiscal 2008 earnings
to be in the range of $1.30 to $1.50 per diluted share ($1.10 to $1.30
per diluted share in the fourth quarter), excluding one-time division
consolidation costs and asset impairment charges. Same-store sales in
the fourth quarter are expected to be in the range of down 1 to 6
percent. If deteriorating sales trends from the latter half of the
third quarter continue through the fourth quarter, sales and earnings
are expected to be toward the lower end of the guidance range.
Terry J. Lundgren, Macy's, Inc. chairman, president and chief
executive officer, said, "Within this poor economic environment,
Macy's, Inc. continues to outperform most of our major competitors in
same-store sales. This gives us confidence in our strategies for
gaining market share, particularly as the My Macy's localization
initiative is yielding promising early results and in that we expect
My Macy's to have a more profound impact in 2009. Thus we are staying
focused on our priorities for offering unique and differentiated
merchandise assortments, delivering great value and service to our
customers, and reaching out with creative marketing that positions
Macy's and Bloomingdale's as preferred shopping destinations for the
holidays. This includes our distinctive 'Believe' campaign for Macy's
and our 'Oh What Fun' campaign for Bloomingdale's.
"Macy's, Inc. remains financially healthy, with strong cash flow,
a solid balance sheet and ample borrowing capacity. We are committed
to continuing to aggressively manage expenses and inventories
consistent with planned sales levels. In recognition of the weak
economy, we reduced our budget for 2009 capital expenditures from
approximately $1 billion to a range of $550 million to $600 million,
compared with approximately $950 million in 2008," Lundgren said.
For the first three quarters of 2008, Macy's, Inc. reported a loss
from continuing operations of 7 cents per diluted share, compared with
earnings of 35 cents per share in the first three quarters of 2007.
Results for the first three quarters of 2008 include two unusual items
(described below) that negatively impacted earnings by 27 cents per
diluted share. Excluding these items, the company earned 20 cents per
diluted share from continuing operations in the first three quarters
of 2008.
The first unusual item relates to the consolidation of three
Macy's divisions announced in February 2008, which is expected to save
approximately $100 million per year beginning in 2009 (approximately
$60 million in savings for the partial year in 2008). In the first
three quarters of 2008, the company booked consolidation costs of $129
million ($81 million after tax or 19 cents per diluted share).
Year-to-date 2008 results also include non-cash asset impairment
charges of $50 million ($31 million after tax or 8 cents per diluted
share) related to private brand tradenames acquired in the merger with
The May Department Stores Company in 2005.
In the first three quarters of 2007, Macy's, Inc. earned 55 cents
per diluted share from continuing operations, excluding May Company
merger integration costs of $150 million ($93 million after tax or 20
cents per diluted share).
Sales
Sales in the third quarter of 2008 totaled $5.493 billion, a
decrease of 7.0 percent, compared with sales of $5.906 billion in the
same period last year. On a same-store basis, Macy's, Inc.'s third
quarter sales were down 6.0 percent.
For the year to date, Macy's, Inc.'s sales totaled $16.958
billion, down 4.3 percent from total sales of $17.719 billion in the
first 39 weeks of 2007. On a same-store basis, Macy's, Inc.'s
year-to-date sales were down 3.5 percent.
In the third quarter of 2008, the company reopened a Macy's store
in the New Orleans market following the effects of Hurricane Katrina,
and opened a second Macy's store in the New Orleans market, a new
Macy's store in Tampa, FL, and a new Macy's furniture gallery in
Portland, OR. The company temporarily closed three Macy's stores in
the Houston, TX, market that were damaged by Hurricane Ike.
Operating Income
Macy's, Inc.'s operating income totaled $68 million or 1.2 percent
of sales for the quarter ended Nov. 1, 2008, compared with operating
income of $183 million or 3.1 percent of sales for the same period
last year. Macy's, Inc.'s third quarter 2008 operating income included
$16 million in division consolidation costs. Excluding these costs,
operating income for the third quarter of 2008 was $84 million or 1.5
percent of sales. Third quarter 2007 operating income included $17
million in May Company integration costs. Excluding these costs,
operating income for the third quarter of 2007 was $200 million or 3.4
percent of sales.
For the first three quarters of 2008, Macy's, Inc.'s operating
income totaled $357 million or 2.1 percent of sales, compared to
operating income of $641 million or 3.6 percent of sales for the same
period last year. Macy's, Inc.'s operating income for the first three
quarters of 2008 includes $129 million in division consolidation costs
and $50 million in asset impairment charges. Excluding these items,
operating income in the first three quarters of 2008 was $536 million
or 3.2 percent of sales. Macy's, Inc.'s operating income for the first
three quarters of 2007 was $791 million or 4.5 percent of sales,
excluding $150 million in May Company integration costs.
Cash Flow
Net cash provided by continuing operating activities was $317
million in the first three quarters of 2008, compared with $285
million in the first nine months of last year. Net cash used by
continuing investing activities in the first three quarters of 2008
was $606 million, compared with $618 million a year ago. In the first
nine months of 2008, net cash used by continuing investing activities
included $25 million from the disposal of property and equipment. In
the first nine months of 2007, net cash used by continuing investing
activities included $66 million in proceeds from the disposition of
the After Hours formalwear business and $96 million from the disposal
of property and equipment, primarily from the sale of duplicate
facilities associated with the May Company integration. Net cash
provided by continuing financing activities was $6 million in the
first three quarters of 2008, compared with cash used by continuing
financing activities of $602 million in the first three quarters of
last year. In the second quarter of 2008, Macy's, Inc. issued $650
million in senior notes, and in the third quarter paid $650 million in
matured senior notes. In the first nine months of 2007, net cash used
by continuing financing activities included approximately $3 billion
in stock repurchased, as well as approximately $2.9 billion in debt
issued.
Looking Ahead
The company reiterates its sales and earnings guidance provided on
Oct. 10, 2008, while continuing to note that the uncertain direction
of the economy makes predictions of future performance difficult.
Same-store sales in the fourth quarter are expected to be down in the
range of 1 to 6 percent, which would result in same-store sales for
the fall season (third and fourth quarters combined) down in the range
of 3 to 6 percent, consistent with previous guidance. Because of a
dramatic year-over-year calendar shift that resulted in a same-store
sales increase of 13.4 percent in November 2007, the company expects a
same-store decrease in the low double digits in November 2008 as a
full week of sales shifts back into the December period.
The company currently expects earnings per share on a diluted
basis of approximately $1.10 to $1.30 in the fourth quarter, excluding
one-time division consolidation costs, which would calculate to $1.30
to $1.50 for fiscal 2008 as a whole, excluding one-time division
consolidation costs and impairment charges. Sales and earnings are
expected to track to the lower end of guidance in the fourth quarter
if sales trends remain consistent with those in the latter half of the
third quarter. The company expects to book approximately $20 million
in division consolidation costs in the fourth quarter of 2008.
Macy's, Inc., with corporate offices in Cincinnati and New York,
is one of the nation's premier retailers, with fiscal 2007 sales of
$26.3 billion. The company operates more than 850 department stores in
45 states, the District of Columbia, Guam and Puerto Rico under the
names of Macy's and Bloomingdale's. The company also operates
macys.com, bloomingdales.com and Bloomingdale's By Mail. Prior to June
1, 2007, Macy's, Inc. was known as Federated Department Stores, Inc.
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,
competitive pressures from specialty stores, general merchandise
stores, manufacturers' outlets, off-price and discount stores, new and
established forms of home shopping (including the Internet, mail-order
catalogs and television) 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.
(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 third quarter earnings call with analysts will be held
beginning at 10:30 a.m. ET on Wednesday, November 12. The webcast is
accessible to the media and general public either via the company's
Web site at www.macysinc.com or by calling in on 1-888-684-1262
(913-312-0975 for international callers), passcode 5642242.)
MACY'S, INC.
Consolidated Statements of Operations (Unaudited) (Note 1)
----------------------------------------------------------------------
(All amounts in millions except percentages and per share figures)
13 Weeks Ended 13 Weeks Ended
November 1, 2008 November 3, 2007
------------------ ------------------
% to % to
$ Net sales $ Net sales
-------- --------- -------- ---------
Net sales $ 5,493 $ 5,906
Cost of sales (Note 2) 3,324 60.5% 3,585 60.7%
-------- --------- -------- ---------
Gross margin 2,169 39.5% 2,321 39.3%
Selling, general and
administrative expenses (2,085) (38.0%) (2,121) (35.9%)
Division consolidation costs
(Note 3) (16) (0.3%) - -%
May integration costs (Note 4) - -% (17) (0.3%)
-------- --------- -------- ---------
Operating income 68 1.2% 183 3.1%
Interest expense - net (143) (145)
-------- --------
Income (loss) before income
taxes (75) 38
Federal, state and local income
tax
benefit (expense) (Note 5) 31 (5)
-------- --------
Net income (loss) $ (44) $ 33
======== ========
Basic earnings (loss) per share $ (.10) $ .08
======== ========
Diluted earnings (loss) per
share $ (.10) $ .08
======== ========
Average common shares:
Basic 421.3 434.2
Diluted 421.3 438.1
End of period common shares
outstanding 420.6 433.0
Depreciation and amortization
expense $ 320 $ 321
MACY'S, INC.
Consolidated Statements of Operations (Unaudited) (Note 1)
----------------------------------------------------------------------
Notes:
(1) Because of the seasonal nature of the retail business, the
results of operations for the 13 weeks ended November 1, 2008
and November 3, 2007, (which do not include the Christmas
season) are not necessarily indicative of such results for the
fiscal year. The May Department Stores Company ("May") was
acquired August 30, 2005.
(2) Merchandise inventories are primarily valued at the lower of
cost or market using the last-in, first-out (LIFO) retail
inventory method. Application of this method did not impact
cost of sales for the 13 weeks ended November 1, 2008 or
November 3, 2007.
(3) Represents costs and expenses associated with the division
consolidation and localization initiatives, primarily
severance and other human resource related costs. For the 13
weeks ended November 1, 2008, division consolidation costs
amounted to $.02 per diluted share.
(4) Represents costs and expenses associated with the integration
and consolidation of May's operations into Macy's operations,
including additional costs related to closed locations, final
system conversion costs and costs related to other operational
consolidations. For the 13 weeks ended November 3, 2007, May
integration costs amounted to $.02 per diluted share.
(5) Income taxes for the 13 weeks ended November 1, 2008 and
November 3, 2007 reflect the adjustment or settlement of
various tax issues.
MACY'S, INC.
Consolidated Statements of Operations (Unaudited) (Note 1)
----------------------------------------------------------------------
(All amounts in millions except percentages and per share figures)
39 Weeks Ended 39 Weeks Ended
November 1, 2008 November 3, 2007
------------------ ------------------
% to % to
$ Net sales $ Net sales
-------- --------- -------- ---------
Net sales $16,958 $17,719
Cost of sales (Note 2) 10,197 60.1% 10,656 60.1%
-------- --------- -------- ---------
Gross margin 6,761 39.9% 7,063 39.9%
Selling, general and
administrative expenses (6,225) (36.7%) (6,272) (35.4%)
Division consolidation costs
(Note 3) (129) (0.8%) - -%
May integration costs (Note 4) - -% (150) (0.9%)
Asset impairment charges (Note
5) (50) (0.3%) - -%
-------- --------- -------- ---------
Operating income 357 2.1% 641 3.6%
Interest expense - net (417) (407)
-------- --------
Income (loss) from continuing
operations
before income taxes (60) 234
Federal, state and local income
tax
benefit (expense) (Note 6) 30 (75)
-------- --------
Income (loss) from continuing
operations (30) 159
Discontinued operations, net of
income taxes (Note 7) - (16)
-------- --------
Net income (loss) $ (30) $ 143
======== ========
Basic earnings (loss) per share:
Income (loss) from
continuing operations $ (.07) $ .35
Loss from discontinued
operations - (.03)
-------- --------
Net income (loss) $ (.07) $ .32
======== ========
Diluted earnings (loss) per
share:
Income (loss) from
continuing operations $ (.07) $ .35
Loss from discontinued
operations - (.04)
-------- --------
Net income (loss) $ (.07) $ .31
======== ========
Average common shares:
Basic 421.1 451.4
Diluted 421.1 457.4
End of period common shares
outstanding 420.6 433.0
Depreciation and amortization
expense $ 950 $ 977
MACY'S, INC.
Consolidated Statements of Operations (Unaudited) (Note 1)
----------------------------------------------------------------------
Notes:
(1) Because of the seasonal nature of the retail business, the
results of operations for the 39 weeks ended November 1, 2008
and November 3, 2007 (which do not include the Christmas
season) are not necessarily indicative of such results for the
fiscal year. The May Department Stores Company ("May") was
acquired August 30, 2005. Among other components, the
acquisition included the Lord & Taylor division and the Bridal
Group, consisting of David's Bridal, After Hours Formalwear
and Priscilla of Boston. The sale of the Lord & Taylor
division was completed in October 2006, the sale of David's
Bridal and Priscilla of Boston was completed in January 2007
and the sale of After Hours Formalwear was completed in April
2007.
(2) Merchandise inventories are primarily valued at the lower of
cost or market using the last-in, first-out (LIFO) retail
inventory method. Application of this method did not impact
cost of sales for the 39 weeks ended November 1, 2008 or
November 3, 2007.
(3) Represents costs and expenses associated with the division
consolidation and localization initiatives, primarily
severance and other human resource related costs. For the 39
weeks ended November 1, 2008, division consolidation costs
amounted to $.19 per diluted share.
(4) Represents costs and expenses associated with the integration
and consolidation of May's operations into Macy's operations,
including additional costs related to closed locations, final
system conversion costs and costs related to other operational
consolidations. For the 39 weeks ended November 3, 2007, May
integration costs amounted to $.20 per diluted share.
(5) Represents impairment charges associated with acquired
indefinite lived private brand tradenames. For the 39 weeks
ended November 1, 2008, impairment charges amounted to $.08
per diluted share.
(6) Income taxes for the 39 weeks ended November 1, 2008 and
November 3, 2007 reflect the adjustment or settlement of
various tax issues.
(7) Represents the results of operations of After Hours Formalwear.
For the 39 weeks ended November 3, 2007, discontinued
operations included the loss on disposal of After Hours
Formalwear of $7 million on a pre-tax and after-tax basis, or
$.01 per diluted share.
MACY'S, INC.
Consolidated Balance Sheets (Unaudited)
----------------------------------------------------------------------
(millions)
November 1, February 2, November 3,
2008 2008 2007
----------- ----------- -----------
ASSETS:
Current Assets:
Cash and cash equivalents $ 300 $ 583 $ 275
Receivables 367 463 459
Merchandise inventories 6,915 5,060 7,012
Income tax receivable 43 - -
Supplies and prepaid
expenses 246 218 261
----------- ----------- -----------
Total Current Assets 7,871 6,324 8,007
Property and Equipment - net 10,616 10,991 11,072
Goodwill 9,123 9,133 9,139
Other Intangible Assets - net 747 831 842
Other Assets 547 510 609
----------- ----------- -----------
Total Assets $28,904 $27,789 $29,669
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Current Liabilities:
Short-term debt $ 1,086 $ 666 $ 1,634
Accounts payable and
accrued liabilities 5,687 4,127 5,757
Income taxes - 344 6
Deferred income taxes 246 223 253
----------- ----------- -----------
Total Current
Liabilities 7,019 5,360 7,650
Long-Term Debt 8,748 9,087 9,097
Deferred Income Taxes 1,466 1,446 1,407
Other Liabilities 1,981 1,989 2,045
Shareholders' Equity 9,690 9,907 9,470
----------- ----------- -----------
Total Liabilities and
Shareholders' Equity $28,904 $27,789 $29,669
=========== =========== ===========
Note: Certain reclassifications were made to prior period amounts to
conform with the classifications of such amounts for the most recent
period.
MACY'S, INC.
Consolidated Statements of Cash Flows (Unaudited)
----------------------------------------------------------------------
(millions)
39 Weeks Ended 39 Weeks Ended
November 1, 2008 November 3, 2007
---------------- ----------------
Cash flows from continuing operating
activities:
Net income (loss) $ (30) $ 143
Adjustments to reconcile net
income (loss) to net cash
provided by continuing operating
activities:
Loss from discontinued
operations - 16
Stock-based compensation
expense 32 48
Division consolidation costs 129 -
May integration costs - 150
Asset impairment charges 50 -
Depreciation and amortization 950 977
Amortization of financing costs
and premium on acquired debt (20) (24)
Changes in assets and
liabilities:
Decrease in receivables 84 57
Increase in merchandise
inventories (1,855) (1,695)
Increase in supplies and
prepaid expenses (28) (10)
Decrease in other assets not
separately identified - 2
Increase in accounts payable
and accrued liabilities not
separately identified 1,320 948
Decrease in current income
taxes (343) (328)
Increase (decrease) in
deferred income taxes 8 (17)
Increase in other
liabilities not separately
identified 20 18
---------------- ----------------
Net cash provided by
continuing operating
activities 317 285
---------------- ----------------
Cash flows from continuing investing
activities:
Purchase of property and equipment (546) (700)
Capitalized software (104) (81)
Proceeds from hurricane insurance
claims 19 1
Disposition of property and
equipment 25 96
Proceeds from the disposition of
After Hours Formalwear - 66
---------------- ----------------
Net cash used by continuing
investing activities (606) (618)
---------------- ----------------
MACY'S, INC.
Consolidated Statements of Cash Flows (Unaudited)
----------------------------------------------------------------------
(millions)
39 Weeks Ended 39 Weeks Ended
November 1, 2008 November 3, 2007
---------------- ----------------
Cash flows from continuing financing
activities:
Debt issued 770 2,918
Financing costs (5) (18)
Debt repaid (663) (647)
Dividends paid (166) (173)
Increase in outstanding checks 64 65
Acquisition of treasury stock (1) (3,003)
Issuance of common stock 7 256
---------------- ----------------
Net cash provided (used) by
continuing financing
activities 6 (602)
---------------- ----------------
Net cash used by continuing
operations (283) (935)
Net cash provided by discontinued
operating activities - 7
Net cash used by discontinued
investing activities - (7)
Net cash used by discontinued
financing activities - (1)
---------------- ----------------
Net cash used by discontinued
operations - (1)
---------------- ----------------
Net decrease in cash and cash
equivalents (283) (936)
Cash and cash equivalents at
beginning of period 583 1,211
---------------- ----------------
Cash and cash equivalents at end of
period $ 300 $ 275
================ ================
CONTACT: Macy's, Inc.
Media - Jim Sluzewski, 513-579-7764
or
Investor - Susan Robinson, 513-579-7780
SOURCE: Macy's, Inc.
