UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
☐ | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 1-13536
Macy's, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 13-3324058 | |
(State or other jurisdiction of incorporation or organization) | ||
(I.R.S. Employer Identification No. | ||
151 West 34th Street,
(Address of Principal Executive Offices, including Zip Code)
(212) 494-1602494-1621
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $.01 par value per share | M | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | ☒ | Accelerated Filer | ☐ | ||||||||
Non-Accelerated Filer | ☐ | Smaller Reporting Company | ☐ | ||||||||
Emerging | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class | Outstanding at July 30, 2022 | |
Common Stock, | 270,991,176 shares |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MACY’S, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(millions, except per share figures)
|
| 13 Weeks Ended |
|
| 26 Weeks Ended |
| ||||||||||
|
| July 30, 2022 |
|
| July 31, 2021 |
|
| July 30, 2022 |
|
| July 31, 2021 |
| ||||
Net sales |
| $ | 5,600 |
|
| $ | 5,647 |
|
| $ | 10,948 |
|
| $ | 10,353 |
|
Credit card revenues, net |
|
| 204 |
|
|
| 197 |
|
|
| 395 |
|
|
| 356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
| (3,422 | ) |
|
| (3,353 | ) |
|
| (6,652 | ) |
|
| (6,242 | ) |
Selling, general and administrative expenses |
|
| (1,981 | ) |
|
| (1,898 | ) |
|
| (3,861 | ) |
|
| (3,646 | ) |
Gains on sale of real estate |
|
| 0 |
|
|
| 6 |
|
|
| 42 |
|
|
| 12 |
|
Impairment, restructuring and other costs |
|
| (2 | ) |
|
| (2 | ) |
|
| (10 | ) |
|
| (21 | ) |
Operating income |
|
| 399 |
|
|
| 597 |
|
|
| 862 |
|
|
| 812 |
|
Benefit plan income, net |
|
| 7 |
|
|
| 17 |
|
|
| 14 |
|
|
| 32 |
|
Settlement charges |
|
| 0 |
|
|
| (81 | ) | �� |
| 0 |
|
|
| (81 | ) |
Interest expense |
|
| (43 | ) |
|
| (80 | ) |
|
| (91 | ) |
|
| (159 | ) |
Losses on early retirement of debt |
|
| 0 |
|
|
| (3 | ) |
|
| (31 | ) |
|
| (14 | ) |
Interest income |
|
| 1 |
|
|
| 0 |
|
|
| 2 |
|
|
| 0 |
|
Income before income taxes |
|
| 364 |
|
|
| 450 |
|
|
| 756 |
|
|
| 590 |
|
Federal, state and local income tax expense |
|
| (89 | ) |
|
| (105 | ) |
|
| (195 | ) |
|
| (142 | ) |
Net income |
| $ | 275 |
|
| $ | 345 |
|
| $ | 561 |
|
| $ | 448 |
|
Basic earnings per share |
| $ | 1.01 |
|
| $ | 1.11 |
|
| $ | 2.02 |
|
| $ | 1.44 |
|
Diluted earnings per share |
| $ | 0.99 |
|
| $ | 1.08 |
|
| $ | 1.97 |
|
| $ | 1.41 |
|
13 Weeks Ended | 39 Weeks Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Net sales | $ | 5,281 | $ | 5,626 | $ | 16,171 | $ | 17,263 | |||||||
Cost of sales | (3,175 | ) | (3,386 | ) | (9,794 | ) | (10,370 | ) | |||||||
Gross margin | 2,106 | 2,240 | 6,377 | 6,893 | |||||||||||
Selling, general and administrative expenses | (1,995 | ) | (2,112 | ) | (5,853 | ) | (6,139 | ) | |||||||
Gains on sale of real estate | 65 | 41 | 176 | 76 | |||||||||||
Impairments, restructuring and other costs | (33 | ) | — | (33 | ) | (249 | ) | ||||||||
Settlement charges | (22 | ) | (62 | ) | (73 | ) | (81 | ) | |||||||
Operating income | 121 | 107 | 594 | 500 | |||||||||||
Interest expense | (76 | ) | (82 | ) | (244 | ) | (279 | ) | |||||||
Net premiums on early retirement of debt | — | — | (1 | ) | — | ||||||||||
Interest income | 2 | 1 | 7 | 3 | |||||||||||
Income before income taxes | 47 | 26 | 356 | 224 | |||||||||||
Federal, state and local income tax expense | (13 | ) | (11 | ) | (140 | ) | (85 | ) | |||||||
Net income | 34 | 15 | 216 | 139 | |||||||||||
Net loss attributable to noncontrolling interest | 2 | 2 | 6 | 5 | |||||||||||
Net income attributable to Macy's, Inc. shareholders | $ | 36 | $ | 17 | $ | 222 | $ | 144 | |||||||
Basic earnings per share attributable to Macy's, Inc. shareholders | $ | .12 | $ | .05 | $ | .73 | $ | .46 | |||||||
Diluted earnings per share attributable to Macy's, Inc. shareholders | $ | .12 | $ | .05 | $ | .73 | $ | .46 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
MACY’S, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(millions)
|
| 13 Weeks Ended |
|
| 26 Weeks Ended |
| ||||||||||
|
| July 30, 2022 |
|
| July 31, 2021 |
|
| July 30, 2022 |
|
| July 31, 2021 |
| ||||
Net income |
| $ | 275 |
|
| $ | 345 |
|
| $ | 561 |
|
| $ | 448 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gain on post employment and postretirement benefit plans, before tax |
|
| 0 |
|
|
| 63 |
|
|
| 0 |
|
|
| 63 |
|
Reclassifications to net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net actuarial loss and prior service credit on post employment and postretirement benefit plans included in net income, before tax |
|
| 5 |
|
|
| 9 |
|
|
| 10 |
|
|
| 19 |
|
Settlement charges, before tax |
|
| 0 |
|
|
| 81 |
|
|
| 0 |
|
|
| 81 |
|
Tax effect related to items of other comprehensive income |
|
| (1 | ) |
|
| (38 | ) |
|
| (3 | ) |
|
| (40 | ) |
Total other comprehensive income, net of tax effect |
|
| 4 |
|
|
| 115 |
|
|
| 7 |
|
|
| 123 |
|
Comprehensive income |
| $ | 279 |
|
| $ | 460 |
|
| $ | 568 |
|
| $ | 571 |
|
13 Weeks Ended | 39 Weeks Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Net income | $ | 34 | $ | 15 | $ | 216 | $ | 139 | |||||||
Other comprehensive income (loss): | |||||||||||||||
Actuarial gain (loss) on post employment and postretirement benefit plans, before tax | 10 | 3 | 57 | (74 | ) | ||||||||||
Settlement charges included in net income, before tax | 22 | 62 | 73 | 81 | |||||||||||
Amortization of net actuarial loss on post employment and postretirement benefit plans included in net income, before tax | 8 | 9 | 26 | 26 | |||||||||||
Tax effect related to items of other comprehensive income (loss) | (15 | ) | (29 | ) | (60 | ) | (13 | ) | |||||||
Total other comprehensive income, net of tax effect | 25 | 45 | 96 | 20 | |||||||||||
Comprehensive income | 59 | 60 | 312 | 159 | |||||||||||
Comprehensive loss attributable to noncontrolling interest | 2 | 2 | 6 | 5 | |||||||||||
Comprehensive income attributable to Macy's, Inc. shareholders | $ | 61 | $ | 62 | $ | 318 | $ | 164 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
MACY’S, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(millions)
|
| July 30, 2022 |
|
| January 29, 2022 |
|
| July 31, 2021 |
| |||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 300 |
|
| $ | 1,712 |
|
| $ | 2,137 |
|
Receivables |
|
| 219 |
|
|
| 297 |
|
|
| 221 |
|
Merchandise inventories |
|
| 4,610 |
|
|
| 4,383 |
|
|
| 4,298 |
|
Prepaid expenses and other current assets |
|
| 387 |
|
|
| 366 |
|
|
| 955 |
|
Total Current Assets |
|
| 5,516 |
|
|
| 6,758 |
|
|
| 7,611 |
|
Property and Equipment - net of accumulated depreciation and amortization of $4,820, $4,548 and $4,689 |
|
| 5,656 |
|
|
| 5,665 |
|
|
| 5,713 |
|
Right of Use Assets |
|
| 2,715 |
|
|
| 2,808 |
|
|
| 2,819 |
|
Goodwill |
|
| 828 |
|
|
| 828 |
|
|
| 828 |
|
Other Intangible Assets – net |
|
| 433 |
|
|
| 435 |
|
|
| 436 |
|
Other Assets |
|
| 1,194 |
|
|
| 1,096 |
|
|
| 1,010 |
|
Total Assets |
| $ | 16,342 |
|
| $ | 17,590 |
|
| $ | 18,417 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
| $ | 0 |
|
| $ | 0 |
|
| $ | 1,546 |
|
Merchandise accounts payable |
|
| 2,290 |
|
|
| 2,222 |
|
|
| 2,476 |
|
Accounts payable and accrued liabilities |
|
| 2,395 |
|
|
| 3,086 |
|
|
| 2,660 |
|
Income taxes |
|
| 23 |
|
|
| 108 |
|
|
| 18 |
|
Total Current Liabilities |
|
| 4,708 |
|
|
| 5,416 |
|
|
| 6,700 |
|
Long-Term Debt |
|
| 2,995 |
|
|
| 3,295 |
|
|
| 3,295 |
|
Long-Term Lease Liabilities |
|
| 3,008 |
|
|
| 3,098 |
|
|
| 3,096 |
|
Deferred Income Taxes |
|
| 948 |
|
|
| 983 |
|
|
| 913 |
|
Other Liabilities |
|
| 1,152 |
|
|
| 1,177 |
|
|
| 1,267 |
|
Shareholders' Equity |
|
| 3,531 |
|
|
| 3,621 |
|
|
| 3,146 |
|
Total Liabilities and Shareholders’ Equity |
| $ | 16,342 |
|
| $ | 17,590 |
|
| $ | 18,417 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 534 | $ | 1,297 | $ | 457 | |||||
Receivables | 219 | 522 | 262 | ||||||||
Merchandise inventories | 7,065 | 5,399 | 7,587 | ||||||||
Income tax receivable | — | — | 60 | ||||||||
Prepaid expenses and other current assets | 432 | 408 | 454 | ||||||||
Total Current Assets | 8,250 | 7,626 | 8,820 | ||||||||
Property and Equipment - net of accumulated depreciation and amortization of $5,330, $4,856 and $5,625 | 6,742 | 7,017 | 7,149 | ||||||||
Goodwill | 3,897 | 3,897 | 3,897 | ||||||||
Other Intangible Assets – net | 491 | 498 | 499 | ||||||||
Other Assets | 835 | 813 | 909 | ||||||||
Total Assets | $ | 20,215 | $ | 19,851 | $ | 21,274 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current Liabilities: | |||||||||||
Short-term debt | $ | 22 | $ | 309 | $ | 938 | |||||
Merchandise accounts payable | 3,173 | 1,423 | 3,375 | ||||||||
Accounts payable and accrued liabilities | 3,162 | 3,563 | 2,930 | ||||||||
Income taxes | 34 | 352 | — | ||||||||
Total Current Liabilities | 6,391 | 5,647 | 7,243 | ||||||||
Long-Term Debt | 6,297 | 6,562 | 6,563 | ||||||||
Deferred Income Taxes | 1,553 | 1,443 | 1,548 | ||||||||
Other Liabilities | 1,750 | 1,877 | 2,129 | ||||||||
Shareholders' Equity: | |||||||||||
Macy's, Inc. | 4,231 | 4,323 | 3,789 | ||||||||
Noncontrolling interest | (7 | ) | (1 | ) | 2 | ||||||
Total Shareholders’ Equity | 4,224 | 4,322 | 3,791 | ||||||||
Total Liabilities and Shareholders’ Equity | $ | 20,215 | $ | 19,851 | $ | 21,274 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
MACY’S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWSCHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(millions)
| Common Stock |
|
| Additional Paid-In Capital |
|
| Accumulated Equity |
|
| Treasury Stock |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Total Shareholders' Equity |
| ||||||
Balance at January 29, 2022 | $ | 3 |
|
| $ | 517 |
|
| $ | 5,268 |
|
| $ | (1,545 | ) |
| $ | (622 | ) |
| $ | 3,621 |
|
Net income |
|
|
|
|
|
|
|
|
| 286 |
|
|
|
|
|
|
|
|
|
|
| 286 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4 |
|
|
| 4 |
|
Common stock dividends ($0.1575 per share) |
|
|
|
|
|
|
|
|
| (45 | ) |
|
|
|
|
|
|
|
|
|
| (45 | ) |
Stock repurchases |
|
|
|
|
|
|
|
|
|
|
|
|
| (600 | ) |
|
|
|
|
|
| (600 | ) |
Stock-based compensation expense |
|
|
|
|
| 13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 13 |
|
Stock issued under stock plans |
|
|
|
|
| (54 | ) |
|
|
|
|
|
| 53 |
|
|
|
|
|
|
| (1 | ) |
Balance at April 30, 2022 |
| 3 |
|
|
| 476 |
|
|
| 5,509 |
|
|
| (2,092 | ) |
|
| (618 | ) |
|
| 3,278 |
|
Net income |
|
|
|
|
|
|
|
|
| 275 |
|
|
|
|
|
|
|
|
|
|
| 275 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3 |
|
|
| 3 |
|
Common stock dividends ($0.1575 per share) |
|
|
|
|
|
|
|
|
| (42 | ) |
|
|
|
|
|
|
|
|
|
| (42 | ) |
Stock-based compensation expense |
|
|
|
|
| 17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 17 |
|
Stock issued under stock plans |
|
|
|
|
| (43 | ) |
|
|
|
|
|
| 43 |
|
|
|
|
|
|
| 0 |
|
Balance at July 30, 2022 | $ | 3 |
|
| $ | 450 |
|
| $ | 5,742 |
|
| $ | (2,049 | ) |
| $ | (615 | ) |
| $ | 3,531 |
|
39 Weeks Ended | |||||||
October 28, 2017 | October 29, 2016 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 216 | $ | 139 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Impairments, restructuring and other costs | 33 | 249 | |||||
Settlement charges | 73 | 81 | |||||
Depreciation and amortization | 741 | 787 | |||||
Stock-based compensation expense | 46 | 56 | |||||
Gains on sale of real estate | (176 | ) | (76 | ) | |||
Amortization of financing costs and premium on acquired debt | (10 | ) | (14 | ) | |||
Changes in assets and liabilities: | |||||||
Decrease in receivables | 274 | 237 | |||||
Increase in merchandise inventories | (1,665 | ) | (2,081 | ) | |||
Increase in prepaid expenses and other current assets | (20 | ) | (37 | ) | |||
Increase in merchandise accounts payable | 1,630 | 1,665 | |||||
Decrease in accounts payable, accrued liabilities and other items not separately identified | (375 | ) | (380 | ) | |||
Decrease in current income taxes | (318 | ) | (287 | ) | |||
Increase in deferred income taxes | 49 | 45 | |||||
Change in other assets and liabilities not separately identified | (109 | ) | (76 | ) | |||
Net cash provided by operating activities | 389 | 308 | |||||
Cash flows from investing activities: | |||||||
Purchase of property and equipment | (359 | ) | (451 | ) | |||
Capitalized software | (191 | ) | (230 | ) | |||
Disposition of property and equipment | 212 | 138 | |||||
Other, net | (8 | ) | 52 | ||||
Net cash used by investing activities | (346 | ) | (491 | ) | |||
Cash flows from financing activities: | |||||||
Debt issued | — | 51 | |||||
Financing costs | (1 | ) | (3 | ) | |||
Debt repaid | (554 | ) | (174 | ) | |||
Dividends paid | (346 | ) | (344 | ) | |||
Increase in outstanding checks | 80 | 193 | |||||
Acquisition of treasury stock | (1 | ) | (230 | ) | |||
Issuance of common stock | 3 | 31 | |||||
Proceeds from noncontrolling interest | 13 | 7 | |||||
Net cash used by financing activities | (806 | ) | (469 | ) | |||
Net decrease in cash and cash equivalents | (763 | ) | (652 | ) | |||
Cash and cash equivalents beginning of period | 1,297 | 1,109 | |||||
Cash and cash equivalents end of period | $ | 534 | $ | 457 | |||
Supplemental cash flow information: | |||||||
Interest paid | $ | 251 | $ | 279 | |||
Interest received | 7 | 3 | |||||
Income taxes paid (net of refunds received) | 412 | 308 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
MACY’S, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - (Continued)
(Unaudited)
(millions)
| Common Stock |
|
| Additional Paid-In Capital |
|
| Accumulated Equity |
|
| Treasury Stock |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Total Shareholders' Equity |
| ||||||
Balance at January 30, 2021 | $ | 3 |
|
| $ | 571 |
|
| $ | 3,928 |
|
| $ | (1,161 | ) |
| $ | (788 | ) |
| $ | 2,553 |
|
Net income |
|
|
|
|
|
|
|
|
| 103 |
|
|
|
|
|
|
|
|
|
|
| 103 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8 |
|
|
| 8 |
|
Stock-based compensation expense |
|
|
|
|
| 11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11 |
|
Stock issued under stock plans |
|
|
|
|
| (24 | ) |
|
|
|
|
|
| 24 |
|
|
|
|
|
|
| 0 |
|
Balance at May 1, 2021 |
| 3 |
|
|
| 558 |
|
|
| 4,031 |
|
|
| (1,137 | ) |
|
| (780 | ) |
|
| 2,675 |
|
Net income |
|
|
|
|
|
|
|
|
| 345 |
|
|
|
|
|
|
|
|
|
|
| 345 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 115 |
|
|
| 115 |
|
Stock-based compensation expense |
|
|
|
|
| 11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11 |
|
Stock issued under stock plans |
|
|
|
|
| (71 | ) |
|
|
|
|
|
| 71 |
|
|
|
|
|
|
| 0 |
|
Balance at July 31, 2021 | $ | 3 |
|
| $ | 498 |
|
| $ | 4,376 |
|
| $ | (1,066 | ) |
| $ | (665 | ) |
| $ | 3,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
MACY’S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(millions)
|
| 26 Weeks Ended |
| |||||
|
| July 30, 2022 |
|
| July 31, 2021 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 561 |
|
| $ | 448 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Impairment, restructuring and other costs |
|
| 10 |
|
|
| 21 |
|
Settlement charges |
|
| 0 |
|
|
| 81 |
|
Depreciation and amortization |
|
| 413 |
|
|
| 444 |
|
Stock-based compensation expense |
|
| 30 |
|
|
| 22 |
|
Gains on sale of real estate |
|
| (42 | ) |
|
| (12 | ) |
Benefit plans |
|
| 10 |
|
|
| 19 |
|
Amortization of financing costs and premium on acquired debt |
|
| 5 |
|
|
| 14 |
|
Deferred income taxes |
|
| (38 | ) |
|
| (36 | ) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Decrease in receivables |
|
| 78 |
|
|
| 55 |
|
Increase in merchandise inventories |
|
| (227 | ) |
|
| (525 | ) |
Increase in prepaid expenses and other current assets |
|
| (28 | ) |
|
| (41 | ) |
Increase in merchandise accounts payable |
|
| 100 |
|
|
| 647 |
|
Decrease in accounts payable and accrued liabilities |
|
| (455 | ) |
|
| (78 | ) |
Increase (decrease) in current income taxes |
|
| (72 | ) |
|
| 12 |
|
Change in other assets and liabilities |
|
| (42 | ) |
|
| (106 | ) |
Net cash provided by operating activities |
|
| 303 |
|
|
| 965 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (378 | ) |
|
| (142 | ) |
Capitalized software |
|
| (204 | ) |
|
| (88 | ) |
Disposition of property and equipment |
|
| 73 |
|
|
| 34 |
|
Other, net |
|
| (6 | ) |
|
| 52 |
|
Net cash used by investing activities |
|
| (515 | ) |
|
| (144 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Debt issued |
|
| 850 |
|
|
| 500 |
|
Debt issuance costs |
|
| (21 | ) |
|
| (9 | ) |
Debt repaid |
|
| (1,140 | ) |
|
| (518 | ) |
Debt repurchase premium and expenses |
|
| (29 | ) |
|
| (15 | ) |
Dividends paid |
|
| (87 | ) |
|
| 0 |
|
Decrease in outstanding checks |
|
| (172 | ) |
|
| (318 | ) |
Acquisition of treasury stock |
|
| (601 | ) |
|
| 0 |
|
Net cash used by financing activities |
|
| (1,200 | ) |
|
| (360 | ) |
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
| (1,412 | ) |
|
| 461 |
|
Cash, cash equivalents and restricted cash beginning of period |
|
| 1,715 |
|
|
| 1,754 |
|
Cash, cash equivalents and restricted cash end of period |
| $ | 303 |
|
| $ | 2,215 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Interest paid |
| $ | 108 |
|
| $ | 152 |
|
Interest received |
|
| 1 |
|
|
| 0 |
|
Income taxes paid, net of refunds received |
|
| 305 |
|
|
| 166 |
|
Note: Restricted cash of $3 million and $78 million have been included with cash and cash equivalents for the 26 weeks ended July 30, 2022 and July 31, 2021, respectively.
The accompanying notes are an integral part of these Consolidated Financial Statements.
7
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. |
Organization and Summary of Significant Accounting Policies |
Nature of Operations
Macy's, Inc. and, together with its subsidiaries (the "Company"), is an omnichannel retail organization operating stores, websites and mobile applications under three brands (Macy's, Bloomingdale's and bluemercury) that sell a wide range of merchandise, including apparel and accessories (men's, women's and children's)kids'), cosmetics, home furnishings and other consumer goods. The Company has stores in 43 states, the District of Columbia, Puerto Rico and Guam. As of July 30, 2022, the Company's operations areand operating segments were conducted through approximately
Bloomingdale's in Dubai, United Arab Emirates and Al Zahra, Kuwait are operated under a license agreement with Al Tayer Insignia, a company of Al Tayer Group, LLC.
A description of the Company's significant accounting policies is included in the Company's Annual Report on Form 10-K for the fiscal year ended
JanuaryUse of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States generally accepted accounting principlesof America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are subject to inherent uncertainties which may result in actual amounts differing from reported amounts.
The Consolidated Financial Statements for the 13 and 3926 weeks ended
Seasonality
Because of the seasonal nature of the retail business, the results of operations for the 13 and 3926 weeks ended
Reclassifications
Certain reclassifications were made to prior years’years' amounts to conform towith the classifications of such amounts in the most recent years.
Comprehensive Income
Total comprehensive income represents the change in equity during a period from sources other than transactions with shareholders and, as such, includes net income. For the Company, the only other components of total comprehensive income for the 13 and 3926 weeks ended October 28, 2017July 30, 2022 and
8
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
2. |
Earnings Per Share |
The following tables set forth the computation of basic and diluted earnings per share attributable to Macy's, Inc. shareholders:share:
|
| 13 Weeks Ended |
| |||||||||||||||||||||
|
| July 30, 2022 |
|
| July 31, 2021 |
| ||||||||||||||||||
|
| Net Income |
|
|
|
|
|
| Shares |
|
| Net Income |
|
|
|
|
|
| Shares |
| ||||
|
| (millions, except per share data) |
| |||||||||||||||||||||
Net income and average number of shares outstanding |
| $ | 275 |
|
|
|
|
|
|
| 270.1 |
|
| $ | 345 |
|
|
|
|
|
|
| 311.5 |
|
Shares to be issued under deferred compensation and other plans |
|
|
|
|
|
|
|
|
|
| 1.0 |
|
|
|
|
|
|
|
|
|
|
| 0.9 |
|
|
| $ | 275 |
|
|
|
|
|
|
| 271.1 |
|
| $ | 345 |
|
|
|
|
|
|
| 312.4 |
|
Basic earnings per share |
|
|
|
|
| $ | 1.01 |
|
|
|
|
|
|
|
|
|
| $ | 1.11 |
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock units |
|
|
|
|
|
|
|
|
|
| 6.3 |
|
|
|
|
|
|
|
|
|
|
| 6 |
|
|
| $ | 275 |
|
|
|
|
|
|
| 277.4 |
|
| $ | 345 |
|
|
|
|
|
|
| 318.6 |
|
Diluted earnings per share |
|
|
|
|
| $ | 0.99 |
|
|
|
|
|
|
|
|
|
| $ | 1.08 |
|
|
|
|
|
|
| 26 Weeks Ended |
| |||||||||||||||||||||
|
| July 30, 2022 |
|
| July 31, 2021 |
| ||||||||||||||||||
|
| Net Income |
|
|
|
|
|
| Shares |
|
| Net Income |
|
|
|
|
|
| Shares |
| ||||
|
| (millions, except per share data) |
|
|
| |||||||||||||||||||
Net income and average number of shares outstanding |
| $ | 561 |
|
|
|
|
|
|
| 276.3 |
|
| $ | 448 |
|
|
|
|
|
|
| 311.1 |
|
Shares to be issued under deferred compensation and other plans |
|
|
|
|
|
|
|
|
|
| 1.0 |
|
|
|
|
|
|
|
|
|
| 0.9 |
| |
|
| $ | 561 |
|
|
|
|
|
|
| 277.3 |
|
| $ | 448 |
|
|
|
|
|
|
| 312.0 |
|
Basic earnings per share |
|
|
|
|
| $ | 2.02 |
|
|
|
|
|
|
|
|
|
| $ | 1.44 |
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock units |
|
|
|
|
|
|
|
|
|
| 6.8 |
|
|
|
|
|
|
|
|
|
|
| 6.6 |
|
|
| $ | 561 |
|
|
|
|
|
|
| 284.1 |
|
| $ | 448 |
|
|
|
|
|
|
| 318.6 |
|
Diluted earnings per share |
|
|
|
|
| $ | 1.97 |
|
|
|
|
|
|
|
|
|
| $ | 1.41 |
|
|
|
|
|
13 Weeks Ended | |||||||||||||||||||||
October 28, 2017 | October 29, 2016 | ||||||||||||||||||||
Net Income | Shares | Net Income | Shares | ||||||||||||||||||
(millions, except per share data) | |||||||||||||||||||||
Net income attributable to Macy's, Inc. shareholders and average number of shares outstanding | $ | 36 | 304.6 | $ | 17 | 307.5 | |||||||||||||||
Shares to be issued under deferred compensation and other plans | 0.9 | 0.9 | |||||||||||||||||||
$ | 36 | 305.5 | $ | 17 | 308.4 | ||||||||||||||||
Basic earnings per share attributable to Macy's, Inc. shareholders | $ | .12 | $ | .05 | |||||||||||||||||
Effect of dilutive securities: | |||||||||||||||||||||
Stock options, restricted stock and restricted stock units | 1.0 | 2.2 | |||||||||||||||||||
$ | 36 | 306.5 | $ | 17 | 310.6 | ||||||||||||||||
Diluted earnings per share attributable to Macy's, Inc. shareholders | $ | .12 | $ | .05 |
39 Weeks Ended | |||||||||||||||||||||
October 28, 2017 | October 29, 2016 | ||||||||||||||||||||
Net Income | Shares | Net Income | Shares | ||||||||||||||||||
(millions, except per share data) | |||||||||||||||||||||
Net income attributable to Macy's, Inc. shareholders and average number of shares outstanding | $ | 222 | 304.5 | $ | 144 | 308.6 | |||||||||||||||
Shares to be issued under deferred compensation and other plans | 0.8 | 0.9 | |||||||||||||||||||
$ | 222 | 305.3 | $ | 144 | 309.5 | ||||||||||||||||
Basic earnings per share attributable to Macy's, Inc. shareholders | $ | .73 | $ | .46 | |||||||||||||||||
Effect of dilutive securities: | |||||||||||||||||||||
Stock options, restricted stock and restricted stock units | 1.3 | 2.3 | |||||||||||||||||||
$ | 222 | 306.6 | $ | 144 | 311.8 | ||||||||||||||||
Diluted earnings per share attributable to Macy's, Inc. shareholders | $ | .73 | $ | .46 |
In addition to the stock options and restricted stock units reflected in the foregoing tables,table, stock options to purchase
3. | Revenue |
Net sales
Revenue is recognized when customers obtain control of goods and services promised by the Company. The amount of revenue recognized is based on the amount that reflects the consideration that is expected to be received in exchange for those respective goods and services. The Company's revenue generating activities include the following:
9
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Retail Sales
Retail sales include merchandise sales, inclusive of delivery income, licensed department income, sales of private brand goods directly to third party retailers and sales of excess inventory to third parties. Sales of merchandise are recorded at point of sale for in-store purchases or the time of shipment to the customer for digital purchases and are reported net of estimated merchandise returns and certain customer incentives. Commissions earned on sales generated by licensed departments are included as a component of total net sales and are recognized as revenue at the time merchandise is sold to customers. Service revenues (e.g., alteration and cosmetic services) are recorded at the time the customer receives the benefit of the service. The Company has elected to present sales taxes on a net basis and, as such, sales taxes are included in accounts payable and accrued liabilities until remitted to the taxing authorities.
Macy’s accounted for 86% and 88% of the Company’s net sales for the 13 weeks ended July 30, 2022 and July 31, 2021, respectively, and 86% and 88% of the Company’s net sales for the 26 weeks ended July 30, 2022 and July 31, 2021, respectively. In addition, digital sales accounted for approximately 30% and 32% of the Company’s net sales for the 13 weeks ended July 30, 2022 and July 31, 2021, respectively, and 32% and 34% of the Company’s net sales for the 26 weeks ended July 30, 2022 and July 31, 2021, respectively.
Disaggregation of the Company's net sales by family of business for the 13 and 3926 weeks ended OctoberJuly 30, 2022 and July 31, 2021 were as follows:
|
| 13 Weeks Ended |
|
| 26 Weeks Ended |
| ||||||||||
Net sales by family of business |
| July 30, 2022 |
|
| July 31, 2021 |
|
| July 30, 2022 |
|
| July 31, 2021 |
| ||||
|
| (millions) |
| |||||||||||||
Women's Accessories, Intimate Apparel, Shoes, Cosmetics and Fragrances |
| $ | 2,099 |
|
| $ | 2,092 |
|
| $ | 4,189 |
|
| $ | 3,973 |
|
Women's Apparel |
|
| 1,267 |
|
|
| 1,299 |
|
|
| 2,549 |
|
|
| 2,353 |
|
Men's and Kids' |
|
| 1,220 |
|
|
| 1,223 |
|
|
| 2,306 |
|
|
| 2,156 |
|
Home/Other (a) |
|
| 1,014 |
|
|
| 1,033 |
|
|
| 1,904 |
|
|
| 1,871 |
|
Total |
| $ | 5,600 |
|
| $ | 5,647 |
|
| $ | 10,948 |
|
| $ | 10,353 |
|
(a) | Other primarily includes restaurant sales, allowance for merchandise returns adjustments and breakage income from unredeemed gift cards. |
Merchandise Returns
The Company estimates merchandise returns using historical data and recognizes an allowance that reduces net sales and cost of sales. The liability for merchandise returns is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was $186 million, $198 million and $196 million as of July 30, 2022, January 29, 2016,2022 and July 31, 2021, respectively. Included in additionprepaid expenses and other current assets is an asset totaling $112 million, $120 million and $115 million as of July 30, 2022, January 29, 2022 and July 31, 2021, respectively, for the recoverable cost of merchandise estimated to be returned by customers.
Gift Cards and Customer Loyalty Programs
The Company only offers no-fee, non-expiring gift cards to its customers. At the time gift cards are sold or issued, no revenue is recognized; rather, the Company records an accrued liability to customers. The liability is relieved and revenue is recognized equal to the stock optionsamount redeemed at the time gift cards are redeemed for merchandise. The Company records revenue from unredeemed gift cards (breakage) in net sales on a pro-rata basis over the time period gift cards are actually redeemed. At least three years of historical data, updated annually, is used to determine actual redemption patterns.
The Company maintains customer loyalty programs in which customers earn points based on their purchases. Under the Macy’s Star Rewards loyalty program, points are earned based on customers’ spending on Macy’s private label and restricted stock units reflectedco-branded credit cards as well as non-proprietary cards and other forms of tender. The Company’s Bloomingdale’s Loyallist and bluemercury BlueRewards programs provide tender neutral points-based programs to their customers. The Company recognizes the estimated net amount of the rewards that will be earned and redeemed as a reduction to net sales at the time of the initial transaction and as tender when the points are subsequently redeemed by a customer.
10
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The liability for unredeemed gift cards and customer loyalty programs is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was $386 million, $481 million and $547 million as of July 30, 2022, January 29, 2022 and July 31, 2021, respectively.
Credit Card Revenues, net
In 2005, the Company entered into an arrangement with Citibank, N.A. ("Citibank") to sell the Company's private label and co-branded credit cards ("Credit Card Program"). Subsequent to this initial arrangement and associated amendments, in 2021, the Company entered into the sixth amendment to the amended and restated Credit Card Program Agreement (the "Program Agreement") with Citibank. The changes to the Credit Card Program’s financial structure are not materially different from its previous terms. As part of the Program Agreement, the Company receives payments for providing a combination of interrelated services and intellectual property to Citibank in support of the underlying Credit Card Program. Revenue based on the spending activity of the underlying accounts is recognized as the respective card purchases occur and the Company’s profit share is recognized based on the performance of the underlying portfolio. Revenue associated with the establishment of new credit accounts and assisting in the foregoing tables, stock options to purchase
The Program Agreement expires March 31, 2030, subject to performance conditions that had notan additional renewal term of three years. The Program Agreement provides for, among other things, (i) the ownership by Citibank of the accounts purchased by Citibank, (ii) the ownership by Citibank of new accounts opened by the Company’s customers, (iii) the provision of credit by Citibank to the holders of the credit cards associated with the foregoing accounts, (iv) the servicing of the foregoing accounts, and (v) the allocation between Citibank and the Company of the economic benefits and burdens associated with the foregoing and other aspects of the alliance. Pursuant to the Program Agreement, the Company continues to provide certain servicing functions related to the accounts and related receivables owned by Citibank and receives compensation from Citibank for these services. The amounts earned under the Program Agreement related to the servicing functions are deemed adequate compensation and, accordingly, no servicing asset or liability has been met.
4. | Financing Activities |
The following table shows the detail of debt repayments:
|
| 26 Weeks Ended |
| |||||
|
| July 30, 2022 |
|
| July 31, 2021 |
| ||
|
| (millions) |
| |||||
2.875% Senior notes due 2023 |
| $ | 504 |
|
| $ | 136 |
|
3.625% Senior notes due 2024 |
|
| 350 |
|
|
| 150 |
|
4.375% Senior notes due 2023 |
|
| 161 |
|
|
| 49 |
|
6.65% Senior debentures due 2024 |
|
| 117 |
|
|
| 4 |
|
6.9% Senior debentures due 2032 |
|
| 4 |
|
|
| 0 |
|
6.7% Senior debentures due 2034 |
|
| 2 |
|
|
| 0 |
|
6.7% Senior debentures due 2028 |
|
| 1 |
|
|
| 0 |
|
3.875% Senior notes due 2022 |
|
| 0 |
|
|
| 156 |
|
7.6% Senior debentures due 2025 |
|
| 0 |
|
|
| 19 |
|
9.5% Amortizing debentures due 2021 |
|
| 0 |
|
|
| 2 |
|
9.75% Amortizing debentures due 2021 |
|
| 0 |
|
|
| 1 |
|
|
| $ | 1,139 |
|
| $ | 517 |
|
|
|
|
|
|
|
|
|
|
39 Weeks Ended | |||||||
October 28, 2017 | October 29, 2016 | ||||||
(millions) | |||||||
7.45% Senior debentures due 2017 | $ | 300 | $ | — | |||
7.875% Senior debentures due 2036 | — | 108 | |||||
6.375% Senior notes due 2037 | 135 | — | |||||
7.45% Senior debentures due 2016 | — | 59 | |||||
6.9% Senior debentures due 2032 | 72 | — | |||||
6.7% Senior debentures due 2034 | 28 | — | |||||
6.65% Senior debentures due 2024 | 4 | — | |||||
6.9% Senior debentures due 2029 | 3 | — | |||||
6.7% Senior debentures due 2028 | 3 | — | |||||
7.0% Senior debentures due 2028 | 2 | — | |||||
9.5% amortizing debentures due 2021 | 4 | 4 | |||||
9.75% amortizing debentures due 2021 | 2 | 2 | |||||
Capital leases and other obligations | 1 | 1 | |||||
$ | 554 | $ | 174 |
On March 3, 2022, Macy’s Inventory Funding LLC (the “ABL Borrower”), an indirect subsidiary of the Company, repaid,and Macy’s Inventory Holdings LLC (the “ABL Parent”), a direct subsidiary of Macy’s and the direct parent of the ABL Borrower, entered into an amendment (“the Amendment”) to the credit agreement governing the existing $2,941 million asset-based credit facility (the “Existing ABL Credit Facility”), which was set to expire in May 2024. The Amendment provides for a new revolving credit facility of $3.0 billion, including a swingline sub-facility and a letter of credit sub-facility (the “New ABL Credit Facility”). The ABL Borrower may request increases in the size of the New ABL Credit Facility up to an additional aggregate principal amount of $750 million. The New ABL Credit Facility replaces the Existing ABL Credit Facility, with similar collateral support, but reduced interest and unused facility fees. The New ABL Credit Facility matures in March 2027.
11
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The New ABL Credit Facility is secured on a first priority basis (subject to customary exceptions) by (i) all assets of the ABL Borrower including all inventory and the proceeds thereof and (ii) the equity of the ABL Borrower. The ABL Parent guarantees the ABL Borrower’s obligations under the New ABL Credit Facility.
The New ABL Credit Facility contains customary borrowing conditions including a borrowing base equal to the sum of (i) 90% of the net orderly liquidation percentage of eligible inventory, minus (ii) customary reserves. Amounts borrowed under the New ABL Credit Facility are subject to interest at maturity, $300a rate per annum equal to, at the ABL Borrower’s option, either (i) adjusted SOFR (calculated to include a 0.10% credit adjustment spread) plus a margin of 1.25% to 1.50% or (ii) a base rate plus a margin of 0.25% to 0.50%, in each case depending on revolving line utilization. The New ABL Credit Facility also contains customary covenants that provide for, among other things, limitations on indebtedness, liens, fundamental changes, restricted payments, cash hoarding, and prepayment of certain indebtedness as well as customary representations and warranties and events of default typical for credit facilities of this type.
The New ABL Credit Facility also requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any fiscal quarter if (i) certain events of default have occurred and are continuing or (ii) Availability plus Suppressed Availability (each as defined in the New ABL Credit Facility) is less than the greater of (a) 10% of the Loan Cap (as defined in the New ABL Credit Facility) and (b) $250 million, in each case, as of the end of such fiscal quarter.
As of July 30, 2022, the Company had $65 million of 7.45% senior debentures duestandby letters of credit outstanding under the ABL Credit Facility, which reduced the available borrowing capacity to $2,935 million. The Company had 0 outstanding borrowings under the ABL Credit Facility as of July 2017.
On March 8, 2022, Macy’s Retail Holdings, LLC (“MRH”), a direct, wholly owned subsidiary of senior notes and debentures. The debt repurchases were made in the open market forMacy’s, Inc., completed a total cash cost of $257 million, including expenses related to the transactions. Such repurchases resulted in the recognition of expense of $1 million during the 39 weeks ended October 28, 2017 presented as net premiums on early retirement of debt on the Consolidated Statements of Income.
On March 10, 2022, MRH issued $850 million in aggregate principal amount of senior notes in two separate tranches, one representing $425 million in aggregate principal amount of 5.875% senior notes due March 15, 2030 (the “2030 Notes”) and the other representing $425 million in aggregate principal amount of 6.125% senior notes due March 15, 2032 (the “2032 Notes”), in a private offering. Each of the 2030 Notes and 2032 Notes are senior unsecured obligations of MRH and are unconditionally guaranteed on an unsecured basis by Macy’s, Inc. Proceeds from the issuance, together with cash on hand, were used to redeem certain of MRH’s outstanding senior notes and debentures,pay fees and expenses therewith and in connection with stated interest rates ranging from 6.375% to 10.25% and maturities ranging from fiscal years 2021 to 2037. The tender offer expires on December 22, 2017, with an early tender date on December 8, 2017.the offering. The Company expects to record the redemption premium and other costsrecognized $31 million of losses related to these repurchases as net premiums onthe early retirement of debt on the Consolidated Statements of Income during the fourthfirst quarter of 2017.2022.
During the 26 weeks ended July 30, 2022, the Company repurchased approximately 24 million shares of its common stock pursuant to existing stock purchase authorizations for a total of approximately $600 million. As of July 30, 2022, the Company had $1.4 billion of authorization remaining under its share repurchase program. The Company may continue or, from time to time, suspend repurchases of shares under its share repurchase program, depending on prevailing market conditions, alternate uses of capital and other factors.
5. | Retirement Plans |
The Company has defined contribution plans whichthat cover substantially all employeescolleagues who work 1,000 hours or more in a year. In addition, the Company has a funded defined benefit plan ("Pension Plan") and an unfunded defined benefit supplementary retirement plan ("SERP"), which provides benefits, for certain employees,colleagues, in excess of qualified plan limitations. Effective January 1, 2012, the Pension Plan was closed to new participants, with limited exceptions, and effective January 2, 2012, the SERP was closed to new participants.
In February 2013, the Company announced changes to the Pension Plan and SERP whereby eligible employeescolleagues no longer earn future pension service credits after December 31, 2013, with limited exceptions. All retirement benefits attributable to service in subsequent periods are provided through defined contribution plans.
12
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In addition, certain retired employeescolleagues currently are provided with specified health care and life insurance benefits ("Postretirement Obligations"). Eligibility requirements for such benefits vary, but generally state that benefits are available to eligible employeescolleagues who were hired prior to a certain date and retire after a certain age with specified years of service. Certain employeescolleagues are subject to having such benefits modified or terminated.
The defined contribution plan expense and actuarially determined components of the net periodic benefit cost (income) associated with the defined benefit plans are as follows:
|
| 13 Weeks Ended |
|
| 26 Weeks Ended |
| ||||||||||
|
| July 30, 2022 |
|
| July 31, 2021 |
|
| July 30, 2022 |
|
| July 31, 2021 |
| ||||
|
| (millions) |
|
| (millions) |
| ||||||||||
401(k) Qualified Defined Contribution Plan |
| $ | 23 |
|
| $ | 17 |
|
| $ | 45 |
|
| $ | 39 |
|
Pension Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | 0 |
|
| $ | 1 |
|
| $ | 0 |
|
| $ | 1 |
|
Interest cost |
|
| 15 |
|
|
| 13 |
|
|
| 29 |
|
|
| 25 |
|
Expected return on assets |
|
| (31 | ) |
|
| (43 | ) |
|
| (62 | ) |
|
| (83 | ) |
Recognition of net actuarial loss |
|
| 4 |
|
|
| 9 |
|
|
| 8 |
|
|
| 17 |
|
|
| $ | (12 | ) |
| $ | (20 | ) |
| $ | (25 | ) |
| $ | (40 | ) |
Supplementary Retirement Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
|
| 3 |
|
|
| 3 |
|
|
| 7 |
|
|
| 6 |
|
Recognition of net actuarial loss |
|
| 3 |
|
|
| 3 |
|
|
| 6 |
|
|
| 6 |
|
|
| $ | 6 |
|
| $ | 6 |
|
| $ | 13 |
|
| $ | 12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Retirement Expense |
| $ | 17 |
|
| $ | 3 |
|
| $ | 33 |
|
| $ | 11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
|
| 1 |
|
|
| 0 |
|
|
| 1 |
|
|
| 0 |
|
Recognition of net actuarial gain |
|
| (2 | ) |
|
| (2 | ) |
|
| (3 | ) |
|
| (3 | ) |
|
| $ | (1 | ) |
| $ | (2 | ) |
| $ | (2 | ) |
| $ | (3 | ) |
13 Weeks Ended | 39 Weeks Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
(millions) | (millions) | ||||||||||||||
401(k) Qualified Defined Contribution Plan | $ | 20 | $ | 22 | $ | 65 | $ | 71 | |||||||
Non-Qualified Defined Contribution Plan | $ | — | $ | — | $ | — | $ | 1 | |||||||
Pension Plan | |||||||||||||||
Service cost | $ | 1 | $ | 1 | $ | 4 | $ | 3 | |||||||
Interest cost | 25 | 27 | 79 | 83 | |||||||||||
Expected return on assets | (55 | ) | (56 | ) | (168 | ) | (170 | ) | |||||||
Recognition of net actuarial loss | 8 | 7 | 24 | 22 | |||||||||||
Amortization of prior service credit | — | — | — | — | |||||||||||
$ | (21 | ) | $ | (21 | ) | $ | (61 | ) | $ | (62 | ) | ||||
Supplementary Retirement Plan | |||||||||||||||
Service cost | $ | — | $ | — | $ | — | $ | — | |||||||
Interest cost | 5 | 5 | 16 | 17 | |||||||||||
Recognition of net actuarial loss | 2 | 3 | 6 | 7 | |||||||||||
Amortization of prior service cost | — | — | — | — | |||||||||||
$ | 7 | $ | 8 | $ | 22 | $ | 24 | ||||||||
Total Retirement Expense | $ | 6 | $ | 9 | $ | 26 | $ | 34 | |||||||
Postretirement Obligations | |||||||||||||||
Service cost | $ | — | $ | — | $ | — | $ | — | |||||||
Interest cost | 1 | 1 | 4 | 4 | |||||||||||
Recognition of net actuarial gain | (2 | ) | (1 | ) | (4 | ) | (3 | ) | |||||||
Amortization of prior service cost | — | — | — | — | |||||||||||
$ | (1 | ) | $ | — | $ | — | $ | 1 |
6. |
Fair Value Measurements |
The following table shows the Company's financial assets that are required to be measured at fair value on a recurring basis, by level within the hierarchy as defined by applicable accounting standards:
Level 1: Quoted prices in active markets for identical assets
Level 2: Significant observable inputs for the assets
Level 3: Significant unobservable inputs for the assets
|
| July 30, 2022 |
|
| July 31, 2021 |
| ||||||||||||||||||||||||||
|
|
|
|
|
| Fair Value Measurements |
|
|
|
|
|
| Fair Value Measurements |
| ||||||||||||||||||
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||
|
| (millions) |
| |||||||||||||||||||||||||||||
Marketable equity and debt securities |
| $ | 34 |
|
| $ | 34 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 46 |
|
| $ | 39 |
|
| $ | 7 |
|
| $ | 0 |
|
October 28, 2017 | October 29, 2016 | ||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements | ||||||||||||||||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||
(millions) | |||||||||||||||||||||||||||||||
Marketable equity and debt securities | $ | 100 | $ | 23 | $ | 77 | $ | — | $ | 127 | $ | 19 | $ | 108 | $ | — |
Other financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, receivables, certain short-term investments and other assets, short-term debt, merchandise accounts payable, accounts payable and accrued liabilities and long-term debt. With the exception of long-term debt, the carrying amount of these financial instruments approximates fair value because of the short maturity of these instruments. The fair values of long-term debt, excluding capitalized leases, are generally estimated based on quoted market prices for identical or similar instruments, and are classified as Level 2 measurements within the hierarchy as defined by applicable accounting standards.
13
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table shows the estimated fair value of the Company's long-term debt:
|
| July 30, 2022 |
|
| July 31, 2021 |
| ||||||||||||||||||
|
| Notional Amount |
|
| Carrying Amount |
|
| Fair Value |
|
| Notional Amount |
|
| Carrying Amount |
|
| Fair Value |
| ||||||
|
| (millions) |
| |||||||||||||||||||||
Long-term debt |
| $ | 3,007 |
|
| $ | 2,995 |
|
| $ | 2,506 |
|
| $ | 3,296 |
|
| $ | 3,295 |
|
| $ | 3,298 |
|
October 28, 2017 | October 29, 2016 | ||||||||||||||||||||||
Notional Amount | Carrying Amount | Fair Value | Notional Amount | Carrying Amount | Fair Value | ||||||||||||||||||
(millions) | |||||||||||||||||||||||
Long-term debt | $ | 6,206 | $ | 6,297 | $ | 5,908 | $ | 6,459 | $ | 6,536 | $ | 6,749 |
Nonfinancial Assets
The Company reviews the carrying amount of goodwill and intangible assets with indefinite lives for impairment annually and whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable. For the Company's annual impairment assessment as of the end of fiscal May 2022, the Company which constitute debt obligations of Macy's Retail Holdings, Inc. ("Subsidiary Issuer"),elected to perform a 100%-owned subsidiary of Macy's, Inc. ("Parent"), are fullyqualitative impairment test on its goodwill and unconditionally guaranteed by Parent. Inintangible assets with indefinite lives and concluded that it is more likely than not that the following condensed consolidating financial statements, "Other Subsidiaries" includes all other direct subsidiaries of Parent, including Bluemercury, Inc., FDS Bank, West 34th Street Insurance Company New York, Macy's Merchandising Corporation, Macy's Merchandising Group, Inc.fair values exceeded the carrying values and its subsidiaries Macy's Merchandising Group (Hong Kong) Limited, Macy's Merchandising Group Procurement, LLC, Macy's Merchandising Group International, LLC, Macy's Merchandising Group International (Hong Kong) Limited,therefore goodwill and its majority-owned subsidiary Macy's China Limited. "Subsidiary Issuer" includes operating divisions and non-guarantor subsidiaries of the Subsidiary Issuer on an equity basis. Theintangible assets and liabilities and results of operations of the non-guarantor subsidiaries of the Subsidiary Issuer are also reflected in "Other Subsidiaries."
14
MACY'S, INC.
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Net sales | $ | — | $ | 2,077 | $ | 5,861 | $ | (2,657 | ) | $ | 5,281 | ||||||||
Cost of sales | — | (1,391 | ) | (4,441 | ) | 2,657 | (3,175 | ) | |||||||||||
Gross margin | — | 686 | 1,420 | — | 2,106 | ||||||||||||||
Selling, general and administrative expenses | — | (813 | ) | (1,182 | ) | — | (1,995 | ) | |||||||||||
Gains on sale of real estate | — | 24 | 41 | — | 65 | ||||||||||||||
Restructuring and other costs | — | (1 | ) | (32 | ) | — | (33 | ) | |||||||||||
Settlement charges | — | (8 | ) | (14 | ) | — | (22 | ) | |||||||||||
Operating income (loss) | — | (112 | ) | 233 | — | 121 | |||||||||||||
Interest (expense) income, net: | |||||||||||||||||||
External | 1 | (76 | ) | 1 | — | (74 | ) | ||||||||||||
Intercompany | — | (34 | ) | 34 | — | — | |||||||||||||
Equity in earnings (loss) of subsidiaries | 35 | (61 | ) | — | 26 | — | |||||||||||||
Income (loss) before income taxes | 36 | (283 | ) | 268 | 26 | 47 | |||||||||||||
Federal, state and local income tax benefit (expense) | — | 59 | (72 | ) | — | (13 | ) | ||||||||||||
Net income (loss) | 36 | (224 | ) | 196 | 26 | 34 | |||||||||||||
Net loss attributable to noncontrolling interest | — | — | 2 | — | 2 | ||||||||||||||
Net income (loss) attributable to Macy's, Inc. shareholders | $ | 36 | $ | (224 | ) | $ | 198 | $ | 26 | $ | 36 | ||||||||
Comprehensive income (loss) | $ | 61 | $ | (201 | ) | $ | 212 | $ | (13 | ) | $ | 59 | |||||||
Comprehensive loss attributable to noncontrolling interest | — | — | 2 | — | 2 | ||||||||||||||
Comprehensive income (loss) attributable to Macy's, Inc. shareholders | $ | 61 | $ | (201 | ) | $ | 214 | $ | (13 | ) | $ | 61 |
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Net sales | $ | — | $ | 2,376 | $ | 6,183 | $ | (2,933 | ) | $ | 5,626 | ||||||||
Cost of sales | — | (1,577 | ) | (4,742 | ) | 2,933 | (3,386 | ) | |||||||||||
Gross margin | — | 799 | 1,441 | — | 2,240 | ||||||||||||||
Selling, general and administrative expenses | (1 | ) | (950 | ) | (1,161 | ) | — | (2,112 | ) | ||||||||||
Gains on sale of real estate | — | 41 | — | — | 41 | ||||||||||||||
Settlement charges | — | (24 | ) | (38 | ) | — | (62 | ) | |||||||||||
Operating income (loss) | (1 | ) | (134 | ) | 242 | — | 107 | ||||||||||||
Interest (expense) income, net: | |||||||||||||||||||
External | 1 | (82 | ) | — | — | (81 | ) | ||||||||||||
Intercompany | — | (51 | ) | 51 | — | — | |||||||||||||
Equity in earnings (loss) of subsidiaries | 17 | (101 | ) | — | 84 | — | |||||||||||||
Income (loss) before income taxes | 17 | (368 | ) | 293 | 84 | 26 | |||||||||||||
Federal, state and local income tax benefit (expense) | — | 68 | (79 | ) | — | (11 | ) | ||||||||||||
Net income (loss) | 17 | (300 | ) | 214 | 84 | 15 | |||||||||||||
Net loss attributable to noncontrolling interest | — | — | 2 | — | 2 | ||||||||||||||
Net income (loss) attributable to Macy's, Inc. shareholders | $ | 17 | $ | (300 | ) | $ | 216 | $ | 84 | $ | 17 | ||||||||
Comprehensive income (loss) | $ | 62 | $ | (255 | ) | $ | 241 | $ | 12 | $ | 60 | ||||||||
Comprehensive loss attributable to noncontrolling interest | — | — | 2 | — | 2 | ||||||||||||||
Comprehensive income (loss) attributable to Macy's, Inc. shareholders | $ | 62 | $ | (255 | ) | $ | 243 | $ | 12 | $ | 62 |
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Net sales | $ | — | $ | 6,319 | $ | 15,727 | $ | (5,875 | ) | $ | 16,171 | ||||||||
Cost of sales | — | (4,126 | ) | (11,543 | ) | 5,875 | (9,794 | ) | |||||||||||
Gross margin | — | 2,193 | 4,184 | — | 6,377 | ||||||||||||||
Selling, general and administrative expenses | (1 | ) | (2,430 | ) | (3,422 | ) | — | (5,853 | ) | ||||||||||
Gains on sale of real estate | — | 116 | 60 | — | 176 | ||||||||||||||
Restructuring and other costs | — | (1 | ) | (32 | ) | — | (33 | ) | |||||||||||
Settlement charges | — | (24 | ) | (49 | ) | — | (73 | ) | |||||||||||
Operating income (loss) | (1 | ) | (146 | ) | 741 | — | 594 | ||||||||||||
Interest (expense) income, net: | |||||||||||||||||||
External | 4 | (243 | ) | 2 | — | (237 | ) | ||||||||||||
Intercompany | — | (102 | ) | 102 | — | — | |||||||||||||
Net premiums on early retirement of debt | — | (1 | ) | — | — | (1 | ) | ||||||||||||
Equity in earnings (loss) of subsidiaries | 220 | (30 | ) | — | (190 | ) | — | ||||||||||||
Income (loss) before income taxes | 223 | (522 | ) | 845 | (190 | ) | 356 | ||||||||||||
Federal, state and local income tax benefit (expense) | (1 | ) | 142 | (281 | ) | — | (140 | ) | |||||||||||
Net income (loss) | 222 | (380 | ) | 564 | (190 | ) | 216 | ||||||||||||
Net loss attributable to noncontrolling interest | — | — | 6 | — | 6 | ||||||||||||||
Net income (loss) attributable to Macy's, Inc. shareholders | $ | 222 | $ | (380 | ) | $ | 570 | $ | (190 | ) | $ | 222 | |||||||
Comprehensive income (loss) | $ | 318 | $ | (290 | ) | $ | 627 | $ | (343 | ) | $ | 312 | |||||||
Comprehensive loss attributable to noncontrolling interest | — | — | 6 | — | 6 | ||||||||||||||
Comprehensive income (loss) attributable to Macy's, Inc. shareholders | $ | 318 | $ | (290 | ) | $ | 633 | $ | (343 | ) | $ | 318 |
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Net sales | $ | — | $ | 7,324 | $ | 16,546 | $ | (6,607 | ) | $ | 17,263 | ||||||||
Cost of sales | — | (4,704 | ) | (12,273 | ) | 6,607 | (10,370 | ) | |||||||||||
Gross margin | — | 2,620 | 4,273 | — | 6,893 | ||||||||||||||
Selling, general and administrative expenses | (2 | ) | (2,803 | ) | (3,334 | ) | — | (6,139 | ) | ||||||||||
Gains on sale of real estate | — | 71 | 5 | — | 76 | ||||||||||||||
Impairments and other costs | — | (184 | ) | (65 | ) | — | (249 | ) | |||||||||||
Settlement charges | — | (29 | ) | (52 | ) | — | (81 | ) | |||||||||||
Operating income (loss) | (2 | ) | (325 | ) | 827 | — | 500 | ||||||||||||
Interest (expense) income, net: | |||||||||||||||||||
External | 2 | (278 | ) | — | — | (276 | ) | ||||||||||||
Intercompany | — | (166 | ) | 166 | — | — | |||||||||||||
Equity in earnings (loss) of subsidiaries | 144 | (69 | ) | — | (75 | ) | — | ||||||||||||
Income (loss) before income taxes | 144 | (838 | ) | 993 | (75 | ) | 224 | ||||||||||||
Federal, state and local income tax benefit (expense) | — | 243 | (328 | ) | — | (85 | ) | ||||||||||||
Net income (loss) | 144 | (595 | ) | 665 | (75 | ) | 139 | ||||||||||||
Net loss attributable to noncontrolling interest | — | — | 5 | — | 5 | ||||||||||||||
Net income (loss) attributable to Macy's, Inc. shareholders | $ | 144 | $ | (595 | ) | $ | 670 | $ | (75 | ) | $ | 144 | |||||||
Comprehensive income (loss) | $ | 164 | $ | (575 | ) | $ | 677 | $ | (107 | ) | $ | 159 | |||||||
Comprehensive loss attributable to noncontrolling interest | — | — | 5 | — | 5 | ||||||||||||||
Comprehensive income (loss) attributable to Macy's, Inc. shareholders | $ | 164 | $ | (575 | ) | $ | 682 | $ | (107 | ) | $ | 164 |
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
ASSETS: | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 116 | $ | 89 | $ | 329 | $ | — | $ | 534 | |||||||||
Receivables | — | 67 | 152 | — | 219 | ||||||||||||||
Merchandise inventories | — | 3,218 | 3,847 | — | 7,065 | ||||||||||||||
Income tax receivable | — | 2 | — | (2 | ) | — | |||||||||||||
Prepaid expenses and other current assets | — | 86 | 346 | — | 432 | ||||||||||||||
Total Current Assets | 116 | 3,462 | 4,674 | (2 | ) | 8,250 | |||||||||||||
Property and Equipment – net | — | 3,184 | 3,558 | — | 6,742 | ||||||||||||||
Goodwill | — | 3,315 | 582 | — | 3,897 | ||||||||||||||
Other Intangible Assets – net | — | 46 | 445 | — | 491 | ||||||||||||||
Other Assets | 1 | 62 | 772 | — | 835 | ||||||||||||||
Deferred Income Taxes | 26 | — | — | (26 | ) | — | |||||||||||||
Intercompany Receivable | 1,436 | — | 1,971 | (3,407 | ) | — | |||||||||||||
Investment in Subsidiaries | 2,882 | 3,644 | — | (6,526 | ) | — | |||||||||||||
Total Assets | $ | 4,461 | $ | 13,713 | $ | 12,002 | $ | (9,961 | ) | $ | 20,215 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Short-term debt | $ | — | $ | 6 | $ | 16 | $ | — | $ | 22 | |||||||||
Merchandise accounts payable | — | 1,339 | 1,834 | — | 3,173 | ||||||||||||||
Accounts payable and accrued liabilities | 139 | 975 | 2,048 | — | 3,162 | ||||||||||||||
Income taxes | 20 | — | 16 | (2 | ) | 34 | |||||||||||||
Total Current Liabilities | 159 | 2,320 | 3,914 | (2 | ) | 6,391 | |||||||||||||
Long-Term Debt | — | 6,280 | 17 | — | 6,297 | ||||||||||||||
Intercompany Payable | — | 3,407 | — | (3,407 | ) | — | |||||||||||||
Deferred Income Taxes | — | 707 | 872 | (26 | ) | 1,553 | |||||||||||||
Other Liabilities | 71 | 476 | 1,203 | — | 1,750 | ||||||||||||||
Shareholders' Equity: | |||||||||||||||||||
Macy's, Inc. | 4,231 | 523 | 6,003 | (6,526 | ) | 4,231 | |||||||||||||
Noncontrolling Interest | — | — | (7 | ) | — | (7 | ) | ||||||||||||
Total Shareholders' Equity | 4,231 | 523 | 5,996 | (6,526 | ) | 4,224 | |||||||||||||
Total Liabilities and Shareholders' Equity | $ | 4,461 | $ | 13,713 | $ | 12,002 | $ | (9,961 | ) | $ | 20,215 |
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
ASSETS: | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 60 | $ | 99 | $ | 298 | $ | — | $ | 457 | |||||||||
Receivables | — | 74 | 188 | — | 262 | ||||||||||||||
Merchandise inventories | — | 3,621 | 3,966 | — | 7,587 | ||||||||||||||
Income tax receivable | 99 | — | — | (39 | ) | 60 | |||||||||||||
Prepaid expenses and other current assets | — | 89 | 365 | — | 454 | ||||||||||||||
Total Current Assets | 159 | 3,883 | 4,817 | (39 | ) | 8,820 | |||||||||||||
Property and Equipment – net | — | 3,534 | 3,615 | — | 7,149 | ||||||||||||||
Goodwill | — | 3,315 | 582 | — | 3,897 | ||||||||||||||
Other Intangible Assets – net | — | 47 | 452 | — | 499 | ||||||||||||||
Other Assets | 1 | 153 | 755 | — | 909 | ||||||||||||||
Deferred Income Taxes | 24 | — | — | (24 | ) | — | |||||||||||||
Intercompany Receivable | 878 | — | 1,876 | (2,754 | ) | — | |||||||||||||
Investment in Subsidiaries | 2,954 | 3,173 | — | (6,127 | ) | — | |||||||||||||
Total Assets | $ | 4,016 | $ | 14,105 | $ | 12,097 | $ | (8,944 | ) | $ | 21,274 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Short-term debt | $ | — | $ | 935 | $ | 3 | $ | — | $ | 938 | |||||||||
Merchandise accounts payable | — | 1,481 | 1,894 | — | 3,375 | ||||||||||||||
Accounts payable and accrued liabilities | 164 | 910 | 1,856 | — | 2,930 | ||||||||||||||
Income taxes | — | 3 | 36 | (39 | ) | — | |||||||||||||
Total Current Liabilities | 164 | 3,329 | 3,789 | (39 | ) | 7,243 | |||||||||||||
Long-Term Debt | — | 6,545 | 18 | — | 6,563 | ||||||||||||||
Intercompany Payable | — | 2,754 | — | (2,754 | ) | — | |||||||||||||
Deferred Income Taxes | — | 694 | 878 | (24 | ) | 1,548 | |||||||||||||
Other Liabilities | 63 | 565 | 1,501 | — | 2,129 | ||||||||||||||
Shareholders' Equity: | |||||||||||||||||||
Macy's, Inc. | 3,789 | 218 | 5,909 | (6,127 | ) | 3,789 | |||||||||||||
Noncontrolling Interest | — | — | 2 | — | 2 | ||||||||||||||
Total Shareholders' Equity | 3,789 | 218 | 5,911 | (6,127 | ) | 3,791 | |||||||||||||
Total Liabilities and Shareholders' Equity | $ | 4,016 | $ | 14,105 | $ | 12,097 | $ | (8,944 | ) | $ | 21,274 |
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
ASSETS: | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 938 | $ | 81 | $ | 278 | $ | — | $ | 1,297 | |||||||||
Receivables | — | 169 | 353 | — | 522 | ||||||||||||||
Merchandise inventories | — | 2,565 | 2,834 | — | 5,399 | ||||||||||||||
Prepaid expenses and other current assets | — | 84 | 324 | — | 408 | ||||||||||||||
Total Current Assets | 938 | 2,899 | 3,789 | — | 7,626 | ||||||||||||||
Property and Equipment – net | — | 3,397 | 3,620 | — | 7,017 | ||||||||||||||
Goodwill | — | 3,315 | 582 | — | 3,897 | ||||||||||||||
Other Intangible Assets – net | — | 51 | 447 | — | 498 | ||||||||||||||
Other Assets | — | 47 | 766 | — | 813 | ||||||||||||||
Deferred Income Taxes | 26 | — | — | (26 | ) | — | |||||||||||||
Intercompany Receivable | 375 | — | 2,428 | (2,803 | ) | — | |||||||||||||
Investment in Subsidiaries | 3,137 | 3,540 | — | (6,677 | ) | — | |||||||||||||
Total Assets | $ | 4,476 | $ | 13,249 | $ | 11,632 | $ | (9,506 | ) | $ | 19,851 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Short-term debt | $ | — | $ | 306 | $ | 3 | $ | — | $ | 309 | |||||||||
Merchandise accounts payable | — | 590 | 833 | — | 1,423 | ||||||||||||||
Accounts payable and accrued liabilities | 16 | 1,064 | 2,483 | — | 3,563 | ||||||||||||||
Income taxes | 71 | 16 | 265 | — | 352 | ||||||||||||||
Total Current Liabilities | 87 | 1,976 | 3,584 | — | 5,647 | ||||||||||||||
Long-Term Debt | — | 6,544 | 18 | — | 6,562 | ||||||||||||||
Intercompany Payable | — | 2,803 | — | (2,803 | ) | — | |||||||||||||
Deferred Income Taxes | — | 688 | 781 | (26 | ) | 1,443 | |||||||||||||
Other Liabilities | 66 | 500 | 1,311 | — | 1,877 | ||||||||||||||
Shareholders' Equity: | |||||||||||||||||||
Macy's, Inc. | 4,323 | 738 | 5,939 | (6,677 | ) | 4,323 | |||||||||||||
Noncontrolling Interest | — | — | (1 | ) | — | (1 | ) | ||||||||||||
Total Shareholders' Equity | 4,323 | 738 | 5,938 | (6,677 | ) | 4,322 | |||||||||||||
Total Liabilities and Shareholders' Equity | $ | 4,476 | $ | 13,249 | $ | 11,632 | $ | (9,506 | ) | $ | 19,851 |
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net income (loss) | $ | 222 | $ | (380 | ) | $ | 564 | $ | (190 | ) | $ | 216 | |||||||
Restructuring and other costs | — | 1 | 32 | — | 33 | ||||||||||||||
Settlement charges | — | 24 | 49 | — | 73 | ||||||||||||||
Equity in loss (earnings) of subsidiaries | (220 | ) | 30 | — | 190 | — | |||||||||||||
Dividends received from subsidiaries | 571 | — | — | (571 | ) | — | |||||||||||||
Depreciation and amortization | — | 265 | 476 | — | 741 | ||||||||||||||
(Increase) decrease in working capital | (52 | ) | 35 | (633 | ) | — | (650 | ) | |||||||||||
Other, net | 8 | 2 | (34 | ) | — | (24 | ) | ||||||||||||
Net cash provided (used) by operating activities | 529 | (23 | ) | 454 | (571 | ) | 389 | ||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Disposition (purchase) of property and equipment and capitalized software, net | — | 30 | (368 | ) | — | (338 | ) | ||||||||||||
Other, net | — | 2 | (10 | ) | — | (8 | ) | ||||||||||||
Net cash provided (used) by investing activities | — | 32 | (378 | ) | — | (346 | ) | ||||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Debt repaid | — | (553 | ) | (1 | ) | — | (554 | ) | |||||||||||
Dividends paid | (346 | ) | — | (571 | ) | 571 | (346 | ) | |||||||||||
Issuance of common stock, net of common stock acquired | 2 | — | — | — | 2 | ||||||||||||||
Proceeds from noncontrolling interest | — | — | 13 | — | 13 | ||||||||||||||
Intercompany activity, net | (1,016 | ) | 584 | 432 | — | — | |||||||||||||
Other, net | 9 | (32 | ) | 102 | — | 79 | |||||||||||||
Net cash used by financing activities | (1,351 | ) | (1 | ) | (25 | ) | 571 | (806 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | (822 | ) | 8 | 51 | — | (763 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 938 | 81 | 278 | — | 1,297 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 116 | $ | 89 | $ | 329 | $ | — | $ | 534 |
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net income (loss) | $ | 144 | $ | (595 | ) | $ | 665 | $ | (75 | ) | $ | 139 | |||||||
Impairments and other costs | — | 184 | 65 | — | 249 | ||||||||||||||
Settlement charges | — | 29 | 52 | — | 81 | ||||||||||||||
Equity in loss (earnings) of subsidiaries | (144 | ) | 69 | — | 75 | — | |||||||||||||
Dividends received from subsidiaries | 535 | 575 | — | (1,110 | ) | — | |||||||||||||
Depreciation and amortization | — | 298 | 489 | — | 787 | ||||||||||||||
Increase in working capital | (59 | ) | (572 | ) | (328 | ) | — | (959 | ) | ||||||||||
Other, net | 19 | (36 | ) | 28 | — | 11 | |||||||||||||
Net cash provided (used) by operating activities | 495 | (48 | ) | 971 | (1,110 | ) | 308 | ||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Purchase of property and equipment and capitalized software, net | — | (23 | ) | (520 | ) | — | (543 | ) | |||||||||||
Other, net | — | 47 | 5 | — | 52 | ||||||||||||||
Net cash provided (used) by investing activities | — | 24 | (515 | ) | — | (491 | ) | ||||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Debt repaid, net of debt issued | — | (122 | ) | (1 | ) | — | (123 | ) | |||||||||||
Dividends paid | (344 | ) | — | (1,110 | ) | 1,110 | (344 | ) | |||||||||||
Common stock acquired, net of issuance of common stock | (199 | ) | — | — | — | (199 | ) | ||||||||||||
Proceeds from noncontrolling interest | — | — | 7 | — | 7 | ||||||||||||||
Intercompany activity, net | (642 | ) | 158 | 484 | — | — | |||||||||||||
Other, net | 9 | (4 | ) | 185 | — | 190 | |||||||||||||
Net cash provided (used) by financing activities | (1,176 | ) | 32 | (435 | ) | 1,110 | (469 | ) | |||||||||||
Net increase (decrease) in cash and cash equivalents | (681 | ) | 8 | 21 | — | (652 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 741 | 91 | 277 | — | 1,109 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 60 | $ | 99 | $ | 298 | $ | — | $ | 457 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
For purposes of the following discussion, all references to "
The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes included elsewhereelsewhere in this report, as well as the financial and other information included in the 20162021 10-K. The following discussion contains forward-looking statements that reflect the Company's plans, estimates and beliefs. The Company's actual results could materially differ from those discussed in these forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this report (particularly in "Risk Factors" and in "Forward-Looking Statements") and in the 20162021 10-K (particularly in "Risk Factors" and in "Forward-Looking Statements"). This discussion includes non-GAAPNon-GAAP financial measures. For information about these measures, see the disclosure under the caption "Important Information Regarding Non-GAAP Financial Measures" on pages 29.
Quarterly Overview
Certain financial highlights are as follows:
• | Comparable sales decreased 1.5% on an owned basis; and decreased 1.6% on an owned plus licensed basis compared to the second quarter of 2021. |
• | Digital sales decreased 5.4% versus the second quarter of 2021. Digital penetration was 30.2% of net sales for the second quarter of 2022, a 2-percentage point decline from the second quarter of 2021. |
• | Gross margin was 38.9%, compared to 40.6% in the second quarter of 2021. |
• | Net credit card revenues were $204 million, up $7 million from the second quarter of 2021. |
• | Selling, general and administrative ("SG&A") expense was $1.98 billion, up $83 million from the second quarter of 2021. SG&A expense as a percent of sales was 35.4%, a deterioration of 180 basis points from the second quarter of 2021. |
• | Net income was $275 million in the second quarter of 2022, compared to $345 million in the second quarter of 2021. |
• | The second quarter of 2022 had positive earnings before interest, taxes, depreciation and amortization ("EBITDA") of $614 million compared to EBITDA of $753 million during the second quarter of 2021. On an adjusted basis, EBITDA was $616 million for the second quarter of 2022, compared to $836 million during the second quarter of 2021. |
• | Diluted earnings per share and adjusted diluted earnings per share were $0.99 and $1.00, respectively, during the second quarter of 2022. This compares to diluted earnings per share and adjusted diluted earnings per share of $1.08 and $1.29 for the second quarter of 2021, respectively. |
• | Inventory was up 7.3% from the second quarter of 2021. |
During the second quarter of 2022, the Company continued to 31.
• | Win With Fashion and Style: By offering a wide assortment of categories, products and brands from off-price to |
• | Deliver Clear Value: The Company is leveraging data analytics and pricing |
15
MACY'S, INC.
categories, seasonal goods, and private brand merchandise; however, this was offset by a higher average unit retail primarily driven by higher ticket prices and favorable category mix. In addition, inventory turn for the trailing 12 months remained relatively consistent with 2021. |
• | Excel in Digital Shopping: While the |
• | Enhance Store Experience: In the second quarter of 2022, consumers continued to shift shopping channels from digital to stores as comfort levels grew along with desires to return to in-store shopping. The Company continues to invest in physical stores to support its digitally-led omnichannel business model and build new capabilities to help make the shopping experience convenient and compelling. For example, the Company is advancing its off-mall, smaller format stores in 2022 by continuing to open additional locations. Also, Bloomingdale’s will kick off its 150th anniversary celebration that will run through the holiday season and feature in-store events, social and digital activations, and luxury designer collaborations. Finally, the Company announced that by October 15, 2022, the Toys “R” Us partnership is expected to expand to every Macy’s location. |
• | Modernize Supply Chain: The Company has continued to update its supply chain infrastructure and network, while leveraging improved data and analytics capabilities in fulfillment strategies to meet customers' desire for speed and convenience and improving inventory placement. The efforts made to date resulted in receipts flowing earlier than the Company anticipated in the second quarter of 2022. The Company is expanding and relocating distribution centers to support business growth and serve the growing customer base. This includes |
• | Enable Transformation: The Company has continued to modernize its technology foundations to increase agility in reacting to customers and the market regardless of the channel in which customers interact. These activities are coupled with others to build out data science and analytics capabilities with a focus on |
From a number of key steps over the past couple of years to position itself to successfully implement the North Star strategy. Specifically, the Company launched a new Star Rewards loyalty program in October 2017 focusednameplate perspective, Macy’s brand comparable sales decreased 2.9% on strengthening relationships with the Company's best customers, migrating existing customers to higher spending levelsan owned basis and attracting new or infrequent customers. The initial launch of the new program focused initially2.8% on proprietary cardholders with additional enhancements and expansion beyond proprietary cardholders planned for the future.
Third Quarter of 2017 | Third Quarter of 2016 | ||||||||||||||||
Amount | % to Sales | Amount | % to Sales | ||||||||||||||
(dollars in millions, except per share figures) | |||||||||||||||||
Net sales | $ | 5,281 | $ | 5,626 | |||||||||||||
Decrease in sales | (6.1 | ) | % | (4.2 | ) | % | |||||||||||
Decrease in comparable sales | (4.0 | ) | % | (3.3 | ) | % | |||||||||||
Cost of sales | (3,175 | ) | (60.1 | ) | % | (3,386 | ) | (60.2 | ) | % | |||||||
Gross margin | 2,106 | 39.9 | % | 2,240 | 39.8 | % | |||||||||||
Selling, general and administrative expenses | (1,995 | ) | (37.8 | ) | % | (2,112 | ) | (37.5 | ) | % | |||||||
Gains on sale of real estate | 65 | 1.2 | % | 41 | 0.7 | % | |||||||||||
Restructuring and other costs | (33 | ) | (0.6 | ) | % | — | — | % | |||||||||
Settlement charges | (22 | ) | (0.4 | ) | % | (62 | ) | (1.1 | ) | % | |||||||
Operating income | 121 | 2.3 | % | 107 | 1.9 | % | |||||||||||
Interest expense - net | (74 | ) | (81 | ) | |||||||||||||
Income before income taxes | 47 | 26 | |||||||||||||||
Federal, state and local income tax expense | (13 | ) | (11 | ) | |||||||||||||
Net income | 34 | 15 | |||||||||||||||
Net loss attributable to noncontrolling interest | 2 | 2 | |||||||||||||||
Net income attributable to Macy's, Inc. shareholders | $ | 36 | 0.7 | % | $ | 17 | 0.3 | % | |||||||||
Diluted earnings per share attributable to Macy's, Inc. shareholders | $ | .12 | $ | .05 | |||||||||||||
Diluted earnings per share attributable to Macy's, Inc. shareholders, excluding the impact of restructuring and other costs and settlement charges | $ | .23 | $ | .17 |
16
MACY'S, INC.
Results of Operations
|
| Second Quarter of 2022 |
|
| Second Quarter of 2021 |
| ||||||||||
|
| Amount |
|
| % to Net Sales |
|
| Amount |
|
| % to Net Sales |
| ||||
|
| (dollars in millions, except per share figures) |
| |||||||||||||
Net sales |
| $ | 5,600 |
|
|
|
|
|
| $ | 5,647 |
|
|
|
|
|
Increase (decrease) in comparable sales |
|
| (1.5 | )% |
|
|
|
|
|
| 61.2 | % |
|
|
|
|
Credit card revenues, net |
|
| 204 |
|
|
| 3.6 | % |
|
| 197 |
|
|
| 3.5 | % |
Cost of sales |
|
| (3,422 | ) |
|
| (61.1 | )% |
|
| (3,353 | ) |
|
| (59.4 | )% |
Selling, general and administrative expenses |
|
| (1,981 | ) |
|
| (35.4 | )% |
|
| (1,898 | ) |
|
| (33.6 | )% |
Gains on sale of real estate |
|
| — |
|
|
| — |
|
|
| 6 |
|
|
| 0.1 | % |
Impairment, restructuring and other costs |
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
|
| 0.0 | % |
Operating income |
|
| 399 |
|
|
| 7.1 | % |
|
| 597 |
|
|
| 10.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
| $ | 0.99 |
|
|
|
|
|
| $ | 1.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Financial Measure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin (a) |
| $ | 2,178 |
|
|
| 38.9 | % |
| $ | 2,294 |
|
|
| 40.6 | % |
Digital sales as a percentage of net sales |
|
| 30 | % |
|
|
|
|
|
| 32 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Non-GAAP Financial Measure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in comparable sales on an owned plus licensed basis |
|
| (1.6 | )% |
|
|
|
|
|
| 62.2 | % |
|
|
|
|
Adjusted diluted earnings per share |
| $ | 1.00 |
|
|
|
|
|
| $ | 1.29 |
|
|
|
|
|
EBITDA |
| $ | 614 |
|
|
|
|
|
| $ | 753 |
|
|
|
|
|
Adjusted EBITDA |
| $ | 616 |
|
|
|
|
|
| $ | 836 |
|
|
|
|
|
(a) | Gross margin is defined as net sales less cost of sales. |
See pages 24 to 26 for reconciliations of the supplemental non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.
Comparison of the Second Quarter of 2022 and the Second Quarter of 2021
|
| Second Quarter of 2022 |
|
| Second Quarter of 2021 |
| ||
Net sales |
| $ | 5,600 |
|
| $ | 5,647 |
|
Increase (decrease) in comparable sales |
|
| (1.5 | )% |
|
| 61.2 | % |
Increase (decrease) in comparable sales on an owned plus licensed basis |
|
| (1.6 | )% |
|
| 62.2 | % |
Digital sales as a percent of net sales |
|
| 30 | % |
|
| 32 | % |
Net sales for the second quarter of 2022 decreased for Macy’s but improved for Bloomingdale’s and bluemercury. During the quarter, consumer shopping behavior continued to shift more towards occasion-based apparel, with strength in dresses, women’s and men’s shoes, men’s tailored, luggage and fragrances. Pandemic-driven categories such as casual, activewear, sleepwear and soft home, underperformed the prior year and digital sales decreased 5% compared to the second quarter of 2021 as a result of the shift in consumer behavior.
|
| Second Quarter of 2022 |
|
| Second Quarter of 2021 |
| ||
Credit card revenues, net |
| $ | 204 |
|
| $ | 197 |
|
Proprietary credit card sales penetration |
|
| 43.1 | % |
|
| 41.4 | % |
The increase in net credit card revenues was driven by similar factors to the first quarter of 2022: the continuation of the strong credit health of the credit card portfolio's customers leading to lower levels of bad debt, higher credit sales and higher spending on the co-brand credit card.
17
MACY'S, INC.
|
| Second Quarter of 2022 |
|
| Second Quarter of 2021 |
| ||
Cost of sales |
| $ | (3,422 | ) |
| $ | (3,353 | ) |
As a percent to net sales |
|
| 61.1 | % |
|
| 59.4 | % |
Gross margin |
| $ | 2,178 |
|
| $ | 2,294 |
|
As a percent to net sales |
|
| 38.9 | % |
|
| 40.6 | % |
The decrease in comparable sales onthe gross margin rate was primarily driven by an owned plus licensed basisincrease in clearance markdowns in pandemic-related categories and seasonal merchandise and an increase in promotional markdowns as a result of the increasingly competitive pricing environment. This was partially offset by higher average unit retail driven by higher ticket prices and favorable category mix particularly within occasion-based categories. Inventory was up 7% year-over-year, impacted by the downshift in consumer demand from active/casual and soft home categories to accelerated demand for occasion-based apparel, coupled with the third quarterloosening in supply chain constraints resulting in a higher percentage of 2017 was 3.6% comparedreceipts than expected.
|
| Second Quarter of 2022 |
|
| Second Quarter of 2021 |
| ||
SG&A expenses |
| $ | (1,981 | ) |
| $ | (1,898 | ) |
As a percent to net sales |
|
| 35.4 | % |
|
| 33.6 | % |
SG&A expenses increased in 2022 both in dollars and as a percent to the
|
| Second Quarter of 2022 |
|
| Second Quarter of 2021 |
| ||
Net interest expense |
| $ | (42 | ) |
| $ | (80 | ) |
The decrease in net interest expense, excluding losses on early retirement of debt, was primarily driven by interest savings associated with organizational restructuring. No such charges were recognizedthe redemption of the Company’s $1.3 billion aggregate principal amount of 8.375% Senior Secured Notes due 2025 in August 2021, as well as the financing activities completed in the
|
| Second Quarter of 2022 |
|
| Second Quarter of 2021 |
| ||
Effective tax rate |
|
| 24.4 | % |
|
| 23.3 | % |
Federal income statutory rate |
|
| 21 | % |
|
| 21 | % |
The third quarters of 2017 and 2016 included $22 million and $62 million, respectively, of non-cash settlement charges relating to the Company's defined benefit plans. These charges relate to the pro-rata recognition of net actuarial losses and are the result of an increase in lump sum distributions associated with store closings, a voluntary separation program and organizational restructuring, and periodic distribution activity.
18
MACY'S, INC.
|
| 2022 |
|
| 2021 |
| ||||||||||
|
| Amount |
|
| % to Net Sales |
|
| Amount |
|
| % to Net Sales |
| ||||
|
| (dollars in millions, except per share figures) |
| |||||||||||||
Net sales |
| $ | 10,948 |
|
|
|
|
|
| $ | 10,353 |
|
|
|
|
|
Increase in comparable sales |
|
| 5.1 | % |
|
|
|
|
|
| 61.8 | % |
|
|
|
|
Credit card revenues, net |
|
| 395 |
|
|
| 3.6 | % |
|
| 356 |
|
|
| 3.4 | % |
Cost of sales |
|
| (6,652 | ) |
|
| (60.8 | )% |
|
| (6,242 | ) |
|
| (60.3 | )% |
Selling, general and administrative expenses |
|
| (3,861 | ) |
|
| (35.3 | )% |
|
| (3,646 | ) |
|
| (35.2 | )% |
Gains on sale of real estate |
|
| 42 |
|
|
| 0.4 | % |
|
| 12 |
|
|
| 0.1 | % |
Impairment, restructuring and other costs |
|
| (10 | ) |
|
| (0.1 | )% |
|
| (21 | ) |
|
| (0.2 | )% |
Operating income |
|
| 862 |
|
|
| 7.9 | % |
|
| 812 |
|
|
| 7.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
| $ | 1.97 |
|
|
|
|
|
| $ | 1.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Financial Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin (a) |
| $ | 4,296 |
|
|
| 39.2 | % |
| $ | 4,111 |
|
|
| 39.7 | % |
Digital sales as a percentage of net sales |
|
| 32 | % |
|
|
|
|
|
| 34 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Non-GAAP Financial Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in comparable sales on an owned plus licensed basis |
|
| 4.9 | % |
|
|
|
|
|
| 63.0 | % |
|
|
|
|
Adjusted diluted earnings per share |
| $ | 2.08 |
|
|
|
|
|
| $ | 1.68 |
|
|
|
|
|
EBITDA |
| $ | 1,289 |
|
|
|
|
|
| $ | 1,207 |
|
|
|
|
|
Adjusted EBITDA |
| $ | 1,299 |
|
|
|
|
|
| $ | 1,309 |
|
|
|
|
|
(b) | Gross margin is defined as net sales less cost of sales. |
See pages 24 to 26 for reconciliations of the settlementsupplemental non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.
Comparison of various tax issuesthe 26 Weeks Ended July 30, 2022 and tax examinations.July 31, 2021
|
| 2022 |
|
| 2021 |
| ||
Net sales |
| $ | 10,948 |
|
| $ | 10,353 |
|
Increase in comparable sales |
|
| 5.1 | % |
|
| 61.8 | % |
Increase in comparable sales on an owned plus licensed basis |
|
| 4.9 | % |
|
| 63.0 | % |
Digital sales as a percent of net sales |
|
| 32 | % |
|
| 34 | % |
Net Income Attributable to Macy's, Inc. Shareholders
|
| 2022 |
|
| 2021 |
| ||
Credit card revenues, net |
| $ | 395 |
|
| $ | 356 |
|
Proprietary credit card sales penetration |
|
| 43.1 | % |
|
| 41.7 | % |
The
|
| 2022 |
|
| 2021 |
| ||
Cost of sales |
| $ | (6,652 | ) |
| $ | (6,242 | ) |
As a percent to net sales |
|
| 60.8 | % |
|
| 60.3 | % |
Gross margin |
| $ | 4,296 |
|
| $ | 4,111 |
|
As a percent to net sales |
|
| 39.2 | % |
|
| 39.7 | % |
19
MACY'S, INC.
The decrease in the gross margin rate was primarily driven by an increase in clearance markdowns in pandemic-related categories and $14 millionseasonal merchandise and an increase in promotional markdowns as a result of after tax retirement plan settlement charges, while the
|
| 2022 |
|
| 2021 |
| ||
SG&A expenses |
| $ | (3,861 | ) |
| $ | (3,646 | ) |
As a percent to net sales |
|
| 35.3 | % |
|
| 35.2 | % |
SG&A expenses increased $.07 compared toin 2022 but the
2017 | 2016 | ||||||||||||||||
Amount | % to Sales | Amount | % to Sales | ||||||||||||||
(dollars in millions, except per share figures) | |||||||||||||||||
Net sales | $ | 16,171 | $ | 17,263 | |||||||||||||
Decrease in sales | (6.3 | ) | % | (5.2 | ) | % | |||||||||||
Decrease in comparable sales | (4.0 | ) | % | (4.0 | ) | % | |||||||||||
Cost of sales | (9,794 | ) | (60.6 | ) | % | (10,370 | ) | (60.1 | ) | % | |||||||
Gross margin | 6,377 | 39.4 | % | 6,893 | 39.9 | % | |||||||||||
Selling, general and administrative expenses | (5,853 | ) | (36.1 | ) | % | (6,139 | ) | (35.5 | ) | % | |||||||
Gains on sale of real estate | 176 | 1.1 | % | 76 | 0.4 | % | |||||||||||
Impairments, restructuring and other costs | (33 | ) | (0.2 | ) | % | (249 | ) | (1.4 | ) | % | |||||||
Settlement charges | (73 | ) | (0.5 | ) | % | (81 | ) | (0.5 | ) | % | |||||||
Operating income | 594 | 3.7 | % | 500 | 2.9 | % | |||||||||||
Interest expense - net | (237 | ) | (276 | ) | |||||||||||||
Net premiums on early retirement of debt | (1 | ) | — | ||||||||||||||
Income before income taxes | 356 | 224 | |||||||||||||||
Federal, state and local income tax expense | (140 | ) | (85 | ) | |||||||||||||
Net income | 216 | 139 | |||||||||||||||
Net loss attributable to noncontrolling interest | 6 | 5 | |||||||||||||||
Net income attributable to Macy's, Inc. shareholders | $ | 222 | 1.4 | % | $ | 144 | 0.8 | % | |||||||||
Diluted earnings per share attributable to Macy's, Inc. shareholders | $ | .73 | $ | .46 | |||||||||||||
Diluted earnings per share attributable to Macy's, Inc. shareholders, excluding the impact of impairments, restructuring and other costs, settlement charges and net premiums on early retirement of debt | $ | .95 | $ | 1.11 |
|
| 2022 |
|
| 2021 |
| ||
Gains on sale of real estate |
| $ | 42 |
|
| $ | 12 |
|
The 2022 asset sale gains mainly consisted of $176 million, including $47 million related togains from the downtown Minneapolis property, $49 million related to the Macy's Brooklyn transaction, and $40 million related to the downtown Seattle Macy's location. This compares to $76 millionsale of asset sale gains recognized in 2016, inclusive of approximately $24 million related to the Macy's Brooklyn transaction and $32 million related to various asset sales to General Growth Properties.three properties.
|
| 2022 |
|
| 2021 |
| ||
Impairment, restructuring and other costs |
| $ | (10 | ) |
| $ | (21 | ) |
Impairment, restructuring and other costs in 2022 and 2021 primarily related to the write-off of $33investment assets and the write-off of capitalized software assets, respectively.
|
| 2022 |
|
| 2021 |
| ||
Losses on early retirement of debt |
| $ | (31 | ) |
| $ | (14 | ) |
In 2022, losses on early retirement of debt were recognized due to the early payment of $1.1 billion senior notes and debentures. In2021, losses on early retirement of debt were recognized due to the $500 million for 2017 and $249 million for 2016 include chargestender offer.
|
| 2022 |
|
| 2021 |
| ||
Net interest expense |
| $ | (89 | ) |
| $ | (159 | ) |
The decrease in net interest expense, excluding losses on early retirement of debt, was primarily driven by interest savings associated with store closings and severance activitiesthe redemption of the Company’s $1.3 billion aggregate principal amount of 8.375% Senior Secured Notes due 2025 in August 2021, as well as other human resource related costs associated with organizational restructuring.
|
| 2022 |
|
| 2021 |
| ||
Effective tax rate |
|
| 25.8 | % |
|
| 24.1 | % |
Federal income statutory rate |
|
| 21 | % |
|
| 21 | % |
The Company repurchased approximately $247 million face value of senior notes and debentures in 2017. The debt repurchases were made in the open market for a total cash cost of approximately $257 million, including expenses related to the transactions. As a result of the debt repurchases, the Company recognized $1 million in expenses and fees net of premiums on acquired debt in 2017.
Liquidity and Capital Resources
The Company's principal sources of liquidity are cash from operations, cash on hand and the asset-based credit facility described below. Material contractual obligations arising in the normal course of business primarily consist of long-term debt and related interest payments, lease obligations, merchandise purchase obligations, retirement plan benefits, and self-insurance reserves.
Merchandise purchase obligations represent future merchandise payables for inventory purchased from various suppliers through contractual arrangements and are expected to be funded through cash from operations.
Capital Allocation
20
MACY'S, INC.
The Company’s capital allocation goals include maintaining a healthy balance sheet and investment-grade credit metrics, followed by investing in growth initiatives and returning capital to shareholders through modest yet predictable dividends and meaningful share repurchases.
The Company ended the second quarter of 2022 with a cash and cash equivalents balance of $300 million, a decrease from $2,137 million at the end of the second quarter of 2021. The Company is party to the New ABL Credit Facility with certain financial institutions providing for a $3 billion asset-based credit facility.
|
| 2022 |
|
|
|
| 2021 |
| ||
Net cash provided by operating activities |
| $ | 303 |
|
|
|
| $ | 965 |
|
Net cash used by investing activities |
|
| (515 | ) |
|
|
|
| (144 | ) |
Net cash used by financing activities |
|
| (1,200 | ) |
|
|
|
| (360 | ) |
Operating Activities
The decrease in net cash provided by operating activities was primarily driven by the decrease in 2017 was
Investing Activities
The Company’s 2022 capital expenditures were $582 million
Financing Activities
Dividends
The Company paid dividends totaling $87 million in 2022. The Board of Directors declared regular quarterly dividends of 15.75 cents per share on the Company for financing activitiesCompany’s common stock, which was $806 million for 2017, including debt paymentspaid on April 1, 2022 and July 1, 2022, to Macy’s shareholders of $554 millionrecord at the close of business on March 15, 2022 and paymentJune 15, 2022, respectively.
OnAugust 26, 2022, the Company's Board of $346 millionDirectors declared a regular quarterly dividend of cash dividends. These cash outflows were partially offset by15.75 cents per share on its common stock, payable October 3, 2022, to shareholders of record at the close of business on September 15, 2022. Subsequent dividends will be subject to approval of the Board of Directors, which will depend on market and other conditions.
Stock Repurchases
On February 22, 2022, the Company’s announced that its Board of Directors authorized a new $2.0 billion share repurchase program, which does not have an increase in outstanding checks of $80 million. For 2017,expiration date. During 2022, the Company repurchased approximately $24724.0 million face valueshares of senior notes and debentures. Duringits common stock at an average cost of $24.98 per share. As of July 30, 2022, $1.4 billion of shares remained available for repurchase. Repurchases may be made from time to time in the second quarteropen market or through privately negotiated transactions in accordance with applicable securities laws, including Rule 10b-18 under the Securities Exchange Act of 2017,1934, on terms determined by the Company.
Debt Transactions
On March 3, 2022, Macy’s Inventory Funding LLC (the “ABL Borrower”), an indirect subsidiary of the Company, repaidand Macy’s Inventory Holdings LLC (the “ABL Parent”), a direct subsidiary of Macy’s and the direct parent of the ABL Borrower, entered into an amendment (the “Amendment”) to the credit agreement governing the existing $2.941 billion asset-based credit facility (the “Existing ABL Credit Facility”), which was set to expire in May 2024. The Amendment provides for a new revolving credit facility of $3.0 billion, including a swingline sub-facility and a letter of credit sub-facility (the “New ABL Credit Facility”). The ABL Borrower may request increases in the size of the New ABL Credit Facility up to an additional aggregate principal amount of $750 million. The New ABL Credit Facility replaces the Existing ABL Credit Facility, with similar collateral support, but reduced interest and unused facility fees. The New ABL Credit Facility matures in March 2027.
The New ABL Credit Facility is secured on a first priority basis (subject to customary exceptions) by (i) all assets of the ABL Borrower including all inventory and the proceeds thereof and (ii) the equity of the ABL Borrower. The ABL Parent guarantees the ABL Borrower’s obligations under the New ABL Credit Facility.
21
MACY'S, INC.
The New ABL Credit Facility contains customary borrowing conditions including a borrowing base equal to the sum of (i) 90% of the net orderly liquidation percentage of eligible inventory, minus (ii) customary reserves. Amounts borrowed under the New ABL Credit Facility are subject to interest at maturity $300a rate per annum equal to, at the ABL Borrower’s option, either (i) adjusted SOFR (calculated to include a 0.10% credit adjustment spread) plus a margin of 1.25% to 1.50% or (ii) a base rate plus a margin of 0.25% to 0.50%, in each case depending on revolving line utilization. The New ABL Credit Facility also contains customary covenants that provide for, among other things, limitations on indebtedness, liens, fundamental changes, restricted payments, cash hoarding, and prepayment of certain indebtedness as well as customary representations and warranties and events of default typical for credit facilities of this type.
The New ABL Credit Facility also requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any fiscal quarter if (i) certain events of default have occurred and are continuing or (ii) Availability plus Suppressed Availability (each as defined in the New ABL Credit Facility) is less than the greater of (a) 10% of the Loan Cap (as defined in the New ABL Credit Facility) and (b) $250 million, in each case, as of the end of such fiscal quarter.
As of July 30, 2022, the Company had $65 million of 7.45% senior debentures duestandby letters of credit outstanding under the ABL Credit Facility, which reduced the available borrowing capacity to $2,935 million. The Company had no outstanding borrowings under the ABL Credit Facility as of July 2017.
On March 8, 2022, Macy’s Retail Holdings, LLC (“MRH”), a direct, wholly owned subsidiary of $344 million of cash dividends, $230 million for the acquisition of the Company's common stock, primarily under its share repurchase program, and repayment of $174 million of debt. These outflows were partially offset by
On March 10, 2022, MRH issued $850 million in aggregate principal amount of senior notes in two separate tranches, one representing $425 million in aggregate principal amount of 5.875% senior notes due March 15, 2030 (the “2030 Notes”) and the other representing $425 million in aggregate principal amount of 6.125% senior notes due March 15, 2032 (the “2032 Notes”), in a private offering. Each of the 2030 Notes and 2032 Notes are senior unsecured obligations of MRH and are unconditionally guaranteed on an unsecured basis by Macy’s, Inc. Proceeds from the issuance, together with cash on hand, were used to redeem certain of MRH’s outstanding senior notes and debentures,pay fees and expenses therewith and in connection with stated interest rates ranging from 6.375% to 10.25% and maturities ranging from fiscal years 2021 to 2037. The tender offer expires on December 22, 2017, with an early tender date on December 8, 2017. the offering. The Company expects to record the redemption premium and other costsrecognized $31 million of losses related to these repurchases as net premiums onthe early retirement of debt on the Consolidated Statements of Income during the fourthfirst quarter of 2017.
Contractual Obligations
As of July 30, 2022, other than the financing transactions discussed above and in Note 4 to the accompanying Consolidated Financial Statements, there were no material changes to our contractual obligations and commitments outside the ordinary course of business since January 29, 2022, as reported in the Company’s 2021 Form 10-K.
22
MACY'S, INC.
Guarantor Summarized Financial Information
The Company is partyhad $3,007 million and $2,935 million aggregate principal amount of senior unsecured notes and senior unsecured debentures (collectively the “Unsecured Notes”) outstanding as of July 30, 2022 and January 29, 2022, respectively, with maturities ranging from 2023 to 2043. The Unsecured Notes constitute debt obligations of MRH ("Subsidiary Issuer"), a credit agreement100%-owned subsidiary of Macy's, Inc. ("Parent" and together with certain financial institutions providing for revolving credit borrowingsthe "Subsidiary Issuer," the "Obligor Group"), and lettersare fully and unconditionally guaranteed on a senior unsecured basis by Parent. The Unsecured Notes rank equally in right of credit in an aggregate amount not to exceed $1,500 million (which may be increased to $1,750 million at the optionpayment with all of the Company, subjectCompany’s existing and future senior unsecured obligations, senior to any of the Company’s future subordinated indebtedness, and are structurally subordinated to all existing and future obligations of each of the Company’s subsidiaries that do not guarantee the Unsecured Notes. Holders of the Company’s secured indebtedness, including any borrowings under the ABL Credit Facility, will have a priority claim on the assets that secure such secured indebtedness; therefore, the Unsecured Notes and the related guarantee are effectively subordinated to all of the Subsidiary Issuer’s and Parent and their subsidiaries’ existing and future secured indebtedness to the willingnessextent of existing or new lenders to provide commitments forthe value of the collateral securing such additional financing) outstanding at any particular time. indebtedness.
The agreement is set to expire May 6, 2021. Asfollowing tables include combined financial information of October 28, 2017, the Company did notObligor Group. Investments in subsidiaries of $8,653 million and $7,975 million as of July 30, 2022 and January 29, 2022, respectively, have any borrowings or lettersbeen excluded from the Summarized Balance Sheets. Equity in earnings of credit outstanding under its credit facility.
Summarized Balance Sheets
|
| July 30, 2022 |
|
| January 29, 2022 |
| ||
|
| (in millions) |
| |||||
ASSETS |
| |||||||
Current Assets |
| $ | 1,011 |
|
| $ | 1,517 |
|
Noncurrent Assets |
|
| 7,671 |
|
|
| 6,784 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
| |||||||
Current Liabilities |
| $ | 1,801 |
|
| $ | 2,243 |
|
Noncurrent Liabilities (a) |
|
| 11,999 |
|
|
| 10,407 |
|
(a) | Includes net amounts due to non-Guarantor subsidiaries of $6,216 million and $4,337 million as of July 30, 2022 and January 29, 2022, respectively. |
Summarized Statement of long-term debt or other securities, including common stock.Operations
|
| 13 Weeks Ended July 30, 2022 |
|
| 26 Weeks Ended July 30, 2022 |
| ||
|
| (in millions) |
| |||||
Net Sales |
| $ | 286 |
|
| $ | 486 |
|
Consignment commission income (a) |
|
| 894 |
|
|
| 1,729 |
|
Cost of sales |
|
| (127 | ) |
|
| (239 | ) |
Operating loss |
|
| (313 | ) |
|
| (541 | ) |
Loss before income taxes (b) |
|
| (171 | ) |
|
| (248 | ) |
Net income (loss) |
|
| (103 | ) |
|
| (100 | ) |
(a) | Income pertains to transactions with ABL Borrower, a non-Guarantor subsidiary. |
(b) | Includes $189 million and $421 million of dividend income from non-Guarantor subsidiaries for the 13 and 26 weeks ended July 30, 2022, respectively. |
Outlook and Recent Developments
On August 23, 2022, the Company has little or no control.updated its annual 2022 guidance as follows:
• | Net sales are now expected to be between $24.3 billion and $24.6 billion |
• | Gross margin is now expected to be down approximately 150 basis points from 2021 annual gross margin |
• | SG&A expense rate is now expected to deteriorate by approximately 120 basis points from 2021 annual SG&A expense rate |
• | Net credit card revenues are now expected to be approximately 3.3% of net sales |
23
MACY'S, INC.
• | Asset sale gains are now expected to be between $75 million to $90 million |
• | Adjusted EBITDA as a percent of net sales is now expected to be approximately 10.5% |
• | Adjusted diluted earnings per share are now expected to be between $4.00 and $4.20 |
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 the impact of 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, on a comparable basis, and in evaluating the impact of changes in the manner in which certain departments are operated. Earnings (loss) 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 (loss) and diluted earnings (loss) per share attributable to Macy's, Inc. shareholders that are no longernot 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 leverage sales and to more readily compare these metrics between past and future periods.
The reconciliationCompany does not provide reconciliations of the forward-looking non-GAAP financial measuremeasures of changes in comparable sales on an owned plus licensed basisadjusted EBITDA and adjusted diluted earnings per share to GAAP comparable sales (i.e., on an owned basis) is in the same manner as illustrated below, where 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 itemsmeasures because the timing and amount of excluded items (e.g., impairments, restructuring and other costs, retirement plan settlement charges and net premiums on the early retirement of debt) 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.
Changes in Comparable Sales
|
| Comparable Sales vs. 13 Weeks Ended July 31, 2021 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Macy's, Inc. |
|
| Macy's |
|
| Bloomingdale's |
|
| bluemercury |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in comparable sales on an owned basis (Note 1) |
|
| (1.5 | %) |
|
| (2.9 | %) |
|
| 8.8 | % |
|
| 7.6 | % |
Impact of departments licensed to third parties (Note 2) |
|
| (0.1 | %) |
|
| 0.1 | % |
|
| (3.0 | %) |
|
| 0.0 | % |
Increase (decrease) in comparable sales on an owned plus licensed basis |
|
| (1.6 | %) |
|
| (2.8 | %) |
|
| 5.8 | % |
|
| 7.6 | % |
|
| Comparable Sales vs. 26 Weeks Ended July 31, 2021 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Macy's, Inc. |
|
| Macy's |
|
| Bloomingdale's |
|
| bluemercury |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in comparable sales on an owned basis (Note 1) |
|
| 5.1 | % |
|
| 3.4 | % |
|
| 17.8 | % |
|
| 15.3 | % |
Impact of departments licensed to third parties (Note 2) |
|
| (0.2 | %) |
|
| (0.3 | %) |
|
| (2.2 | %) |
|
| 0.0 | % |
Increase in comparable sales on an owned plus licensed basis |
|
| 4.9 | % |
|
| 3.1 | % |
|
| 15.6 | % |
|
| 15.3 | % |
24
MACY'S, INC.
Notes:
Third Quarter of 2017 | Third Quarter of 2016 | |||||
Decrease in comparable sales on an owned basis (note 1) | (4.0 | )% | (3.3 | )% | ||
Impact of growth in comparable sales of departments licensed to third parties (note 2) | 0.4 | % | 0.6 | % | ||
Decrease in comparable sales on an owned plus licensed basis | (3.6 | )% | (2.7 | )% |
2017 | 2016 | |||||
Decrease in comparable sales on an owned basis (note 1) | (4.0 | )% | (4.0 | )% | ||
Impact of growth in comparable sales of departments licensed to third parties (note 2) | 0.4 | % | 0.5 | % | ||
Decrease in comparable sales on an owned plus licensed basis | (3.6 | )% | (3.5 | )% |
(1) | Represents the period-to-period percentage change in net sales from stores in operation |
(2) | 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 |
Adjusted EBITDA as a Percent to Macy's, Inc. Shareholders, Excluding Certain Items
The following is a tabular reconciliation of the non-GAAP financial measure of diluted earnings per share attributablemeasures EBITDA, as adjusted to Macy's, Inc. shareholders, excludingexclude certain items (“Adjusted EBITDA”), as a percent to net sales to GAAP diluted earnings per share attributablenet income as a percent to Macy's, Inc., shareholders,net sales, which the Company believes to be the most directly comparable GAAP financial measure.
|
| 13 Weeks Ended July 30, 2022 |
|
| 13 Weeks Ended July 31, 2021 |
| ||
|
| (millions, except percentages) |
| |||||
Net sales |
| $ | 5,600 |
|
| $ | 5,647 |
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 275 |
|
| $ | 345 |
|
|
|
|
|
|
|
|
|
|
Net income as a percent to net sales |
|
| 4.9 | % |
|
| 6.1 | % |
|
|
|
|
|
|
|
|
|
Net income |
| $ | 275 |
|
| $ | 345 |
|
Interest expense - net |
|
| 42 |
|
|
| 80 |
|
Losses on early retirement of debt |
|
| — |
|
|
| 3 |
|
Federal, state and local income tax expense |
|
| 89 |
|
|
| 105 |
|
Depreciation and amortization |
|
| 208 |
|
|
| 220 |
|
EBITDA |
| $ | 614 |
|
| $ | 753 |
|
Impairment, restructuring and other costs |
|
| 2 |
|
|
| 2 |
|
Settlement charges |
|
| — |
|
|
| 81 |
|
Adjusted EBITDA |
| $ | 616 |
|
| $ | 836 |
|
Adjusted EBITDA as a percent to net sales |
|
| 11.0 | % |
|
| 14.8 | % |
Third Quarter of 2017 | Third Quarter of 2016 | |||||||
Diluted earnings per share attributable to Macy's, Inc. shareholders | $ | .12 | $ | .05 | ||||
Add back the pre-tax impact of restructuring and other costs | .11 | — | ||||||
Add back the pre-tax impact of settlement charges | .07 | .20 | ||||||
Deduct the income tax impact of certain items identified above | (.07 | ) | (.08 | ) | ||||
Diluted earnings per share attributable to Macy's, Inc. shareholders, excluding certain items | $ | .23 | $ | .17 |
2017 | 2016 | |||||||
Diluted earnings per share attributable to Macy's, Inc. shareholders | $ | .73 | $ | .46 | ||||
Add back the pre-tax impact of impairments, restructuring and other costs | .11 | .80 | ||||||
Add back the pre-tax impact of settlement charges | .24 | .26 | ||||||
Add back the pre-tax impact of net premiums on the early retirement of debt (note 1) | — | — | ||||||
Deduct the income tax impact of certain items identified above | (.13 | ) | (.41 | ) | ||||
Diluted earnings per share attributable to Macy's, Inc. shareholders, excluding certain items | $ | .95 | $ | 1.11 |
25
MACY'S, INC.
|
| 26 Weeks Ended July 30, 2022 |
|
| 26 Weeks Ended July 31, 2021 |
| ||
|
| (millions, except percentages) |
| |||||
Net sales |
| $ | 10,948 |
|
| $ | 10,353 |
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 561 |
|
| $ | 448 |
|
|
|
|
|
|
|
|
|
|
Net income as a percent to net sales |
|
| 5.1 | % |
|
| 4.3 | % |
|
|
|
|
|
|
|
|
|
Net income |
| $ | 561 |
|
| $ | 448 |
|
Interest expense - net |
|
| 89 |
|
|
| 159 |
|
Losses on early retirement of debt |
|
| 31 |
|
|
| 14 |
|
Federal, state and local income tax expense |
|
| 195 |
|
|
| 142 |
|
Depreciation and amortization |
|
| 413 |
|
|
| 444 |
|
EBITDA |
| $ | 1,289 |
|
| $ | 1,207 |
|
Impairment, restructuring and other costs |
|
| 10 |
|
|
| 21 |
|
Settlement charges |
|
| — |
|
|
| 81 |
|
Adjusted EBITDA |
| $ | 1,299 |
|
| $ | 1,309 |
|
Adjusted EBITDA as a percent to net sales |
|
| 11.9 | % |
|
| 12.6 | % |
Adjusted Net Income and Adjusted Diluted Earnings Per Share
The following is a tabular reconciliation of the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09,
|
| Second Quarter of 2022 |
|
| Second Quarter of 2021 |
| ||||||||||
|
| Net Income |
|
| Diluted Earnings Per Share |
|
| Net Income |
|
| Diluted Earnings Per Share |
| ||||
|
| (millions, except per share figures) |
| |||||||||||||
As reported |
| $ | 275 |
|
| $ | 0.99 |
|
| $ | 345 |
|
| $ | 1.08 |
|
Impairment, restructuring and other costs |
|
| 2 |
|
|
| 0.01 |
|
|
| 2 |
|
|
| 0.01 |
|
Settlement charges |
|
| — |
|
|
| — |
|
|
| 81 |
|
|
| 0.25 |
|
Losses on early retirement of debt |
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| 0.01 |
|
Income tax impact of certain items noted above |
|
| — |
|
|
| — |
|
|
| (20 | ) |
|
| (0.06 | ) |
As adjusted to exclude certain items above |
| $ | 277 |
|
| $ | 1.00 |
|
| $ | 411 |
|
| $ | 1.29 |
|
|
| 2022 |
|
| 2021 |
| ||||||||||
|
| Net Income |
|
| Diluted Earnings Per Share |
|
| Net Income |
|
| Diluted Earnings Per Share |
| ||||
|
| (millions, except per share figures) |
| |||||||||||||
As reported |
| $ | 561 |
|
| $ | 1.97 |
|
| $ | 448 |
|
| $ | 1.41 |
|
Impairment, restructuring and other costs |
|
| 10 |
|
|
| 0.04 |
|
|
| 21 |
|
|
| 0.07 |
|
Settlement charges |
|
| — |
|
|
| — |
|
|
| 81 |
|
|
| 0.25 |
|
Losses on early retirement of debt |
|
| 31 |
|
|
| 0.11 |
|
|
| 14 |
|
|
| 0.04 |
|
Income tax impact of certain items noted above |
|
| (10 | ) |
|
| (0.04 | ) |
|
| (27 | ) |
|
| (0.09 | ) |
As adjusted to exclude certain items above |
| $ | 592 |
|
| $ | 2.08 |
|
| $ | 537 |
|
| $ | 1.68 |
|
26
MACY'S, INC.
New Pronouncements
The Company does not expect the new guidance to materially impact the revenue recognition associated with gift card breakage as well as the accounting for its warranty arrangements, loyalty programs and other customer incentive arrangements. The Company is continuing to evaluate the impact of the new standards and the final determinations of the impact of the new guidance may differ from these initial estimates.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
There have been no material changes to the Company’s market risk as described in the Company's 20162021 10-K. For a discussion of the Company’s exposure to market risk, refer to the Company’s market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of the 20162021 10-K.
Item 4. | Controls and Procedures. |
The Company's Chief Executive Officer and Chief Financial Officer have carried out, as of October 28, 2017,July 30, 2022, with the participation of the Company's management, an evaluation of the effectiveness of the Company's disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act.Act of 1934 (the "Exchange Act"). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of October 28, 2017July 30, 2022, the Company's disclosure controls and procedures arewere effective to provide reasonable assurance that information required to be disclosed by the Company in reports the Company files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission (the "SEC") rules and forms, and that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
From time to time adoption of new accounting pronouncements, major organizational restructuring and realignment occurs for which the Company reviews its internal control over financial reporting. As a result of this review, there were no changes in the Company's internal control over financial reporting that occurred during the Company's most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
27
MACY'S, INC.
PART II - OTHER INFORMATION
Item 1. | Legal Proceedings. |
The Company and its subsidiaries are involved in various proceedings that are incidental to the normal course of their businesses. As of the date of this report, the Company does not expect that any of such proceedings will have a material adverse effect on thethe Company’s financial position or results of operations.
Item 1A. | Risk Factors. |
There have been no material changes to the Risk Factors described in Part I, "ItemItem 1A."Risk Factors" in the Company's 20162021 Form 10-K.
Item 5. | Other Information. |
Forward-Looking Statements
This report and other reports, statements and information previously or subsequently filed by the Company with the SEC contain or may contain forward-looking statements. Such statements are based upon the beliefs and assumptions of, and on information available to, the management of the Company at the time such statements are made. The following are or may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995: (i) statements preceded by, followed by or that include the words "may," "will," "could," "should," "believe," "expect," "future," "potential," "anticipate," "intend," "plan," "think," "estimate" or "continue" or the negative or other variations thereof, and (ii) statements regarding matters that are not historical facts. Such forward-looking statements are subject to various risks and uncertainties, including risks and uncertainties relating to:
• | the effects of the weather, natural disasters, outbreak of disease, and health pandemics, including the COVID-19 pandemic, on the Company’s business, including the ability to open stores, customer demand and its supply chain, as well as its consolidated results of operations, financial position and cash flows; |
• | the possible invalidity of the underlying beliefs and assumptions; |
• | the Company's ability to successfully execute against its Polaris strategy, including the ability to realize the anticipated benefits associated with the strategy; |
• | the success of the Company’s operational decisions, such as product sourcing, merchandise mix and pricing, and marketing and strategic initiatives, such as growing its digital channels, expanding off-mall and modernizing its technology and supply chain infrastructures; |
• | general consumer shopping behaviors and spending levels, including the shift of consumer spending to digital channels, the impact of changes in general economic conditions, consumer disposable income levels, consumer confidence levels, the availability, cost and level of consumer debt, and the costs of basic necessities and other goods; |
• | competitive pressures from department stores, specialty stores, general merchandise stores, manufacturers’ outlets, off-price and discount stores, and all other retail channels, including digitally-native retailers, social media and catalogs; |
• | the Company’s ability to remain competitive and relevant as consumers’ shopping behaviors continue to migrate to online and other shopping channels and to maintain its brand image and reputation; |
• | possible systems failures and/or security breaches, including any security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or company information, or the failure to comply with various laws applicable to the Company in the event of such a breach; |
• | the cost of colleague benefits as well as attracting and retaining quality colleagues; |
• | transactions and strategy involving the Company's real estate portfolio; |
• | the seasonal nature of the Company's business; |
• | conditions to, or changes in the timing of, proposed transactions, and changes in expected synergies, cost savings and non-recurring charges; |
28
MACY'S, INC.
• | the potential for the incurrence of charges in connection with the impairment of tangible and intangible assets, including goodwill; |
• | possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions; |
• | possible actions taken or omitted to be taken by third parties, including customers, suppliers, business partners, competitors and legislative, regulatory, judicial and other governmental authorities and officials; |
• | changes in relationships with vendors and other product and service providers; |
• | our level of indebtedness; |
• | currency, interest and exchange rates, inflation rates, and other capital market, economic and geo-political conditions; |
• | unstable political conditions, civil unrest, terrorist activities and armed conflicts; |
• | the possible inability of the Company's manufacturers or transporters to deliver products in a timely manner or meet the Company's quality standards; |
• | the Company’s reliance on foreign sources of production, including risks related to the disruption of imports by labor disputes, regional and global health pandemics, and regional political and economic conditions; |
• | duties, taxes, other charges and quotas on imports; |
• | labor shortages. and |
• | the amount and timing of future dividends and share repurchases. |
In addition to any risks and uncertainties specifically identified in the text surrounding such forward-looking statements, the statements in the immediately preceding sentence and the statements under captions such as "Risk Factors" in this report and in reports, statements and information filed by the Company with the SEC from time to time constitute cautionary statements identifying important factors that could cause actual amounts, results, events and circumstances to differ materially from those expressed in or implied by such forward-looking statements.
29
MACY'S, INC.
Item 6. | Exhibits. |
10.1 | ||
22 | ||
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) | |
31.2 | ||
32.1 | ||
32.2 | ||
101 | The following financial statements from Macy's, Inc.'s Quarterly Report on Form 10-Q for the quarter ended | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
* | Constitutes a compensatory contract or arrangement. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MACY’S, INC. | |||
By: | |||
/s/ ELISA D. GARCIA | |||
Elisa D. Garcia Executive Vice President, Chief Legal Officer and Secretary | |||
By: | /s/ | ||
Paul Griscom |
Date:
31