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
OctoberOR
☐ | |
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 November | ||
Common Stock, | 271,111,978 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 |
|
| 39 Weeks Ended |
| ||||||||||
|
| October 29, 2022 |
|
| October 30, 2021 |
|
| October 29, 2022 |
|
| October 30, 2021 |
| ||||
Net sales |
| $ | 5,230 |
|
| $ | 5,440 |
|
| $ | 16,178 |
|
| $ | 15,794 |
|
Credit card revenues, net |
|
| 206 |
|
|
| 213 |
|
|
| 601 |
|
|
| 568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
| (3,204 | ) |
|
| (3,207 | ) |
|
| (9,856 | ) |
|
| (9,449 | ) |
Selling, general and administrative expenses |
|
| (2,057 | ) |
|
| (1,973 | ) |
|
| (5,918 | ) |
|
| (5,618 | ) |
Gains on sale of real estate |
|
| 32 |
|
|
| 50 |
|
|
| 74 |
|
|
| 61 |
|
Impairment, restructuring and other costs |
|
| (15 | ) |
|
| — |
|
|
| (25 | ) |
|
| (21 | ) |
Operating income |
|
| 192 |
|
|
| 523 |
|
|
| 1,054 |
|
|
| 1,335 |
|
Benefit plan income, net |
|
| 7 |
|
|
| 17 |
|
|
| 21 |
|
|
| 49 |
|
Settlement charges |
|
| (32 | ) |
|
| (8 | ) |
|
| (32 | ) |
|
| (90 | ) |
Interest expense |
|
| (43 | ) |
|
| (53 | ) |
|
| (134 | ) |
|
| (212 | ) |
Losses on early retirement of debt |
|
| — |
|
|
| (185 | ) |
|
| (31 | ) |
|
| (199 | ) |
Interest income |
|
| 1 |
|
|
| — |
|
|
| 3 |
|
|
| 1 |
|
Income before income taxes |
|
| 125 |
|
|
| 294 |
|
|
| 881 |
|
|
| 884 |
|
Federal, state and local income tax expense |
|
| (17 | ) |
|
| (55 | ) |
|
| (213 | ) |
|
| (197 | ) |
Net income |
| $ | 108 |
|
| $ | 239 |
|
| $ | 668 |
|
| $ | 687 |
|
Basic earnings per share |
| $ | 0.40 |
|
| $ | 0.78 |
|
| $ | 2.43 |
|
| $ | 2.21 |
|
Diluted earnings per share |
| $ | 0.39 |
|
| $ | 0.76 |
|
| $ | 2.37 |
|
| $ | 2.17 |
|
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 |
|
| 39 Weeks Ended |
| ||||||||||
|
| October 29, 2022 |
|
| October 30, 2021 |
|
| October 29, 2022 |
|
| October 30, 2021 |
| ||||
Net income |
| $ | 108 |
|
| $ | 239 |
|
| $ | 668 |
|
| $ | 687 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gain (loss) on post employment and postretirement benefit plans, before tax |
|
| (161 | ) |
|
| (9 | ) |
|
| (161 | ) |
|
| 53 |
|
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 |
|
|
| 7 |
|
|
| 15 |
|
|
| 27 |
|
Settlement charges, before tax |
|
| 32 |
|
|
| 8 |
|
|
| 32 |
|
|
| 90 |
|
Tax effect related to items of other comprehensive income |
|
| 32 |
|
|
| (2 | ) |
|
| 30 |
|
|
| (43 | ) |
Total other comprehensive income (loss), net of tax effect |
|
| (92 | ) |
|
| 4 |
|
|
| (84 | ) |
|
| 127 |
|
Comprehensive income |
| $ | 16 |
|
| $ | 243 |
|
| $ | 584 |
|
| $ | 814 |
|
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)
|
| October 29, 2022 |
|
| January 29, 2022 |
|
| October 30, 2021 |
| |||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 326 |
|
| $ | 1,712 |
|
| $ | 316 |
|
Receivables |
|
| 204 |
|
|
| 297 |
|
|
| 212 |
|
Merchandise inventories |
|
| 6,403 |
|
|
| 4,383 |
|
|
| 6,141 |
|
Prepaid expenses and other current assets |
|
| 415 |
|
|
| 366 |
|
|
| 922 |
|
Total Current Assets |
|
| 7,348 |
|
|
| 6,758 |
|
|
| 7,591 |
|
Property and Equipment - net of accumulated depreciation and amortization of $4,957, $4,548 and $4,826 |
|
| 5,831 |
|
|
| 5,665 |
|
|
| 5,600 |
|
Right of Use Assets |
|
| 2,699 |
|
|
| 2,808 |
|
|
| 2,808 |
|
Goodwill |
|
| 828 |
|
|
| 828 |
|
|
| 828 |
|
Other Intangible Assets – net |
|
| 433 |
|
|
| 435 |
|
|
| 435 |
|
Other Assets |
|
| 1,091 |
|
|
| 1,096 |
|
|
| 1,017 |
|
Total Assets |
| $ | 18,230 |
|
| $ | 17,590 |
|
| $ | 18,279 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
| $ | 183 |
|
| $ | — |
|
| $ | 140 |
|
Merchandise accounts payable |
|
| 3,861 |
|
|
| 2,222 |
|
|
| 3,796 |
|
Accounts payable and accrued liabilities |
|
| 2,678 |
|
|
| 3,086 |
|
|
| 2,735 |
|
Income taxes |
|
| 21 |
|
|
| 108 |
|
|
| — |
|
Total Current Liabilities |
|
| 6,743 |
|
|
| 5,416 |
|
|
| 6,671 |
|
Long-Term Debt |
|
| 2,996 |
|
|
| 3,295 |
|
|
| 3,295 |
|
Long-Term Lease Liabilities |
|
| 2,988 |
|
|
| 3,098 |
|
|
| 3,090 |
|
Deferred Income Taxes |
|
| 884 |
|
|
| 983 |
|
|
| 970 |
|
Other Liabilities |
|
| 1,144 |
|
|
| 1,177 |
|
|
| 1,245 |
|
Shareholders' Equity |
|
| 3,475 |
|
|
| 3,621 |
|
|
| 3,008 |
|
Total Liabilities and Shareholders’ Equity |
| $ | 18,230 |
|
| $ | 17,590 |
|
| $ | 18,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
| — |
|
Balance at July 30, 2022 | $ | 3 |
|
| $ | 450 |
|
| $ | 5,742 |
|
| $ | (2,049 | ) |
| $ | (615 | ) |
| $ | 3,531 |
|
Net income |
|
|
|
|
|
|
|
|
| 108 |
|
|
|
|
|
|
|
|
|
|
| 108 |
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (92 | ) |
|
| (92 | ) |
Common stock dividends ($0.315 per share) |
|
|
|
|
|
|
|
|
| (86 | ) |
|
|
|
|
|
|
|
|
|
| (86 | ) |
Stock-based compensation expense |
|
|
|
|
| 14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 14 |
|
Stock issued under stock plans |
|
|
|
|
| (1 | ) |
|
|
|
|
|
| 1 |
|
|
|
|
|
|
| — |
|
Balance at October 29, 2022 | $ | 3 |
|
| $ | 463 |
|
| $ | 5,764 |
|
| $ | (2,048 | ) |
| $ | (707 | ) |
| $ | 3,475 |
|
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 |
|
|
|
|
|
|
| — |
|
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 |
|
|
|
|
|
|
| — |
|
Balance at July 31, 2021 | $ | 3 |
|
| $ | 498 |
|
| $ | 4,376 |
|
| $ | (1,066 | ) |
| $ | (665 | ) |
| $ | 3,146 |
|
Net income |
|
|
|
|
|
|
|
|
| 239 |
|
|
|
|
|
|
|
|
|
|
| 239 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4 |
|
|
| 4 |
|
Common stock dividends ($0.30 per share) |
|
|
|
|
|
|
|
|
| (92 | ) |
|
|
|
|
|
|
|
|
|
| (92 | ) |
Stock repurchases |
|
|
|
|
|
|
|
|
|
|
|
|
| (300 | ) |
|
|
|
|
|
| (300 | ) |
Stock-based compensation expense |
|
|
|
|
| 11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11 |
|
Stock issued under stock plans |
|
|
|
|
| (2 | ) |
|
|
|
|
|
| 2 |
|
|
|
|
|
|
| — |
|
Balance at October 30, 2021 | $ | 3 |
|
| $ | 507 |
|
| $ | 4,523 |
|
| $ | (1,364 | ) |
| $ | (661 | ) |
| $ | 3,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
MACY’S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(millions)
|
| 39 Weeks Ended |
| |||||
|
| October 29, 2022 |
|
| October 30, 2021 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 668 |
|
| $ | 687 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Impairment, restructuring and other costs |
|
| 25 |
|
|
| 21 |
|
Settlement charges |
|
| 32 |
|
|
| 90 |
|
Depreciation and amortization |
|
| 638 |
|
|
| 668 |
|
Stock-based compensation expense |
|
| 44 |
|
|
| 32 |
|
Gains on sale of real estate |
|
| (74 | ) |
|
| (61 | ) |
Benefit plans |
|
| 15 |
|
|
| 27 |
|
Amortization of financing costs and premium on acquired debt |
|
| 8 |
|
|
| 66 |
|
Deferred income taxes |
|
| (70 | ) |
|
| 19 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Decrease in receivables |
|
| 93 |
|
|
| 64 |
|
Increase in merchandise inventories |
|
| (2,019 | ) |
|
| (2,367 | ) |
Increase in prepaid expenses and other current assets |
|
| (56 | ) |
|
| (44 | ) |
Increase in merchandise accounts payable |
|
| 1,636 |
|
|
| 1,758 |
|
Increase (decrease) in accounts payable and accrued liabilities |
|
| (300 | ) |
|
| 73 |
|
Decrease in current income taxes |
|
| (73 | ) |
|
| (50 | ) |
Change in other assets and liabilities |
|
| (79 | ) |
|
| (142 | ) |
Net cash provided by operating activities |
|
| 488 |
|
|
| 841 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (655 | ) |
|
| (230 | ) |
Capitalized software |
|
| (328 | ) |
|
| (155 | ) |
Disposition of property and equipment |
|
| 122 |
|
|
| 118 |
|
Other, net |
|
| (8 | ) |
|
| 64 |
|
Net cash used by investing activities |
|
| (869 | ) |
|
| (203 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Debt issued |
|
| 1,891 |
|
|
| 975 |
|
Debt issuance costs |
|
| (21 | ) |
|
| (9 | ) |
Debt repaid |
|
| (1,998 | ) |
|
| (2,448 | ) |
Debt repurchase premium and expenses |
|
| (29 | ) |
|
| (152 | ) |
Dividends paid |
|
| (130 | ) |
|
| (46 | ) |
Decrease in outstanding checks |
|
| (117 | ) |
|
| (97 | ) |
Acquisition of treasury stock |
|
| (601 | ) |
|
| (294 | ) |
Net cash used by financing activities |
|
| (1,005 | ) |
|
| (2,071 | ) |
Net decrease in cash, cash equivalents and restricted cash |
|
| (1,386 | ) |
|
| (1,433 | ) |
Cash, cash equivalents and restricted cash beginning of period |
|
| 1,715 |
|
|
| 1,754 |
|
Cash, cash equivalents and restricted cash end of period |
| $ | 329 |
|
| $ | 321 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Interest paid |
| $ | 168 |
|
| $ | 407 |
|
Interest received |
|
| 3 |
|
|
| 1 |
|
Income taxes paid, net of refunds received |
|
| 356 |
|
|
| 228 |
|
Note: Restricted cash of $3 million and $5 million have been included with cash and cash equivalents for the 39 weeks ended October 29, 2022 and October 30, 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 October 29, 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 39 weeks ended
Seasonality
Because of the seasonal nature of the retail business, the results of operations for the 13 and 39 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 39 weeks ended October 28, 201729, 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 |
| |||||||||||||||||||||
|
| October 29, 2022 |
|
| October 30, 2021 |
| ||||||||||||||||||
|
| Net Income |
|
|
|
|
|
| Shares |
|
| Net Income |
|
|
|
|
|
| Shares |
| ||||
|
| (millions, except per share data) |
| |||||||||||||||||||||
Net income and average number of shares outstanding |
| $ | 108 |
|
|
|
|
|
|
| 271.0 |
|
| $ | 239 |
|
|
|
|
|
|
| 305.8 |
|
Shares to be issued under deferred compensation and other plans |
|
|
|
|
|
|
|
|
|
| 1.0 |
|
|
|
|
|
|
|
|
|
|
| 1.1 |
|
|
| $ | 108 |
|
|
|
|
|
|
| 272.0 |
|
| $ | 239 |
|
|
|
|
|
|
| 306.9 |
|
Basic earnings per share |
|
|
|
|
| $ | 0.40 |
|
|
|
|
|
|
|
|
|
| $ | 0.78 |
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock units |
|
|
|
|
|
|
|
|
|
| 5.7 |
|
|
|
|
|
|
|
|
|
|
| 6.9 |
|
|
| $ | 108 |
|
|
|
|
|
|
| 277.7 |
|
| $ | 239 |
|
|
|
|
|
|
| 313.8 |
|
Diluted earnings per share |
|
|
|
|
| $ | 0.39 |
|
|
|
|
|
|
|
|
|
| $ | 0.76 |
|
|
|
|
|
|
| 39 Weeks Ended |
| |||||||||||||||||||||
|
| October 29, 2022 |
|
| October 30, 2021 |
| ||||||||||||||||||
|
| Net Income |
|
|
|
|
|
| Shares |
|
| Net Income |
|
|
|
|
|
| Shares |
| ||||
|
| (millions, except per share data) |
|
|
| |||||||||||||||||||
Net income and average number of shares outstanding |
| $ | 668 |
|
|
|
|
|
|
| 274.6 |
|
| $ | 687 |
|
|
|
|
|
|
| 309.3 |
|
Shares to be issued under deferred compensation and other plans |
|
|
|
|
|
|
|
|
|
| 1.0 |
|
|
|
|
|
|
|
|
|
|
| 1.0 |
|
|
| $ | 668 |
|
|
|
|
|
|
| 275.6 |
|
| $ | 687 |
|
|
|
|
|
|
| 310.3 |
|
Basic earnings per share |
|
|
|
|
| $ | 2.43 |
|
|
|
|
|
|
|
|
|
| $ | 2.21 |
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock units |
|
|
|
|
|
|
|
|
|
| 6.4 |
|
|
|
|
|
|
|
|
|
|
| 6.7 |
|
|
| $ | 668 |
|
|
|
|
|
|
| 282.0 |
|
| $ | 687 |
|
|
|
|
|
|
| 317.0 |
|
Diluted earnings per share |
|
|
|
|
| $ | 2.37 |
|
|
|
|
|
|
|
|
|
| $ | 2.17 |
|
|
|
|
|
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
9
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
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:
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% of the Company’s net sales for the 13 weeks ended October 29, 2022 and October 30, 2021 and 87% of the Company’s net sales for the 39 weeks ended October 29, 2022 and October 30, 2021. In addition, digital sales accounted for approximately 31% and 33% of the Company’s net sales for the 13 weeks ended October 29, 2022 and October 30, 2021, respectively, and 31% and 34% of the Company’s net sales for the 39 weeks ended October 29, 2022 and October 30, 2021, respectively.
Disaggregation of the Company's net sales by family of business for the 13 and 39 weeks ended October 29, 2016,2022 and October 30, 2021 were as follows:
|
| 13 Weeks Ended |
|
| 39 Weeks Ended |
| ||||||||||
Net sales by family of business |
| October 29, 2022 |
|
| October 30, 2021 |
|
| October 29, 2022 |
|
| October 30, 2021 |
| ||||
|
| (millions) |
| |||||||||||||
Women's Accessories, Intimate Apparel, Shoes, Cosmetics and Fragrances |
| $ | 2,025 |
|
| $ | 2,011 |
|
| $ | 6,214 |
|
| $ | 5,984 |
|
Women's Apparel |
|
| 1,223 |
|
|
| 1,211 |
|
|
| 3,772 |
|
|
| 3,565 |
|
Men's and Kids' |
|
| 1,153 |
|
|
| 1,194 |
|
|
| 3,459 |
|
|
| 3,350 |
|
Home/Other (a) |
|
| 829 |
|
|
| 1,024 |
|
|
| 2,733 |
|
|
| 2,895 |
|
Total |
| $ | 5,230 |
|
| $ | 5,440 |
|
| $ | 16,178 |
|
| $ | 15,794 |
|
(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 additionaccounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was $233 million, $198 million and $243 million as of October 29, 2022, January 29, 2022 and October 30, 2021, respectively. Included in prepaid expenses and other current assets is an asset totaling $142 million, $120 million and $142 million as of October 29, 2022, January 29, 2022 and October 30, 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.
10
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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.
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 $355 million, $481 million and $500 million as of October 29, 2022, January 29, 2022 and October 30, 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.
11
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. | Financing Activities |
The following table shows the detail of debt repayments:
|
| 39 Weeks Ended |
| |||||
|
| October 29, 2022 |
|
| October 30, 2021 |
| ||
|
| (millions) |
| |||||
Revolving credit agreement |
| $ | 858 |
|
| $ | 335 |
|
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 |
|
|
| — |
|
6.7% Senior debentures due 2034 |
|
| 2 |
|
|
| — |
|
6.7% Senior debentures due 2028 |
|
| 1 |
|
|
| — |
|
8.375% Senior notes due 2025 |
|
| — |
|
|
| 1,300 |
|
3.875% Senior notes due 2022 |
|
| — |
|
|
| 450 |
|
7.6% Senior debentures due 2025 |
|
| — |
|
|
| 19 |
|
9.5% Amortizing debentures due 2021 |
|
| — |
|
|
| 2 |
|
9.75% Amortizing debentures due 2021 |
|
| — |
|
|
| 1 |
|
|
| $ | 1,997 |
|
| $ | 2,446 |
|
|
|
|
|
|
|
|
|
|
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 |
As of October 29, 2022, and October 30, 2021, the Company had $65 million and $116 million of standby letters of credit outstanding under its revolving credit facility (“ABL Credit Facility”), respectively, which reduced the available borrowing capacity to $2,935 million and $2,825 million respectively. The Company had outstanding borrowings under the ABL Credit Facility of $183 million as of October 29, 2022 and $140 million as of October 30, 2021.
During the 39 weeks ended October 28, 2017, the Company repaid, at maturity, $300 million of 7.45% senior debentures due July 2017.
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.
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.
12
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 |
|
| 39 Weeks Ended |
| ||||||||||
|
| October 29, 2022 |
|
| October 30, 2021 |
|
| October 29, 2022 |
|
| October 30, 2021 |
| ||||
|
| (millions) |
|
| (millions) |
| ||||||||||
401(k) Qualified Defined Contribution Plan |
| $ | 21 |
|
| $ | 20 |
|
| $ | 66 |
|
| $ | 59 |
|
Pension Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 1 |
|
Interest cost |
|
| 14 |
|
|
| 11 |
|
|
| 44 |
|
|
| 36 |
|
Expected return on assets |
|
| (31 | ) |
|
| (39 | ) |
|
| (93 | ) |
|
| (122 | ) |
Recognition of net actuarial loss |
|
| 4 |
|
|
| 5 |
|
|
| 11 |
|
|
| 22 |
|
|
| $ | (13 | ) |
| $ | (23 | ) |
| $ | (38 | ) |
| $ | (63 | ) |
Supplementary Retirement Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
|
| 4 |
|
|
| 3 |
|
|
| 11 |
|
|
| 8 |
|
Recognition of net actuarial loss |
|
| 3 |
|
|
| 3 |
|
|
| 9 |
|
|
| 10 |
|
|
| $ | 7 |
|
| $ | 6 |
|
| $ | 20 |
|
| $ | 18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Retirement Expense |
| $ | 15 |
|
| $ | 3 |
|
| $ | 48 |
|
| $ | 14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
|
| 1 |
|
Recognition of net actuarial gain |
|
| (1 | ) |
|
| (1 | ) |
|
| (4 | ) |
|
| (4 | ) |
Amortization of prior service credit |
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| $ | (1 | ) |
| $ | — |
|
| $ | (3 | ) |
| $ | (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 |
In connection with the Company's defined benefit plans. Duringplans, for the 13 and 39 weeks ended October 29, 2016,2022, the Company also incurred $62 million and $81 million, respectively, ofa non-cash settlement charges relatingcharge of $32 million. This charge relates to the pro-rata recognition of net actuarial losses associated with the Company's Pension Plan and are the result of an increase in lump sum distributions associated with retiree distribution elections.
In connection with the Company's defined benefit plans. Theseplans, for the 13 and 39 weeks ended October 30, 2021, the Company incurred non-cash settlement charges of $8 million and $90 million, respectively. For the 13 weeks ended October 30, 2021, these charges relate to the pro-rata recognition of net actuarial losses associated with the Company's defined benefit plansPension Plan and are athe result of an increase in lump sum distributions associated with retiree distribution elections. For the 39 weeks ended October 31, 2021, these charges relate to the pro-rata recognition of net actuarial losses associated with the Company’s Pension Plan and is the result of the transfer of pension obligations for certain retirees and beneficiaries under the Pension Plan through the purchase of a voluntary separation program, organizational restructuring, and store closings,group annuity contract with an insurance company. The Company transferred $256 million of Pension Plan assets to the insurance company in addition to periodic distribution activity.
13
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
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
|
| October 29, 2022 |
|
| October 30, 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 |
| $ | 33 |
|
| $ | 33 |
|
| $ | — |
|
| $ | — |
|
| $ | 41 |
|
| $ | 41 |
|
| $ | — |
|
| $ | — |
|
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.
The following table shows the estimated fair value of the Company's long-term debt:
|
| October 29, 2022 |
|
| October 30, 2021 |
| ||||||||||||||||||
|
| Notional Amount |
|
| Carrying Amount |
|
| Fair Value |
|
| Notional Amount |
|
| Carrying Amount |
|
| Fair Value |
| ||||||
|
| (millions) |
| |||||||||||||||||||||
Long-term debt |
| $ | 3,007 |
|
| $ | 2,996 |
|
| $ | 2,371 |
|
| $ | 3,295 |
|
| $ | 3,295 |
|
| $ | 3,377 |
|
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 |
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 to 31.
Quarterly Overview
Certain financial highlights are operated under a license agreement with Al Tayer Insignia, a company of Al Tayer Group, LLC.
• | Comparable sales for Macy’s, Inc. decreased 3.1% on an owned basis; and |
◦ | Macy’s brand comparable sales decreased 4.4% on an owned basis and |
◦ | Bloomingdale’s comparable sales on an owned basis were up 5.3% and on an owned-plus-licensed basis were up 4.1% compared to the third quarter of 2021. |
◦ | Bluemercury comparable sales were up 14.0% on an owned and owned-plus licensed basis compared to the third quarter of 2021. |
• | Digital sales decreased 9% versus the third quarter of 2021. Digital penetration was 31% of net sales for |
• | Gross margin was 38.7%, compared to 41.0% in the |
• |
Net credit card revenues were $206 million, down $7 million from the |
• | Selling, general and |
• | Net income was $108 million in the third quarter of 2022, compared to $239 million in the third quarter of 2021. |
• | The third quarter of 2022 had positive earnings before interest, taxes, depreciation and amortization ("EBITDA") of $392 million compared to |
• | Diluted earnings per share and adjusted diluted earnings per share were $0.39 and $0.52, respectively, during the third quarter of 2022. This compares to diluted earnings per share and adjusted diluted earnings per share of $0.76 and $1.23 for the third quarter of 2021, respectively. |
• | Inventory was up 4.3% from the third quarter of 2021. |
During the third quarter of 2017,2022, the Company recognized $33continued to execute its Polaris strategy and these actions impacted its operating results for the period, notably:
• | Win With Fashion and Style: By offering a wide assortment of categories, products and brands from off-price to luxury, the Company continued to reach a broad and diverse range of customers during the third quarter. The Company is committed to providing quality fashion newness through a curation of premium owned and market brands, which is brought to life at |
15
MACY'S, INC.
Macy’s through the Own Your Style platform. Customer shopping trends shifted into occasion-based categories, such as career and tailored sportswear, fragrances, shoes, dresses and luggage rather than popular pandemic categories such as active, casual sportswear, sleepwear and soft home. |
• | Deliver Clear Value: The Company is leveraging data analytics and pricing tools to efficiently plan, place and price inventory, including location level pricing, competitive pricing and point-of-sale (“POS”) pricing work. Throughout the third quarter, the Company maintained a mix of full-price, promotions and markdown items that, when combined with selectively higher tickets, resulted in an eighth consecutive quarter of average-unit-retail improvement. Inventory turn for the trailing 12 months remained relatively consistent with 2021. |
• | Excel in Digital Shopping: While the Company experienced a deceleration in the growth of its digital channel during the third quarter as consumers shifted back to in-store shopping, the Company continued to make digital investments to serve customers’ lifestyle needs through the introduction of personalized and live shopping as well as ongoing refinement of existing online platforms, including the Company’s mobile app, which resulted in an increase in active app customers of 11% on a trailing 12-month basis. In addition, Macy’s Media Network, an in-house media platform that enables business-to-business monetization of advertising partnerships, generated net income of $31 million in the third quarter of 2022, an increase of 21% from the third quarter of 2021. Finally, the Company launched the Macy’s digital Marketplace in late September 2022, which features a collection of new brands, product and categories from third-party sellers, representing a pathway to introduce customers to new merchandise options while limiting inventory risk. |
• | Enhance Store Experience: In the third quarter of 2022, consumers continued to shift shopping channels from digital to stores as they returned 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, including two Market by Macy’s locations that opened in the third quarter of 2022. The Company also opened an additional Market by Macy’s location and a second Bloomie’s location in November 2022. Finally, the Company introduced permanent Toys “R” Us shops within all Macy’s locations during the third quarter with an encouraging initial response through a 63% increase in toy sales from the third quarter of 2021. |
• | Modernize Supply Chain: The Company has continued to update its supply chain infrastructure and network, both upstream and downstream, while leveraging improved data and analytics capabilities in fulfillment strategies to meet customers' preference for speed and convenience while also improving inventory placement. The investments to-date have allowed the Company to strategically bring in seasonal product earlier and provided the added capacity to chase in-season trends. The Company is expanding and relocating distribution centers to support business growth and serve the growing customer base. This includes plans to open a modern, new facility in Texas in mid-2023 which is expected to continue to support stores in the region. In addition, the Company plans to open a new fulfillment center in North Carolina in 2025. |
• | 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 include increasing the Company’s data science and analytics capabilities. The Company is committed to continue its transformation efforts by attracting and retaining talent through several initiatives designed to engage current and potential candidates. |
In addition to the pillars of the Polaris strategy above, the Company is committed to providing value to people, communities and the planet through the evolution of its Mission Every One social purpose platform. In early November, the Company launched S.P.U.R. Pathways: Shared Purpose, Unlimited Reach, with its partner Momentus Capital. S.P.U.R. Pathways is a multi-year, multi-faceted program that ultimately will provide up to $200 million of costs primarily associated with this restructuring effort as well as a restructuring withinfunding. The Company is committed to contribute approximately $30 million over five years to empower new brands across the marketing function. Additional financialCompany’s network of stores and operational impactsbroaden the Company’s range of such restructuring actions include future annual savings of approximately $38 million, some of which may be used for reinvestment in the business, and savings of approximately $.01 per diluted share in the fourth quarter of 2017.
16
MACY'S, INC.
Results of certain assets:Operations
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||||||||||
|
| Amount |
|
| % to Net Sales |
|
| Amount |
|
| % to Net Sales |
| ||||
|
| (dollars in millions, except per share figures) |
| |||||||||||||
Net sales |
| $ | 5,230 |
|
|
|
|
|
| $ | 5,440 |
|
|
|
|
|
Increase (decrease) in comparable sales |
|
| (3.1 | )% |
|
|
|
|
|
| 37.2 | % |
|
|
|
|
Credit card revenues, net |
|
| 206 |
|
|
| 3.9 | % |
|
| 213 |
|
|
| 3.9 | % |
Cost of sales |
|
| (3,204 | ) |
|
| (61.3 | )% |
|
| (3,207 | ) |
|
| (59.0 | )% |
Selling, general and administrative expenses |
|
| (2,057 | ) |
|
| (39.3 | )% |
|
| (1,973 | ) |
|
| (36.3 | )% |
Gains on sale of real estate |
|
| 32 |
|
|
| 0.6 | % |
|
| 50 |
|
|
| 0.9 | % |
Impairment, restructuring and other costs |
|
| (15 | ) |
|
| (0.3 | )% |
|
| — |
|
|
| — |
|
Operating income |
|
| 192 |
|
|
| 3.7 | % |
|
| 523 |
|
|
| 9.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
| $ | 0.39 |
|
|
|
|
|
| $ | 0.76 |
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Supplemental Financial Measure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin (a) |
| $ | 2,026 |
|
|
| 38.7 | % |
| $ | 2,233 |
|
|
| 41.0 | % |
Digital sales as a percentage of net sales |
|
| 31 | % |
|
|
|
|
|
| 33 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Non-GAAP Financial Measure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in comparable sales on an owned plus licensed basis |
|
| (2.7 | )% |
|
|
|
|
|
| 35.6 | % |
|
|
|
|
Adjusted diluted earnings per share |
| $ | 0.52 |
|
|
|
|
|
| $ | 1.23 |
|
|
|
|
|
EBITDA |
| $ | 392 |
|
|
|
|
|
| $ | 757 |
|
|
|
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|
Adjusted EBITDA |
| $ | 439 |
|
|
|
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|
| $ | 765 |
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|
(a) | Gross margin is defined as net sales less cost of sales. |
See pages 24 to recreate Macy's Brooklyn store. The Company continues to own and operate the first four floors and lower level of its existing nine-story retail store, which is currently being reconfigured and remodeled. The remaining portion26 for reconciliations of the storesupplemental non-GAAP financial measures to their most comparable GAAP financial measure and its nearby parking facility were sold to Tishman Speyer in a single sales transaction. As the sales agreement required the Company to conduct certain redevelopment activities within the store, the Company is recognizing the gain on the transaction, approximately $250 million, under the percentage of completion method of accounting over the redevelopment period. Accordingly, $166 million has been recognized to-date, of which $117 million was recognized through fiscal 2016 and $49 million has been recognized during 2017.
Comparison of the Company's 248,000 square-foot Union Square Men’s building in San Francisco for approximately $250 million in January 2017. The Company will use partThird Quarter of the proceeds to consolidate the Men’s store into its main Union Square store. The Company is leasing back the Men's store property as it completes the reconfiguration of the main store. The Company is expected to recognize a gain of approximately $235 million in January 2018.
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||
Net sales |
| $ | 5,230 |
|
| $ | 5,440 |
|
Increase (decrease) in comparable sales |
|
| (3.1 | )% |
|
| 37.2 | % |
Increase (decrease) in comparable sales on an owned plus licensed basis |
|
| (2.7 | )% |
|
| 35.6 | % |
Digital sales as a percent of net sales |
|
| 31 | % |
|
| 33 | % |
Net sales for the third quarter of 2017.
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 |
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||
Credit card revenues, net |
| $ | 206 |
|
| $ | 213 |
|
Credit card revenues, net as a percent of net sales |
|
| 3.9 | % |
|
| 3.9 | % |
Proprietary credit card sales penetration |
|
| 44.5 | % |
|
| 43.0 | % |
Net credit card revenues performance during the third quarter of 20172022 was 3.6% compareddriven by similar factors to the
17
MACY'S, INC.
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||
Cost of sales |
| $ | (3,204 | ) |
| $ | (3,207 | ) |
As a percent to net sales |
|
| 61.3 | % |
|
| 59.0 | % |
Gross margin |
| $ | 2,026 |
|
| $ | 2,233 |
|
As a percent to net sales |
|
| 38.7 | % |
|
| 41.0 | % |
The decrease in the gross margin rate was primarily driven by an increase in promotional and clearance markdowns to sell through slower moving categories at Macy’s, including casual apparel, soft home, and warmer weather seasonal goods. This was partially offset by higher average unit retail driven by higher ticket prices and favorable category mix particularly within occasion-based categories.
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||
SG&A expenses |
| $ | (2,057 | ) |
| $ | (1,973 | ) |
As a percent to net sales |
|
| 39.3 | % |
|
| 36.3 | % |
SG&A expenses increased in third quarter of 2016
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||
Gains on sale of real estate |
| $ | 32 |
|
| $ | 50 |
|
The third quarter of 2017
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||
Settlement charges |
| $ | (32 | ) |
| $ | (8 | ) |
During the third quarter of 2016. This decrease in2022 and 2021, the cost of sales rate as a percent to net sales was due in part to lower inventory levels at the end of the quarter, including less clearance merchandise subject to liquidation. The application of the last-in,
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||
Losses on early retirement of debt |
| $ | — |
|
| $ | (185 | ) |
During the third quarter of 2017 decreased $72021, the Company recognized $185 million from the third quarter of 2016 due to a reduction in the Company'slosses on early retirement of debt from $7.5 billion as of the end of the third quarter of 2016 to $6.3 billion as of the end of the third quarter of 2017. This reduction of approximately $1.2 billion is due to the maturity and repurchase of certainredemption of the Company's borrowings.entire outstanding $1.3 billion aggregate principal amount of its senior secured notes due 2025.
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||
Net interest expense |
| $ | (42 | ) |
| $ | (53 | ) |
The decrease in net interest expense, excluding losses on early retirement of debt, was primarily driven by interest savings associated with the financing activities completed in the first quarter of 2022.
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||
Effective tax rate |
|
| 13.6 | % |
|
| 18.7 | % |
Federal income statutory rate |
|
| 21 | % |
|
| 21 | % |
The Company's Company’s effective tax rate of 27.7% for the third quarter of 2017 and 42.3% for the third quarter of 2016 differvaries from the federal income tax statutory rate of 35%, and on a comparative basis, principally because of the effect of state and local income taxes, including the settlement of various tax issues and tax examinations.
18
MACY'S, INC.
|
| 39 Weeks Ended October 29, 2022 |
|
| 39 Weeks Ended October 30, 2021 |
| ||||||||||
|
| Amount |
|
| % to Net Sales |
|
| Amount |
|
| % to Net Sales |
| ||||
|
| (dollars in millions, except per share figures) |
| |||||||||||||
Net sales |
| $ | 16,178 |
|
|
|
|
|
| $ | 15,794 |
|
|
|
|
|
Increase in comparable sales |
|
| 2.3 | % |
|
|
|
|
|
| 52.4 | % |
|
|
|
|
Credit card revenues, net |
|
| 601 |
|
|
| 3.7 | % |
|
| 568 |
|
|
| 3.6 | % |
Cost of sales |
|
| (9,856 | ) |
|
| (60.9 | )% |
|
| (9,449 | ) |
|
| (59.8 | )% |
Selling, general and administrative expenses |
|
| (5,918 | ) |
|
| (36.6 | )% |
|
| (5,618 | ) |
|
| (35.6 | )% |
Gains on sale of real estate |
|
| 74 |
|
|
| 0.5 | % |
|
| 61 |
|
|
| 0.4 | % |
Impairment, restructuring and other costs |
|
| (25 | ) |
|
| (0.2 | )% |
|
| (21 | ) |
|
| (0.1 | )% |
Operating income |
|
| 1,054 |
|
|
| 6.5 | % |
|
| 1,335 |
|
|
| 8.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
| $ | 2.37 |
|
|
|
|
|
| $ | 2.17 |
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|
|
|
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|
|
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|
Supplemental Financial Measures |
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|
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|
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|
|
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|
Gross margin (a) |
| $ | 6,322 |
|
|
| 39.1 | % |
| $ | 6,345 |
|
|
| 40.2 | % |
Digital sales as a percentage of net sales |
|
| 31 | % |
|
|
|
|
|
| 34 | % |
|
|
|
|
|
|
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|
|
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|
|
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|
Supplemental Non-GAAP Financial Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in comparable sales on an owned plus licensed basis |
|
| 2.3 | % |
|
|
|
|
|
| 52.5 | % |
|
|
|
|
Adjusted diluted earnings per share |
| $ | 2.60 |
|
|
|
|
|
| $ | 2.91 |
|
|
|
|
|
EBITDA |
| $ | 1,681 |
|
|
|
|
|
| $ | 1,962 |
|
|
|
|
|
Adjusted EBITDA |
| $ | 1,738 |
|
|
|
|
|
| $ | 2,073 |
|
|
|
|
|
(b) | 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 costs and settlement charges, diluted earnings per share for the
Comparison of the 39 Weeks Ended October 28, 201729, 2022 and October 29, 2016
|
| 2022 |
|
| 2021 |
| ||
Net sales |
| $ | 16,178 |
|
| $ | 15,794 |
|
Increase in comparable sales |
|
| 2.3 | % |
|
| 52.4 | % |
Increase in comparable sales on an owned plus licensed basis |
|
| 2.3 | % |
|
| 52.5 | % |
Digital sales as a percent of net sales |
|
| 31 | % |
|
| 34 | % |
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 |
Net sales for 2017 decreased $1,092 million or 6.3%through the third quarter of 2022 increased as compared to 2016 due to fiscal year-end 2016 store closuresthe same period in 2021 and the declineCompany continued to experience an increase in comparable sales. Through the third quarter of 2022, consumer shopping behavior shifted more towards occasion-based apparel, with strength in dresses, women’s and men’s shoes, career and tailored sportswear, luggage and fragrances. Pandemic-driven categories such as casual, activewear, sleepwear and soft home, underperformed the prior year. Digital sales decreased compared to the prior year period given a shift back to in-store shopping.
|
| 2022 |
|
| 2021 |
| ||
Credit card revenues, net |
| $ | 601 |
|
| $ | 568 |
|
Credit card revenues, net as a percent of net sales |
|
| 3.7 | % |
|
| 3.6 | % |
Proprietary credit card sales penetration |
|
| 43.6 | % |
|
| 42.1 | % |
The increase in net credit card revenues was driven by 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.
19
MACY'S, INC.
|
| 2022 |
|
| 2021 |
| ||
Cost of sales |
| $ | (9,856 | ) |
| $ | (9,449 | ) |
As a percent to net sales |
|
| 60.9 | % |
|
| 59.8 | % |
Gross margin |
| $ | 6,322 |
|
| $ | 6,345 |
|
As a percent to net sales |
|
| 39.1 | % |
|
| 40.2 | % |
The decrease in comparable sales onthe gross margin rate was primarily driven by an owned basis for 2017increase in clearance and promotional markdowns in pandemic-related categories and seasonal merchandise. This was 4.0% compared to 2016. The decrease in comparable sales on an owned plus licensed basis for 2017 was 3.6% compared to 2016. Sales during 2017 were strongest in active apparel, fine jewelry, fragrances, furniture/mattressespartially offset by higher average unit retail driven by higher ticket prices and women's shoes. Sales were weaker in housewares and tabletop. The Company’s digital business continued its strong growth at both macys.com and bloomingdales.com. Geographically, the Company’s strongest business wasfavorable category mix particularly within occasion-based categories.
|
| 2022 |
|
| 2021 |
| ||
SG&A expenses |
| $ | (5,918 | ) |
| $ | (5,618 | ) |
As a percent to net sales |
|
| 36.6 | % |
|
| 35.6 | % |
SG&A expenses increased in the Southwest region.
|
| 2022 |
|
| 2021 |
| ||
Gains on sale of real estate |
| $ | 74 |
|
| $ | 61 |
|
The 2022 asset sale gains mainly consisted of $176 million, including $47 million related togains from the downtown Minneapolis property, $49 million related tosale of four properties, while the Macy's Brooklyn transaction, and $40 million related to2021 asset gains are mainly driven by the downtown Seattle Macy's location. This compares to $76 million of assetBaldwin Hills sale, coupled with less significant gains recognized in 2016, inclusivefrom the sale of approximately $24 million related to the Macy's Brooklyn transaction and $32 million related to various asset sales to General Growth Properties.12 other properties.
|
| 2022 |
|
| 2021 |
| ||
Impairment, restructuring and other costs |
| $ | (25 | ) |
| $ | (21 | ) |
Impairment, restructuring and other costs in the first nine months of $33 million for 20172022 and $249 million for 2016 include charges associated with store closings and severance activities as well as other human resource2021 primarily related costs associated with organizational restructuring.to the write-off of capital software assets.
|
| 2022 |
|
| 2021 |
| ||
Settlement charges |
| $ | (32 | ) |
| $ | (90 | ) |
During the first nine months of 2022, the Company recognized a non-cash settlement charges relating to the Company's defined benefit plans. These charges relate to the pro-rata recognitioncharge of net actuarial losses and are the result of$32 million primarily driven by an increase in lump sum distributions associated with store closings,retiree distribution elections. During the first nine months of 2021, the Company recognized a voluntary separation programnon-cash settlement charge of $90 million primarily driven by the transfer of fully funded pension obligations for certain retirees and organizational restructuring, and periodic distribution activity.beneficiaries through the purchase of a group annuity contract with an insurance company.
|
| 2022 |
|
| 2021 |
| ||
Losses on early retirement of debt |
| $ | (31 | ) |
| $ | (199 | ) |
In the first nine months of 2022, losses on early retirement of debt were recognized due to a reduction in the Company's debt as discussed previously within the quarterly review.
|
| 2022 |
|
| 2021 |
| ||
Net interest expense |
| $ | (131 | ) |
| $ | (211 | ) |
The decrease in net interest expense, excluding losses on early retirement of debt, was primarily driven by interest savings associated with the transactions. As a resultredemption of the debt repurchases,Company’s $1.3 billion aggregate principal amount of its senior secured notes due 2025 in August 2021, as well as the Company recognized $1 millionfinancing activities completed in expenses and fees netthe first quarter of premiums on acquired debt in 2017.2022.
20
MACY'S, INC.
|
| 2022 |
|
| 2021 |
| ||
Effective tax rate |
|
| 24.2 | % |
|
| 22.3 | % |
Federal income statutory rate |
|
| 21 | % |
|
| 21 | % |
The Company's Company’s effective tax rate of 39.3% for 2017 and 37.9% for 2016 differvaries from the federal income tax statutory rate of 35%, and on a comparative basis, principally because of21% in both periods mainly driven by the effectimpact of state and local income taxes, including the settlement of various tax issues and tax examinations as well as the recognition of approximately $12 million of net tax deficiencies in 2017 associated with share-based payment awards due to the adoption of ASU 2016-09,
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.
Merchandise purchase obligations represent future merchandise payables resultingfor inventory purchased from lower inventory levels as of October 28, 2017 comparedvarious suppliers through contractual arrangements and are expected to October 29, 2016. These lowerbe funded through cash outflows offset other negative cash flow items including lower salesfrom operations.
Capital Allocation
The Company’s capital allocation goals include maintaining a healthy balance sheet and higher income taxes paid in 2017.
The Company ended the Company received cash of $212 million from the disposition of property and equipment in 2017, primarily related to real estate transactions, as compared to $138 million received in 2016.
|
| 2022 |
|
|
|
| 2021 |
| ||
Net cash provided by operating activities |
| $ | 488 |
|
|
|
| $ | 841 |
|
Net cash used by investing activities |
|
| (869 | ) |
|
|
|
| (203 | ) |
Net cash used by financing activities |
|
| (1,005 | ) |
|
|
|
| (2,071 | ) |
Operating Activities
The decrease in net cash provided by operating activities was primarily driven by changes in accounts payable and letters of creditaccrued liabilities, which decreased in an aggregate amount not to exceed $1,500 million (which may be increased to $1,750 million at the option of the Company, subject to the willingness of existing or new lenders to provide commitments for such additional financing) outstanding at any particular time. The agreement is set to expire May 6, 2021. As of October 28, 2017, the Company did not have any borrowings or letters of credit outstanding under its credit facility.
Investing Activities
The Company’s 2022 capital expenditures were $983 million compared to $385 million through the third quarter of 2021. The increase is mainly driven by investments in its leverage ratiostores and distribution centers as well as its technology-based initiatives, including those that support the digital business, data science initiatives and the simplification of its technology structure.
Financing Activities
Dividends
The Company paid dividends totaling $130 million and $46 million in 2022 and 2021, respectively.
In 2022, the Board of Directors declared regular quarterly dividends of 15.75 cents per share on the Company’s common stock, which were paid on April 1, 2022, July 1, 2022, and October 3, 2022 to Macy’s, Inc. shareholders of record at October 28, 2017 was 2.36, in each case as calculated in accordance with the credit agreement.
OnOctober 28, 2022, the Company's Board of Directors declared a regular quarterly dividend of 15.75 cents per share on its common stock, payable January 2, 2018,3, 2023, to Macy's shareholders of record at the close of business on December 15, 2017.
21
MACY'S, INC.
Stock Repurchases
On February 22, 2022, the Company's reasonably foreseeable working capital, capital expenditureCompany announced that its Board of Directors authorized a new $2.0 billion share repurchase program, which does not have an expiration date. During 2022 and debt service requirements2021, the Company repurchased approximately 24.0 million and other cash requirements in both13.0 million shares of its common stock at an average cost of $24.98 and $23.02 per share, respectively. As of October 29, 2022, $1.4 billion of shares remained available for repurchase under the near term and over the longer term. The Company's ability to generate funds from operationsCompany’s share repurchase program. Repurchases may be affected by numerous factors, including general economic conditions and levels of consumer confidence and demand; however, the Company expects to be able to manage its working capital levels and capital expenditure amounts so as to maintain sufficient levels of liquidity. To the extent that the Company's cash balancesmade from time to time exceed amounts that are needed to fund its immediate liquidity requirements,in the Company will consider alternative uses of some or all of such excess cash. Such alternative uses may include, among others, the redemption or repurchase of debt, equity or other securities through open market purchases,or through privately negotiated transactions or otherwise,in accordance with applicable securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, on terms determined by the Company.
Debt Transactions
Beginning August 2021, the Company completed a series of debt transactions that resulted in a $1.9 billion decrease in its long-term debt through the third quarter of 2022. These transactions also contributed to a decrease in interest expense, a re-laddering of fixed interest rate debt maturities and the funding of pension related obligations. Depending upon its actual and anticipated sources and uses of liquidity, conditionsan improvement in the capital marketsCompany’s leverage ratio.
As of October 29, 2022, and other factors,October 30, 2021, the Company willhad $65 million and $116 million of standby letters of credit outstanding under its revolving credit facility (“ABL Credit Facility”), respectively, which reduced the available borrowing capacity to $2,935 million and $2,825 million respectively. The Company had outstanding borrowings under the ABL Credit Facility of $183 million as of October 29, 2022 and $140 million as of October 30, 2021.
The Company may, from time to time, consider the issuancerepurchase or otherwise retire, exchange or extend its outstanding debt and/or take other steps to reduce its outstanding debt or otherwise optimize its capital structure and improve its financial position. These actions may include open market debt repurchases, tender or exchange offers, negotiated repurchases, other retirements or redemptions of outstanding debt and/or opportunistic refinancing of debt or otherwise. The amount of debt that may be repurchased or otherwise retired or refinanced, if any, will depend on prevailing market conditions, trading levels of the Company’s debt, the Company’s cash position, compliance with debt covenants and other securities, orconsiderations.
Credit Ratings
As of October 29, 2022, the Company’s credit rating and outlook were as described in the table below.
Moody's | Standard & Poor's | Fitch | ||||
Long-term debt | Ba1 | BB | BBB- | |||
Outlook | Stable | Positive | Stable |
Subsequent to October 29, 2022, Standard & Poor’s upgraded the Company’s long-term debt rating to BB+ and the outlook to stable.
Contractual and Other Material Cash Obligations
As of October 29, 2022, other possible capital marketsthan the financing transactions discussed above and in Note 4 to the accompanying Consolidated Financial Statements, there were no material changes to our contractual and other material cash 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 had $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 October 29, 2022 and January 29, 2022, respectively, with maturities ranging from 2023 to 2043. The Unsecured Notes constitute debt obligations of MRH ("Subsidiary Issuer"), a 100%-owned subsidiary of Macy's, Inc. ("Parent" and together with the "Subsidiary Issuer," the "Obligor Group"), and are fully and unconditionally guaranteed on a senior unsecured basis by Parent. The Unsecured Notes rank equally in right of payment with all of the Company’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 extent of the value of the collateral securing such indebtedness.
The following tables include combined financial information of the Obligor Group. Investments in subsidiaries of $8,905 million and $7,975 million as of October 29, 2022 and January 29, 2022, respectively, have been excluded from the Summarized Balance Sheets. Equity in earnings of non-Guarantor subsidiaries of $487 million and $1,568 million for the purpose13 and 39 weeks ended October 29, 2022, respectively, have been excluded from the Summarized Statement of raising capital which could be used to refinance current indebtedness or for other corporate purposes, including the redemption or repurchase of debt, equity or other securities through open market purchases, privately negotiated transactions or otherwise, and the funding of pension related obligations.
Summarized Balance Sheets
|
| October 29, 2022 |
|
| January 29, 2022 |
| ||
|
| (in millions) |
| |||||
ASSETS |
| |||||||
Current Assets |
| $ | 1,131 |
|
| $ | 1,517 |
|
Noncurrent Assets |
|
| 7,836 |
|
|
| 6,784 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
| |||||||
Current Liabilities |
| $ | 1,191 |
|
| $ | 2,243 |
|
Noncurrent Liabilities (a) |
|
| 12,402 |
|
|
| 10,407 |
|
(a) | Includes net amounts due to non-Guarantor subsidiaries of $6,709 million and $4,337 million as of October 29, 2022 and January 29, 2022, respectively. |
Summarized Statement of long-term debt or other securities, including common stock.Operations
|
| 13 Weeks Ended October 29, 2022 |
|
| 39 Weeks Ended October 29, 2022 |
| ||
|
| (in millions) |
| |||||
Net Sales |
| $ | 205 |
|
| $ | 691 |
|
Consignment commission income (a) |
|
| 834 |
|
|
| 2,563 |
|
Cost of sales |
|
| (95 | ) |
|
| (334 | ) |
Operating loss |
|
| (401 | ) |
|
| (942 | ) |
Loss before income taxes (b) |
|
| (278 | ) |
|
| (526 | ) |
Net income (loss) |
|
| (187 | ) |
|
| (287 | ) |
(a) | Income pertains to transactions with ABL Borrower, a non-Guarantor subsidiary. |
(b) | Includes $192 million and $613 million of dividend income from non-Guarantor subsidiaries for the 13 and 39 weeks ended October 29, 2022, respectively. |
Outlook and Recent Developments
On November 17, 2022, the Company has little or no control.
• | Digital sales are expected to be approximately 33% of net sales |
• | Net credit card revenues are now expected to be approximately 3.4% of net sales |
23
MACY'S, INC.
• | Benefit plan income is now expected to be approximately $21 million |
• | Net interest expense is now expected to be approximately $180 million |
• | Diluted shares outstanding are now expected to be approximately 281 million |
• | Adjusted diluted earnings per share are now expected to be between $4.07 and $4.27 |
• | Capital expenditures are now expected to be approximately $1.2 billion |
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 October 30, 2021 |
| |||||||||||||
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|
| Macy's, Inc. |
|
| Macy's |
|
| Bloomingdale's |
|
| bluemercury |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in comparable sales on an owned basis (Note 1) |
|
| (3.1 | %) |
|
| (4.4 | %) |
|
| 5.3 | % |
|
| 14.0 | % |
Impact of departments licensed to third parties (Note 2) |
|
| 0.4 | % |
|
| 0.4 | % |
|
| (1.2 | %) |
|
| 0.0 | % |
Increase (decrease) in comparable sales on an owned plus licensed basis |
|
| (2.7 | %) |
|
| (4.0 | %) |
|
| 4.1 | % |
|
| 14.0 | % |
24
MACY'S, INC.
|
| Comparable Sales vs. 39 Weeks Ended October 30, 2021 |
| |||||||||||||
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|
| Macy's, Inc. |
|
| Macy's |
|
| Bloomingdale's |
|
| bluemercury |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in comparable sales on an owned basis (Note 1) |
|
| 2.3 | % |
|
| 0.7 | % |
|
| 13.4 | % |
|
| 14.9 | % |
Impact of departments licensed to third parties (Note 2) |
|
| 0.0 | % |
|
| 0.0 | % |
|
| (1.9 | %) |
|
| 0.0 | % |
Increase in comparable sales on an owned plus licensed basis |
|
| 2.3 | % |
|
| 0.7 | % |
|
| 11.5 | % |
|
| 14.9 | % |
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 October 29, 2022 |
|
| 13 Weeks Ended October 30, 2021 |
| ||
|
| (millions, except percentages) |
| |||||
Net sales |
| $ | 5,230 |
|
| $ | 5,440 |
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 108 |
|
| $ | 239 |
|
|
|
|
|
|
|
|
|
|
Net income as a percent to net sales |
|
| 2.1 | % |
|
| 4.4 | % |
|
|
|
|
|
|
|
|
|
Net income |
| $ | 108 |
|
| $ | 239 |
|
Interest expense - net |
|
| 42 |
|
|
| 53 |
|
Losses on early retirement of debt |
|
| — |
|
|
| 185 |
|
Federal, state and local income tax expense |
|
| 17 |
|
|
| 55 |
|
Depreciation and amortization |
|
| 225 |
|
|
| 225 |
|
EBITDA |
| $ | 392 |
|
| $ | 757 |
|
Impairment, restructuring and other costs |
|
| 15 |
|
|
| — |
|
Settlement charges |
|
| 32 |
|
|
| 8 |
|
Adjusted EBITDA |
| $ | 439 |
|
| $ | 765 |
|
Adjusted EBITDA as a percent to net sales |
|
| 8.4 | % |
|
| 14.1 | % |
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.
|
| 39 Weeks Ended October 29, 2022 |
|
| 39 Weeks Ended October 30, 2021 |
| ||
|
| (millions, except percentages) |
| |||||
Net sales |
| $ | 16,178 |
|
| $ | 15,794 |
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 668 |
|
| $ | 687 |
|
|
|
|
|
|
|
|
|
|
Net income as a percent to net sales |
|
| 4.1 | % |
|
| 4.3 | % |
|
|
|
|
|
|
|
|
|
Net income |
| $ | 668 |
|
| $ | 687 |
|
Interest expense - net |
|
| 131 |
|
|
| 211 |
|
Losses on early retirement of debt |
|
| 31 |
|
|
| 199 |
|
Federal, state and local income tax expense |
|
| 213 |
|
|
| 197 |
|
Depreciation and amortization |
|
| 638 |
|
|
| 668 |
|
EBITDA |
| $ | 1,681 |
|
| $ | 1,962 |
|
Impairment, restructuring and other costs |
|
| 25 |
|
|
| 21 |
|
Settlement charges |
|
| 32 |
|
|
| 90 |
|
Adjusted EBITDA |
| $ | 1,738 |
|
| $ | 2,073 |
|
Adjusted EBITDA as a percent to net sales |
|
| 10.7 | % |
|
| 13.1 | % |
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,
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||||||||||
|
| Net Income |
|
| Diluted Earnings Per Share |
|
| Net Income |
|
| Diluted Earnings Per Share |
| ||||
|
| (millions, except per share figures) |
| |||||||||||||
As reported |
| $ | 108 |
|
| $ | 0.39 |
|
| $ | 239 |
|
| $ | 0.76 |
|
Impairment, restructuring and other costs |
|
| 15 |
|
|
| 0.05 |
|
|
| — |
|
|
| — |
|
Settlement charges |
|
| 32 |
|
|
| 0.12 |
|
|
| 8 |
|
|
| 0.03 |
|
Losses on early retirement of debt |
|
| — |
|
|
| — |
|
|
| 185 |
|
|
| 0.59 |
|
Income tax impact of certain items noted above |
|
| (12 | ) |
|
| (0.04 | ) |
|
| (46 | ) |
|
| (0.15 | ) |
As adjusted to exclude certain items above |
| $ | 143 |
|
| $ | 0.52 |
|
| $ | 386 |
|
| $ | 1.23 |
|
|
| 2022 |
|
| 2021 |
| ||||||||||
|
| Net Income |
|
| Diluted Earnings Per Share |
|
| Net Income |
|
| Diluted Earnings Per Share |
| ||||
|
| (millions, except per share figures) |
| |||||||||||||
As reported |
| $ | 668 |
|
| $ | 2.37 |
|
| $ | 687 |
|
| $ | 2.17 |
|
Impairment, restructuring and other costs |
|
| 25 |
|
|
| 0.09 |
|
|
| 21 |
|
|
| 0.07 |
|
Settlement charges |
|
| 32 |
|
|
| 0.11 |
|
|
| 90 |
|
|
| 0.28 |
|
Losses on early retirement of debt |
|
| 31 |
|
|
| 0.11 |
|
|
| 199 |
|
|
| 0.63 |
|
Income tax impact of certain items noted above |
|
| (22 | ) |
|
| (0.08 | ) |
|
| (73 | ) |
|
| (0.24 | ) |
As adjusted to exclude certain items above |
| $ | 734 |
|
| $ | 2.60 |
|
| $ | 924 |
|
| $ | 2.91 |
|
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, 2017,29, 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, 201729, 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. |
On October 28, 2022, the Board of Directors of the Company approved an amendment to the advance notice provisions of the Amended and Restated By-Laws of the Company to change the timing of advance notice by stockholders required to make director nominations or bring business before an annual meeting of stockholders from not less than 60 days before the annual meeting to not earlier than 120 days and not later than 90 days prior to the one-year anniversary of the preceding year’s annual meeting (subject to adjustment if the scheduled annual meeting date differs from the anniversary date by more than 30 days). The amendment also makes changes to address Rule 14-19 under the Securities Exchange Act of 1934, as amended. The foregoing description is qualified by the full text of the amendment which is included as an exhibit to the Company’s Form 8-K filed on October 31, 2022 and is incorporated herein by reference.
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 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; |
28
MACY'S, INC.
• | the seasonal nature of the Company's business; |
• | the effects of 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; |
• | conditions to, or changes in the timing of, proposed transactions, and changes in expected synergies, cost savings and non-recurring charges; |
• | 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. |
3.1 | ||
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 October | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
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