| |||||
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2023
| |||||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
| |||||
Delaware | 13-3324058 | |||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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 |
Large Accelerated Filer | x |
| Accelerated Filer |
| ||||||||||||
Non-Accelerated Filer | o |
| Smaller Reporting Company |
| ||||||||||||
Emerging Growth Company | o |
|
Class | Outstanding at | |||||||
Common Stock, $.01 par value per share |
|
Page | ||||||||
OPERATIONS
|
| 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 | 26 Weeks Ended | |||||||||||||||||||||||||
July 29, 2023 | July 30, 2022 | July 29, 2023 | July 30, 2022 | |||||||||||||||||||||||
Net sales | $ | 5,130 | $ | 5,600 | $ | 10,112 | $ | 10,948 | ||||||||||||||||||
Other revenue | 150 | 234 | 341 | 451 | ||||||||||||||||||||||
Total revenue | 5,280 | 5,834 | 10,453 | 11,399 | ||||||||||||||||||||||
Cost of sales | (3,176) | (3,422) | (6,164) | (6,652) | ||||||||||||||||||||||
Selling, general and administrative expenses | (1,980) | (2,011) | (3,930) | (3,917) | ||||||||||||||||||||||
Gains on sale of real estate | 4 | — | 15 | 42 | ||||||||||||||||||||||
Impairment, restructuring and other costs | (4) | (2) | (6) | (10) | ||||||||||||||||||||||
Operating income | 124 | 399 | 368 | 862 | ||||||||||||||||||||||
Benefit plan income, net | 4 | 7 | 8 | 14 | ||||||||||||||||||||||
Settlement charges | (122) | — | (122) | — | ||||||||||||||||||||||
Interest expense, net | (36) | (42) | (73) | (89) | ||||||||||||||||||||||
Losses on early retirement of debt | — | — | — | (31) | ||||||||||||||||||||||
Income (loss) before income taxes | (30) | 364 | 181 | 756 | ||||||||||||||||||||||
Federal, state and local income tax benefit (expense) | 8 | (89) | (48) | (195) | ||||||||||||||||||||||
Net income (loss) | $ | (22) | $ | 275 | $ | 133 | $ | 561 | ||||||||||||||||||
Basic earnings (loss) per share | $ | (0.08) | $ | 1.01 | $ | 0.49 | $ | 2.02 | ||||||||||||||||||
Diluted earnings (loss) per share | $ | (0.08) | $ | 0.99 | $ | 0.48 | $ | 1.97 |
|
| 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 | 26 Weeks Ended | |||||||||||||||||||||||||
July 29, 2023 | July 30, 2022 | July 29, 2023 | July 30, 2022 | |||||||||||||||||||||||
Net income (loss) | $ | (22) | $ | 275 | $ | 133 | $ | 561 | ||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||
Actuarial gain on post employment and postretirement benefit plans, before tax | (1) | — | (1) | — | ||||||||||||||||||||||
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 | 1 | 5 | 3 | 10 | ||||||||||||||||||||||
Settlement charges, before tax | 122 | — | 122 | — | ||||||||||||||||||||||
Tax effect related to items of other comprehensive income | (31) | (1) | (32) | (3) | ||||||||||||||||||||||
Total other comprehensive income, net of tax effect | 91 | 4 | 92 | 7 | ||||||||||||||||||||||
Comprehensive income | $ | 69 | $ | 279 | $ | 225 | $ | 568 |
|
| 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 29, 2023 | January 28, 2023 | July 30, 2022 | ||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 438 | $ | 862 | $ | 300 | ||||||||||||||
Receivables | 223 | 300 | 219 | |||||||||||||||||
Merchandise inventories | 4,129 | 4,267 | 4,610 | |||||||||||||||||
Prepaid expenses and other current assets | 411 | 424 | 387 | |||||||||||||||||
Income tax receivable | 70 | — | — | |||||||||||||||||
Total Current Assets | 5,271 | 5,853 | 5,516 | |||||||||||||||||
Property and Equipment - net of accumulated depreciation and amortization of $4,905, $4,633 and $4,820 | 5,876 | 5,913 | 5,656 | |||||||||||||||||
Right of Use Assets | 2,692 | 2,683 | 2,715 | |||||||||||||||||
Goodwill | 828 | 828 | 828 | |||||||||||||||||
Other Intangible Assets – net | 431 | 432 | 433 | |||||||||||||||||
Other Assets | 1,206 | 1,157 | 1,194 | |||||||||||||||||
Total Assets | $ | 16,304 | $ | 16,866 | $ | 16,342 | ||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Merchandise accounts payable | $ | 1,978 | $ | 2,053 | $ | 2,290 | ||||||||||||||
Accounts payable and accrued liabilities | 2,206 | 2,750 | 2,395 | |||||||||||||||||
Income taxes | — | 58 | 23 | |||||||||||||||||
Total Current Liabilities | 4,184 | 4,861 | 4,708 | |||||||||||||||||
Long-Term Debt | 2,997 | 2,996 | 2,995 | |||||||||||||||||
Long-Term Lease Liabilities | 2,975 | 2,963 | 3,008 | |||||||||||||||||
Deferred Income Taxes | 933 | 947 | 948 | |||||||||||||||||
Other Liabilities | 1,005 | 1,017 | 1,152 | |||||||||||||||||
Shareholders' Equity | 4,210 | 4,082 | 3,531 | |||||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 16,304 | $ | 16,866 | $ | 16,342 |
| 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 |
|
Common Stock | Additional Paid-In Capital | Accumulated Equity | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders' Equity | ||||||||||||||||||||||||||||||
Balance at January 28, 2023 | $ | 3 | $ | 467 | $ | 6,268 | $ | (2,038) | $ | (618) | $ | 4,082 | |||||||||||||||||||||||
Net income | 155 | 155 | |||||||||||||||||||||||||||||||||
Other comprehensive income | 1 | 1 | |||||||||||||||||||||||||||||||||
Common stock dividends ($0.1654 per share) | (45) | (45) | |||||||||||||||||||||||||||||||||
Stock repurchases | (25) | (25) | |||||||||||||||||||||||||||||||||
Stock-based compensation expense | 14 | 14 | |||||||||||||||||||||||||||||||||
Stock issued under stock plans | (108) | 96 | (12) | ||||||||||||||||||||||||||||||||
Balance at April 29, 2023 | $ | 3 | $ | 373 | $ | 6,378 | $ | (1,967) | $ | (617) | $ | 4,170 | |||||||||||||||||||||||
Net loss | (22) | (22) | |||||||||||||||||||||||||||||||||
Other comprehensive income | 91 | 91 | |||||||||||||||||||||||||||||||||
Common stock dividends ($0.1654 per share) | 1 | (46) | (45) | ||||||||||||||||||||||||||||||||
Stock-based compensation expense | 16 | 16 | |||||||||||||||||||||||||||||||||
Stock issued under stock plans | (38) | 38 | — | ||||||||||||||||||||||||||||||||
Balance at July 29, 2023 | $ | 3 | $ | 352 | $ | 6,310 | $ | (1,929) | $ | (526) | $ | 4,210 |
| 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 | 103 | |||||||||||||||||||||||||||||||||
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 |
|
| 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 |
|
26 Weeks Ended | |||||||||||
July 29, 2023 | July 30, 2022 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 133 | $ | 561 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Impairment, restructuring and other costs | 6 | 10 | |||||||||
Settlement charges | 122 | — | |||||||||
Depreciation and amortization | 433 | 413 | |||||||||
Stock-based compensation expense | 30 | 30 | |||||||||
Gains on sale of real estate | (15) | (42) | |||||||||
Benefit plans | 3 | 10 | |||||||||
Amortization of financing costs and premium on acquired debt | 5 | 5 | |||||||||
Deferred income taxes | (46) | (38) | |||||||||
Changes in assets and liabilities: | |||||||||||
Decrease in receivables | 77 | 78 | |||||||||
Decrease (increase) in merchandise inventories | 138 | (227) | |||||||||
Decrease (increase) in prepaid expenses and other current assets | 10 | (28) | |||||||||
(Decrease) increase in merchandise accounts payable | (53) | 100 | |||||||||
Decrease in accounts payable and accrued liabilities | (418) | (455) | |||||||||
Decrease in current income taxes | (121) | (72) | |||||||||
Change in other assets and liabilities | (33) | (42) | |||||||||
Net cash provided by operating activities | 271 | 303 | |||||||||
Cash flows from investing activities: | |||||||||||
Purchase of property and equipment | (390) | (378) | |||||||||
Capitalized software | (174) | (204) | |||||||||
Disposition of property and equipment | 32 | 73 | |||||||||
Other, net | 1 | (6) | |||||||||
Net cash used by investing activities | (531) | (515) | |||||||||
Cash flows from financing activities: | |||||||||||
Debt issued | — | 850 | |||||||||
Debt issuance costs | — | (21) | |||||||||
Debt repaid | (1) | (1,140) | |||||||||
Debt repurchase premium and expenses | — | (29) | |||||||||
Dividends paid | (90) | (87) | |||||||||
Decrease in outstanding checks | (35) | (172) | |||||||||
Acquisition of treasury stock | (38) | (601) | |||||||||
Net cash used by financing activities | (164) | (1,200) | |||||||||
Net decrease in cash, cash equivalents and restricted cash | (424) | (1,412) | |||||||||
Cash, cash equivalents and restricted cash beginning of period | 865 | 1,715 | |||||||||
Cash, cash equivalents and restricted cash end of period | $ | 441 | $ | 303 | |||||||
Supplemental cash flow information: | |||||||||||
Interest paid | $ | 82 | $ | 108 | |||||||
Interest received | 18 | 1 | |||||||||
Income taxes paid, net of refunds received | 215 | 305 |
2022.
7
MACY'S,
|
| |
Bluemercury.
8
|
| |
13 Weeks Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
July 29, 2023 | July 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss | Shares | Net Income | Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(millions, except per share data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) and average number of shares outstanding | Net income (loss) and average number of shares outstanding | $ | (22) | 272.8 | $ | 275 | 270.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares to be issued under deferred compensation and other plans | Shares to be issued under deferred compensation and other plans | 1.0 | 1.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | (22) | 273.8 | $ | 275 | 271.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic earnings (loss) per share | Basic earnings (loss) per share | $ | (0.08) | $ | 1.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effect of dilutive securities: | Effect of dilutive securities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options and restricted stock units | Stock options and restricted stock units | — | 6.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | (22) | 273.8 | $ | 275 | 277.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diluted earnings (loss) per share | Diluted earnings (loss) per share | $ | (0.08) | $ | 0.99 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 13 Weeks Ended |
| 26 Weeks Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| October 29, 2022 |
|
| October 30, 2021 |
| July 29, 2023 | July 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Net Income |
|
|
|
|
|
| Shares |
|
| Net Income |
|
|
|
|
|
| Shares |
| Net Income | Shares | Net Income | Shares | |||||||||||||||||||||||||||||||||||
|
| (millions, except per share data) |
| (millions, except per share data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income and average number of shares outstanding |
| $ | 108 |
|
|
|
|
|
|
| 271.0 |
|
| $ | 239 |
|
|
|
|
|
|
| 305.8 |
| Net income and average number of shares outstanding | $ | 133 | 272.5 | $ | 561 | 276.3 | ||||||||||||||||||||||||||||
Shares to be issued under deferred compensation and other plans |
|
|
|
|
|
|
|
|
|
| 1.0 |
|
|
|
|
|
|
|
|
|
|
| 1.1 |
| Shares to be issued under deferred compensation and other plans | 1.0 | 1.0 | ||||||||||||||||||||||||||||||||
|
| $ | 108 |
|
|
|
|
|
|
| 272.0 |
|
| $ | 239 |
|
|
|
|
|
|
| 306.9 |
| $ | 133 | 273.5 | $ | 561 | 277.3 | |||||||||||||||||||||||||||||
Basic earnings per share |
|
|
|
|
| $ | 0.40 |
|
|
|
|
|
|
|
|
|
| $ | 0.78 |
|
|
|
|
| Basic earnings per share | $ | 0.49 | $ | 2.02 | ||||||||||||||||||||||||||||||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Effect of dilutive securities: | ||||||||||||||||||||||||||||||||||
Stock options and restricted stock units |
|
|
|
|
|
|
|
|
|
| 5.7 |
|
|
|
|
|
|
|
|
|
|
| 6.9 |
| Stock options and restricted stock units | 4.3 | 6.8 | ||||||||||||||||||||||||||||||||
|
| $ | 108 |
|
|
|
|
|
|
| 277.7 |
|
| $ | 239 |
|
|
|
|
|
|
| 313.8 |
| $ | 133 | 277.8 | $ | 561 | 284.1 | |||||||||||||||||||||||||||||
Diluted earnings per share |
|
|
|
|
| $ | 0.39 |
|
|
|
|
|
|
|
|
|
| $ | 0.76 |
|
|
|
|
| Diluted earnings per share | $ | 0.48 | $ | 1.97 |
|
| 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 |
|
|
|
|
|
9
13 Weeks Ended | 26 Weeks Ended | ||||||||||||||||||||||
Revenues | July 29, 2023 | July 30, 2022 | July 29, 2023 | July 30, 2022 | |||||||||||||||||||
(millions) | |||||||||||||||||||||||
Women's Accessories, Shoes, Cosmetics and Fragrances | $ | 2,050 | $ | 2,099 | $ | 4,075 | $ | 4,189 | |||||||||||||||
Women's Apparel | 1,110 | 1,267 | 2,260 | 2,549 | |||||||||||||||||||
Men's and Kids' | 1,110 | 1,220 | 2,128 | 2,306 | |||||||||||||||||||
Home/Other (a) | 860 | 1,014 | 1,649 | 1,904 | |||||||||||||||||||
Total Net Sales | 5,130 | 5,600 | $ | 10,112 | $ | 10,948 | |||||||||||||||||
Credit card revenues, net | $ | 120 | $ | 204 | $ | 282 | $ | 395 | |||||||||||||||
Macy's Media Network revenue, net (b) | 30 | 30 | 59 | 56 | |||||||||||||||||||
Other Revenue | 150 | 234 | 341 | 451 | |||||||||||||||||||
Total Revenue | $ | 5,280 | $ | 5,834 | $ | 10,453 | $ | 11,399 |
|
| |
Net
Revenue is recognized when customers obtain control for the 13 and 26 weeks ended July 29, 2023 and 86% for the 13 and 26 weeks ended July 30, 2022. In addition, digital sales accounted for 30% of goodsthe Company's net sales for both the 13 weeks ended July 29, 2023 and services promised byJuly 30, 2022, and 31% and 32% of the Company. The amount of revenue recognized is based onCompany's net sales for the amount that reflects the consideration that is expected to be received in exchange for those respective goods26 weeks ended July 29, 2023 and services. The Company's revenue generating activities include the following:
July 30, 2022, respectively.
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, 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 |
|
|
|
Merchandise Returns
10
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
reserves and are a component of other revenue on the consolidated statements of income.
11
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
|
|
| 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 |
|
|
|
|
|
|
|
|
|
|
As of OctoberJuly 29, 2022,2023 and OctoberJuly 30, 2021,2022, the Company had $65$138 million and $116$65 million of standby letters of credit outstanding under its revolving credit facility (“("ABL Credit Facility”Facility"), respectively, which reduced the available borrowing capacity to $2,935$2,862 million and $2,825$2,935 million, respectively. The Company had no outstanding borrowings under the ABL Credit Facility of $183 millionas of OctoberJuly 29, 20222023 and $140 million as of OctoberJuly 30, 2021.
2022.
|
|
12
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| 13 Weeks Ended |
|
| 39 Weeks Ended |
| 13 Weeks Ended | 26 Weeks Ended | |||||||||||||||||||||||||||||||
|
| October 29, 2022 |
|
| October 30, 2021 |
|
| October 29, 2022 |
|
| October 30, 2021 |
| July 29, 2023 | July 30, 2022 | July 29, 2023 | July 30, 2022 | |||||||||||||||||||||||
|
| (millions) |
|
| (millions) |
| (millions) | ||||||||||||||||||||||||||||||||
401(k) Qualified Defined Contribution Plan |
| $ | 21 |
|
| $ | 20 |
|
| $ | 66 |
|
| $ | 59 |
| 401(k) Qualified Defined Contribution Plan | $ | 21 | $ | 23 | $ | 44 | $ | 45 | ||||||||||||||
Pension Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Pension Plan | ||||||||||||||||||||||
Service cost |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 1 |
| |||||||||||||||||||||||
Interest cost |
|
| 14 |
|
|
| 11 |
|
|
| 44 |
|
|
| 36 |
| Interest cost | $ | 22 | $ | 15 | 44 | 29 | ||||||||||||||||
Expected return on assets |
|
| (31 | ) |
|
| (39 | ) |
|
| (93 | ) |
|
| (122 | ) | Expected return on assets | (34) | (31) | (68) | (62) | ||||||||||||||||||
Recognition of net actuarial loss |
|
| 4 |
|
|
| 5 |
|
|
| 11 |
|
|
| 22 |
| Recognition of net actuarial loss | 1 | 4 | 3 | 8 | ||||||||||||||||||
|
| $ | (13 | ) |
| $ | (23 | ) |
| $ | (38 | ) |
| $ | (63 | ) | $ | (11) | $ | (12) | $ | (21) | $ | (25) | |||||||||||||||
Supplementary Retirement Plan |
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|
|
| Supplementary Retirement Plan | ||||||||||||||||||||||
Interest cost |
|
| 4 |
|
|
| 3 |
|
|
| 11 |
|
|
| 8 |
| Interest cost | $ | 6 | $ | 3 | $ | 11 | $ | 7 | ||||||||||||||
Recognition of net actuarial loss |
|
| 3 |
|
|
| 3 |
|
|
| 9 |
|
|
| 10 |
| Recognition of net actuarial loss | 2 | 3 | 4 | 6 | ||||||||||||||||||
|
| $ | 7 |
|
| $ | 6 |
|
| $ | 20 |
|
| $ | 18 |
| $ | 8 | $ | 6 | $ | 15 | $ | 13 | |||||||||||||||
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| |||||||||||||||||||||||
Total Retirement Expense |
| $ | 15 |
|
| $ | 3 |
|
| $ | 48 |
|
| $ | 14 |
| Total Retirement Expense | $ | 18 | $ | 17 | $ | 38 | $ | 33 | ||||||||||||||
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| |||||||||||||||||||||||
Postretirement Obligations |
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|
| Postretirement Obligations | ||||||||||||||||||||||
Interest cost |
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
|
| 1 |
| Interest cost | $ | 1 | $ | 1 | $ | 2 | $ | 1 | ||||||||||||||
Recognition of net actuarial gain |
|
| (1 | ) |
|
| (1 | ) |
|
| (4 | ) |
|
| (4 | ) | Recognition of net actuarial gain | (1) | (2) | (3) | (3) | ||||||||||||||||||
Amortization of prior service credit |
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
|
| — |
| Amortization of prior service credit | (1) | — | (1) | — | ||||||||||||||||||
|
| $ | (1 | ) |
| $ | — |
|
| $ | (3 | ) |
| $ | (3 | ) | $ | (1) | $ | (1) | $ | (2) | $ | (2) |
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 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 For purposes of the following discussion, all references to 3926 weeks ended OctoberJuly 29, 2022,2023, the Company incurred a non-cash settlement charge of $32$122 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, 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 Pension Plan and are the 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 group annuity contract with an insurance company.The Company transferred $256 million of Pension Plan assets to the insurance company in the second quarter of 2021, thereby reducing its Pension Plan benefit obligations.13MACY'S, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Unaudited)6.Fair Value MeasurementsJuly 29, 2023 July 30, 2022 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 $ 39 $ 39 $ — $ — $ 34 $ 34 $ — $ — July 29, 2023 July 30, 2022 Notional
AmountCarrying
AmountFair
ValueNotional
AmountCarrying
AmountFair
Value(millions) Long-term debt $ 3,007 $ 2,997 $ 2,482 $ 3,007 $ 2,995 $ 2,506 14Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations"third"2022"2023" and "third"second quarter of 2021"2022" are to the Company's 13-week fiscal periods ended OctoberJuly 29, 20222023 and OctoberJuly 30, 2021,2022, respectively. References to "2022"the "first half of 2023" or "2023" and "2021"the "first half of 2022" or "2022" are to the Company’s 39-weekCompany's 26-week fiscal periods ended OctoberJuly 29, 2023 and July 30, 2022, and October 30, 2021, respectively.
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◦Macy's comparable sales declined 9.2% on an owned basis and declined 8.2% on an owned-plus-licensed basis compared to the second quarter of 2022. |
|
◦Bloomingdale's comparable sales declined 2.7% on an owned basis and declined 2.6% on an owned-plus-licensed basis compared to the second quarter of 2022. |
|
◦Bluemercury comparable sales increased 5.8% on an owned basis compared to the second quarter of 2022. |
|
•Digital sales decreased 10% versus the second quarter of 2022. Digital penetration was 30% of net sales for the second quarter of 2023, which remained flat compared to second quarter of 2022. |
|
•Other revenues were $150 million, down $84 million from the second quarter of 2022. |
|
•Gross margin rate was 38.1%, compared to 38.9% in the second quarter of 2022. |
|
•Selling, general and administrative ("SG&A") expense was $1,980 million, down $31 million from the second quarter of 2022. SG&A expense as a percent of total revenue was 37.5%, 300 basis points higher than the second quarter of 2022. |
|
•Net loss was $22 million in the second quarter of 2023, compared to net income of $275 million in the second quarter of 2022. |
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|
|
•The second quarter of 2023 had earnings before interest, taxes, depreciation and amortization ("EBITDA") of $221 million compared to EBITDA of $614 million during the second quarter of 2022. On an adjusted basis, EBITDA was $347 million for the second quarter of 2023, compared to $616 million during the second quarter of 2022. |
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15
MACY'S, INC.
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In addition to refresh or replace all existing brands in its private brand portfolio, and plans to introduce four new private brands in total, including On 34th.
16
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| Second Quarter of 2023 | Second Quarter of 2022 | |||||||||||||||||||||||||||||||||||||||||||
|
| Amount |
|
| % to Net Sales |
|
| Amount |
|
| % to Net Sales |
| Amount | % to Net Sales | % to Total Revenue | Amount | % to Net Sales | % to Total Revenue | |||||||||||||||||||||||||||||||||
|
| (dollars in millions, except per share figures) |
| (dollars in millions, except per share figures) | |||||||||||||||||||||||||||||||||||||||||||||||
Net sales |
| $ | 5,230 |
|
|
|
|
|
| $ | 5,440 |
|
|
|
|
| Net sales | $ | 5,130 | $ | 5,600 | ||||||||||||||||||||||||||||||
Increase (decrease) in comparable sales |
|
| (3.1 | )% |
|
|
|
|
|
| 37.2 | % |
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|
|
| |||||||||||||||||||||||||||||||||||
Credit card revenues, net |
|
| 206 |
|
|
| 3.9 | % |
|
| 213 |
|
|
| 3.9 | % | |||||||||||||||||||||||||||||||||||
Other revenue | Other revenue | 150 | 2.9 | % | 234 | 4.2 | % | ||||||||||||||||||||||||||||||||||||||||||||
Total revenue | Total revenue | 5,280 | 5,834 | ||||||||||||||||||||||||||||||||||||||||||||||||
Cost of sales |
|
| (3,204 | ) |
|
| (61.3 | )% |
|
| (3,207 | ) |
|
| (59.0 | )% | Cost of sales | (3,176) | (61.9) | % | (3,422) | (61.1) | % | ||||||||||||||||||||||||||||
Selling, general and administrative expenses |
|
| (2,057 | ) |
|
| (39.3 | )% |
|
| (1,973 | ) |
|
| (36.3 | )% | Selling, general and administrative expenses | (1,980) | (37.5) | % | (2,011) | (34.5) | % | ||||||||||||||||||||||||||||
Gains on sale of real estate |
|
| 32 |
|
|
| 0.6 | % |
|
| 50 |
|
|
| 0.9 | % | Gains on sale of real estate | 4 | 0.1 | % | — | — | % | ||||||||||||||||||||||||||||
Impairment, restructuring and other costs |
|
| (15 | ) |
|
| (0.3 | )% |
|
| — |
|
|
| — |
| Impairment, restructuring and other costs | (4) | (0.1) | % | (2) | — | % | ||||||||||||||||||||||||||||
Operating income |
|
| 192 |
|
|
| 3.7 | % |
|
| 523 |
|
|
| 9.6 | % | Operating income | 124 | 2.3 | % | 399 | 6.8 | % | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||
Diluted earnings per share |
| $ | 0.39 |
|
|
|
|
|
| $ | 0.76 |
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|
|
|
| |||||||||||||||||||||||||||||||||||
Diluted earnings (loss) per share | Diluted earnings (loss) per share | $ | (0.08) | $ | 0.99 | ||||||||||||||||||||||||||||||||||||||||||||||
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Supplemental Financial Measure |
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Supplemental Financial Measures | Supplemental Financial Measures | ||||||||||||||||||||||||||||||||||||||||||||||||||
Gross margin (a) |
| $ | 2,026 |
|
|
| 38.7 | % |
| $ | 2,233 |
|
|
| 41.0 | % | Gross margin (a) | $ | 1,954 | 38.1 | % | $ | 2,178 | 38.9 | % | ||||||||||||||||||||||||||
Digital sales as a percentage of net sales |
|
| 31 | % |
|
|
|
|
|
| 33 | % |
|
|
|
| Digital sales as a percentage of net sales | 30 | % | 30 | % | ||||||||||||||||||||||||||||||
Decrease in comparable sales | Decrease in comparable sales | (8.2) | % | (1.5) | % | ||||||||||||||||||||||||||||||||||||||||||||||
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Supplemental Non-GAAP Financial Measure |
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| |||||||||||||||||||||||||||||||||||
Increase (decrease) in comparable sales on an owned plus licensed basis |
|
| (2.7 | )% |
|
|
|
|
|
| 35.6 | % |
|
|
|
| |||||||||||||||||||||||||||||||||||
Supplemental Non-GAAP Financial Measures | Supplemental Non-GAAP Financial Measures | ||||||||||||||||||||||||||||||||||||||||||||||||||
Decrease in comparable sales on an owned-plus-licensed basis | Decrease in comparable sales on an owned-plus-licensed basis | (7.3) | % | (1.6) | % | ||||||||||||||||||||||||||||||||||||||||||||||
Adjusted diluted earnings per share |
| $ | 0.52 |
|
|
|
|
|
| $ | 1.23 |
|
|
|
|
| Adjusted diluted earnings per share | $ | 0.26 | $ | 1.00 | ||||||||||||||||||||||||||||||
EBITDA |
| $ | 392 |
|
|
|
|
|
| $ | 757 |
|
|
|
|
| EBITDA | $ | 221 | $ | 614 | ||||||||||||||||||||||||||||||
Adjusted EBITDA |
| $ | 439 |
|
|
|
|
|
| $ | 765 |
|
|
|
|
| Adjusted EBITDA | $ | 347 | $ | 616 |
(a) | Gross margin is defined as net sales less cost of sales. |
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| Second Quarter of 2023 | Second Quarter of 2022 | ||||||||||||||
Net sales |
| $ | 5,230 |
|
| $ | 5,440 |
| Net sales | $ | 5,130 | $ | 5,600 | |||||||||
Increase (decrease) in comparable sales |
|
| (3.1 | )% |
|
| 37.2 | % | ||||||||||||||
Increase (decrease) in comparable sales on an owned plus licensed basis |
|
| (2.7 | )% |
|
| 35.6 | % | ||||||||||||||
Decrease in comparable sales | Decrease in comparable sales | (8.2) | % | (1.5) | % | |||||||||||||||||
Decrease in comparable sales on an owned-plus-licensed basis | Decrease in comparable sales on an owned-plus-licensed basis | (7.3) | % | (1.6) | % | |||||||||||||||||
Digital sales as a percent of net sales |
|
| 31 | % |
|
| 33 | % | Digital sales as a percent of net sales | 30 | % | 30 | % |
|
| 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 2022 was driven by similar factors to the first half of 2022: the continuation of the strong credit health of the credit card portfolio's customers, leading to lower levels of bad debt, higher credit sales and higher spending on the co-brand credit card.
17
MACY'S, INC.
|
| 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 | % |
Second Quarter of 2023 | Second Quarter of 2022 | |||||||||||||||||||||||||
$ | % to Net Sales | $ | % to Net Sales | |||||||||||||||||||||||
Credit card revenues, net | $ | 120 | 2.3 | % | $ | 204 | 3.6 | % | ||||||||||||||||||
Macy's Media Network, net | 30 | 0.6 | % | 30 | 0.5 | % | ||||||||||||||||||||
Other revenue | $ | 150 | 2.9 | % | $ | 234 | 4.2 | % | ||||||||||||||||||
Proprietary credit card sales penetration | 43.1 | % | 43.1 | % |
Second Quarter of 2023 | Second Quarter of 2022 | |||||||||||||
Cost of sales | $ | (3,176) | (3,422) | |||||||||||
As a percent to net sales | 61.9 | % | 61.1 | % | ||||||||||
Gross margin | $ | 1,954 | $ | 2,178 | ||||||||||
As a percent to net sales | 38.1 | % | 38.9 | % |
|
| 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 thirdthe Company's cost saving efforts. Delivery expense as a percent of net sales decreased 50 basis points from the second quarter of 2022 primarily due to improved carrier rates from contract renegotiations as well as lower fuel costs and lower vendor direct volume. Finally, inventory declined 10% year-over-year, driven by the Company's continued inventory discipline
Second Quarter of 2023 | Second Quarter of 2022 | |||||||||||||
SG&A expenses | $ | (1,980) | $ | (2,011) | ||||||||||
As a percent to total revenue | 37.5 | % | 34.5 | % |
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||
Gains on sale of real estate |
| $ | 32 |
|
| $ | 50 |
|
The thirdsecond quarter of 2022 and 2021 asset sale gains were driven by the $32 million related to the sale of the Macy’s Westminster location and $33 million related to the sale of the Macy’s Baldwin Hills location, respectively.
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||
Settlement charges |
| $ | (32 | ) |
| $ | (8 | ) |
During the third quarter of 2022 and 2021, the Company recognized non-cash settlement charges of $32 million and $8 million, respectively, related to the pro-rata recognition of net actuarial losses associated with the Company’s defined benefit plans and are the result of an increase in lump sum distribution associated with retiree distribution elections.
|
| Third Quarter of 2022 |
|
| Third Quarter of 2021 |
| ||
Losses on early retirement of debt |
| $ | — |
|
| $ | (185 | ) |
During the third quarter of 2021, the Company recognized $185 million of losses on early retirement of debt2023 was due to the redemption of the 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 decreasea decline 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 effective tax rate varies from the federal income tax statutory rate of 21% in both periods, primarily driven by the impact of return-to-provision adjustments that were identified in connection with the filing of its U.S. federal income tax returns in the respective periods.
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Financial Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin (a) |
| $ | 6,322 |
|
|
| 39.1 | % |
| $ | 6,345 |
|
|
| 40.2 | % |
Digital sales as a percentage of net sales |
|
| 31 | % |
|
|
|
|
|
| 34 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
See pages 24 to 26 for reconciliations of the supplemental non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.
Comparison of the 39 Weeks Ended October 29, 2022 and October 30, 2021
|
| 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 | % |
Net sales through the third quarter of 2022 increased astotal revenue compared to the same period in 2021 and the Company continued to experience an increase in comparable sales. Through the thirdsecond 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 | % |
Second Quarter of 2023 | Second Quarter of 2022 | |||||||||||||
Settlement charges | $ | (122) | $ | — |
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 the gross margin rate was primarily driven by an increase in clearance and promotional markdowns in pandemic-related categories and seasonal merchandise. This was partially offset by higher average unit retail driven by higher ticket prices and favorable 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 first nine months of 2022 both in dollars and as a percent to net sales. The increase in SG&A expense dollars and as a percent to net sales corresponds with the Company filling a significant number of positions that were open in the prior year as well as adjustments to colleague compensation to remain competitive and attract the best talent, including increasing the Company’s minimum wage to $15/hour starting May 1, 2022.
|
| 2022 |
|
| 2021 |
| ||
Gains on sale of real estate |
| $ | 74 |
|
| $ | 61 |
|
The 2022 asset sale gains mainly consisted of gains from the sale of four properties, while the 2021 asset gains are mainly driven by the Baldwin Hills sale, coupled with less significant gains from the sale of approximately 12 other properties.
|
| 2022 |
|
| 2021 |
| ||
Impairment, restructuring and other costs |
| $ | (25 | ) |
| $ | (21 | ) |
Impairment, restructuring and other costs in the first nine months of 2022 and 2021 primarily related to the write-off of capital software assets.
|
| 2022 |
|
| 2021 |
| ||
Settlement charges |
| $ | (32 | ) |
| $ | (90 | ) |
During the 2022 2021 Losses on early retirement of debt $ (31 ) $ (199 ) 2022 2021 Net interest expense $ (131 ) $ (211 ) 2022 2021 Effective tax rate 24.2 % 22.3 % Federal income statutory rate 21 % 21 % The repurchases with excess cash. 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 ) 2023. certain stock awards. 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 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 ) Developments be approximately 279 million. Important Information Regarding Non-GAAP Financial Measures Management also believes that EBITDA and Adjusted EBITDA are frequently used by investors and securities analysts in their evaluations of companies, and that such supplemental measures facilitate comparisons between companies that have different capital and financing structures and/or tax rates. The Company uses certain non-GAAP financial measures as performance measures for components of executive compensation. Comparable Sales vs. 13 Weeks Ended October 30, 2021 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 % Comparable Sales vs. 39 Weeks Ended October 30, 2021 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 % The following is a tabular reconciliation of the non-GAAP financial 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 % 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 % 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 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 tfirst nine monthssecond quarter of 2022,2023, the Company recognized a non-cash settlement charge of $32$122 million primarily driven by an increase in lump sum distributions associated with retiree distribution elections. During the first nine months of 2021, the Company recognized a non-cash settlement charge of $90 million primarily driven by the transfer of fully funded pension obligations for certain retirees and beneficiaries through the purchase of a group annuity contract with an insurance company.Second Quarter of 2023 Second Quarter of 2022 Net interest expense $ (36) $ (42) Second Quarter of 2023 Second Quarter of 2022 Effective tax rate 26.7 % 24.5 % Federal income statutory rate 21 % 21 % InThe Company's effective tax rate varies from the federal income tax statutory rate of 21% in both periods, primarily driven by the effect of state and local taxes.2023 2022 Amount % to Net Sales % to Total Revenue Amount % to Net Sales % to Total Revenue (dollars in millions, except per share figures) Net sales $ 10,112 $ 10,948 Other revenue 341 3.4 % 451 4.1 % Total revenue 10,453 11,399 Cost of sales (6,164) (61.0) % (6,652) (60.8) % Selling, general and administrative expenses (3,930) (37.6) % (3,917) (34.4) % Gains on sale of real estate 15 0.1 % 42 0.4 % Impairment, restructuring and other costs (6) (0.1) % (10) (0.1) % Operating income $ 368 3.5 % $ 862 7.6 % Diluted earnings per share $ 0.48 $ 1.97 Supplemental Financial Measures Gross margin (a) $ 3,948 39.0 % $ 4,296 39.2 % Digital sales as a percentage of net sales 31 % 32 % Increase (decrease) in comparable sales (8) % 5.1 % Supplemental Non-GAAP Financial Measures Increase (decrease) in comparable sales on an owned-plus-licensed basis (7.2) % 4.9 % Adjusted diluted earnings per share $ 0.82 $ 2.08 EBITDA $ 687 $ 1,289 Adjusted EBITDA $ 815 $ 1,299 2023 2022 Net sales $ 10,112 $ 10,948 Increase (decrease) in comparable sales (8.1) % 5.1 % Increase (decrease) in comparable sales on an owned-plus-licensed basis (7.2) % 4.9 % Digital sales as a percent of net sales 31 % 32 % nine monthshalf of 2023 decreased for Macy’s and Bloomingdale’s but improved for Bluemercury as compared to the first half of 2022. Net sales were impacted by macroeconomic conditions as consumer spending in discretionary categories continued to be under pressure. Macy's experienced strength in categories that included fragrances, cosmetics, women's career sportswear, and men’s tailored. Categories such as casual, activewear,and sleepwear underperformed the prior year, and digital sales decreased 1% compared to the first half of 2022 as a result of the shift in consumer behavior. Owned AUR increased 4.7% from the first half of 2022 compared to the first half of 2023 due to ticket increases and category mix.2023 2022 $ % to Net Sales $ % to Net Sales Credit card revenues, net $ 282 2.8 % $ 395 3.6 % Macy's Media Network, net 59 0.6 % 56 0.5 % Other revenue $ 341 3.4 % $ 451 4.1 % Proprietary credit card sales penetration 43.4 % 43.1 % 2023 2022 Cost of sales $ (6,164) $ (6,652) As a percent to net sales 61.0 % 60.8 % Gross margin $ 3,948 $ 4,296 As a percent to net sales 39.0 % 39.2 % 2023 2022 SG&A expenses $ (3,930) $ (3,917) As a percent to total revenue 37.6 % 34.4 % 2023 2022 Gains on sale of real estate $ 15 $ 42 2023 2022 Impairment, restructuring and other costs $ (6) $ (10) 2023 2022 Settlement charges $ (122) $ — 2023 2022 Net interest expense $ (73) $ (89) 2023 2022 Losses on early retirement of debt $ — $ (31) aggregate principal amount of senior notes and debentures in the first quarter ofMarch 2022. In2023 2022 Effective tax rate 26.5 % 25.8 % Federal income statutory rate 21 % 21 % the first nine months of 2021, losses on early retirement of debt were recognized primarily due to the redemption of the entire outstanding $1.3 billion aggregate principal amount of Company’s senior secured notes due 2025 in the third quarter of 2021 as well as the repurchase of $500 million aggregate principal amount of notes in a tender offer in the first quarter of 2021.The decrease in net interest expense, excluding losses on early retirement of debt, was primarily driven by interest savings associated with the redemption of the Company’s $1.3 billion aggregate principal amount of its senior secured notes due 2025 in August 2021, as well as the financing activities completed in the first quarter of 2022.20MACY'S, INC.Company’s Company's effective tax rate varies from the federal income tax statutory rate of 21% in both periods, mainlyprimarily driven by the impact of state and local taxes.asset-based credit facility described below.ABL Credit Facility (as defined below). Material contractual obligations arising in the normal course of business primarily consist of long-term debt and related interest payments, lease obligations, merchandise purchase obligations, retirement plan benefits, and self-insurance reserves.The Company believes that, assuming no change in its current business plan, its available cash, together with expected future cash generated from operations, the amount available under the ABL Credit Facility, and credit available in the market, will be sufficient to satisfy its anticipated needs for working capital, capital expenditures, and cash dividends for at least the next twelve months and the foreseeable future thereafter.Company’sCompany's capital allocation goals include maintaining a healthy balance sheet and investment-grade credit metrics, followed by investing in growth initiatives and returning capital to shareholders through modest yet predictable dividends and meaningful share repurchases.thirdsecond quarter of 20222023 with a cash and cash equivalents balance of $326 million. This compares to a balance$438 million, an increase of $316$138 million from $300 million at the end of the thirdsecond quarter of 2021.2022. The Company is party to the ABL Credit Facility with certain financial institutions providing for a $3 billion$3,000 million asset-based credit facility.2023 2022 Net cash provided by operating activities $ 271 $ 303 Net cash used by investing activities (531) (515) Net cash used by financing activities (164) (1,200) changes in accounts payable and accrued liabilities, which decreased in the third quarter of 2022 from 2021 fiscal year end compared to an increase in the third quarter of 2021 from 2020 fiscal year end.lower EBITDA. This was largely drivenoffset by certain expense prepayments that occurred ata cash flow benefit associated with decreases in merchandise inventory and merchandise payables related to inventory efficiencies realized during the endfirst half of 2020, more significant bonus accruals at the end of 2021 compared to 2020 and a reduction in the Company’s gift card reserve due to lower gift card sales and lower redemption patterns as compared to historical levels.Company’s 2022Company's capital expenditures were $983$564 million in the first half of 2023 compared to $385$582 million throughin the third quartersecond half of 2021.2022. Capital expenditures in the current year are primarily focused on digital and technology investments, data and analytics, supply chain modernization and omni-channel capabilities. The increase is mainly driven by investmentsCompany's asset disposition activity was also lower in its stores and distribution centers as well as its technology-based initiatives, including those that support the digital business, data science initiatives andfirst half of 2023 compared to the simplificationfirst half of its technology structure.2022.$130$90 million and $46$87 million in the first half of 2023 and 2022, and 2021, respectively.In 2022, the The Board of Directors declared regular quarterly dividends of 15.7516.54 cents per share on the Company’sCompany's common stock, which were paid on April 1, 2022,3, 2023 and July 1, 2022, and October 3, 20222023, to Macy’s, Inc.Macy's shareholders of record at the close of business on March 15, 2022,2023 and June 15, 2022, and September 15, 2022,2023, respectively. In 2021,1516.54 cents per share on the Company’sits common stock, which waswill be paid on October 1, 20212, 2023, to Macy’s, Inc.Macy's shareholders of record at the close of business on September 15, 2021.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 3, 2023, to shareholders of record at the close of business on December 15, 2022. 2023. Subsequent dividends will be subject to approval of the Board of Directors, which will depend on market and other conditions.21MACY'S, INC.$2.0 billion$2,000 million share repurchase program, which does not have an expiration date. During 2022 and 2021,the first quarter of 2023, the Company repurchased approximately 24.0 million and 13.01.4 million shares of its common stock at an average cost of $24.98 and $23.02$17.57 per share respectively. As of October 29, 2022, $1.4 billion of shares remained available for repurchaseon the open market under the Company’sits share repurchase program. As of July 29, 2023, $1,375 million remained available under the authorization. The Company did not repurchase any shares of its common stock during the second quarter of 2023. Repurchases may be made from time to time in the open market or through privately negotiated transactions in accordance with applicable securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, on terms determined by the Company.Debt TransactionsBeginning August 2021, During the first quarter of 2023, the Company completed a seriesalso withheld approximately $12 million of debt transactions that resulted in a $1.9 billion decrease in its long-term debt throughshares for tax purposes associated with the third quarterissuance of 2022. These transactions also contributed to a decrease in interest expense, a re-laddering of fixed interest rate debt maturities and an improvement in the Company’s leverage ratio.OctoberJuly 29, 2022,2023 and OctoberJuly 30, 2021,2022, the Company had $65$138 million and $116$65 million of standby letters of credit outstanding under its revolving credit facility (“ABL Credit Facility”),Facility, respectively, which reduced the available borrowing capacity to $2,935$2,862 million and $2,825$2,935 million respectively. The Company hadno outstanding borrowings under the ABL Credit Facility of $183 million as of OctoberJuly 29, 20222023 and $140 million as of OctoberJuly 30, 2021.The Company may, from time to time, repurchase 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 considerations.Credit Ratings2022.OctoberJuly 29, 2022, the Company’s credit rating and outlook were as described in the table below.Moody'sStandard & Poor'sFitchLong-term debtBa1BBBBB-OutlookStablePositiveStableSubsequent 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 ObligationsAs of October 29, 2022,2023, other than the financing transactions discussed above and in Note 4 to the accompanying Consolidated Financial Statements, there were no material changes to ourthe Company's contractual and other material cash obligations and commitments outside the ordinary course of business since January 29, 2022,28, 2023, as reported in the Company’s 2021Company's 2022 Form 10-K.22MACY'S, INC. million and $2,935 million aggregate principal amount of senior unsecured notes and senior unsecured debentures (collectively the “Unsecured Notes”"Unsecured Notes") outstanding as of Octoberboth July 29, 20222023 and January 29, 2022, respectively, 28, 2023 with maturities ranging from 20232025 to 2043. The Unsecured Notes constitute debt obligations of MRHMacy's Retail Holdings, LLC ("SubsidiaryMRH" or "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’sCompany's existing and future senior unsecured obligations, senior to any of the Company’sCompany's future subordinated indebtedness, and are structurally subordinated to all existing and future obligations of each of the Company’sCompany's subsidiaries that do not guarantee the Unsecured Notes. Holders of the Company’sCompany'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 guaranteeguarantees are effectively subordinated to all of the Subsidiary Issuer’sIssuer's and Parent and their subsidiaries’ existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness.$8,905$7,933 million and $7,975$9,146 million as of OctoberJuly 29, 20222023 and January 29, 2022,28, 2023, respectively, have been excluded from the Summarized Balance Sheets. Equity in earnings of non-Guarantor subsidiaries of $487$307 million and $1,568$708 million for the 13 and 3926 weeks ended OctoberJuly 29, 2022, respectively,2023, have been excluded from the Summarized Statement of Operations. The combined financial information of the Obligor Group is presented on a combined basis with intercompany balances and transactions within the Obligor Group eliminated.(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.July 29, 2023 January 28, 2023 (in millions) ASSETS Current Assets $ 945 $ 1,154 Noncurrent Assets 7,449 8,261 LIABILITIES Current Liabilities $ 1,633 $ 1,958 Noncurrent Liabilities (a) 10,682 12,517 (a)Income pertains to transactions with ABL Borrower, a non-Guarantor subsidiary.13 Weeks Ended
July 29, 202326 Weeks Ended
July 29, 2023(in millions) Net sales $ 227 $ 443 Consignment commission income (a) 821 1,590 Other revenue 30 59 Cost of sales (103) (212) Operating loss (286) (556) Loss before income taxes (b) (316) (210) Net loss (202) (6) (b)(a)Income pertains to transactions with ABL Borrower, a non-Guarantor subsidiary.Includes $192 million and $613 million of dividend income from non-Guarantor subsidiaries for the 13 and 39 weeks ended October 29, 2022, respectively.DevelopmentsNovember 17, 2022,August 22, 2023, the Company reaffirmedupdated its annual 20222023 guidance as follows:guidance and raised its earnings guidance to account for improved expectations forwith credit card revenues accounting for approximately 80% to 81% of other revenue;interestas a percent to net sales is now expected to be approximately 35.2% to 35.6% and 36.4% to 36.7%, respectively;lower benefit plan income,is now expected to be approximately $160 million; and, updatedestimates. The updatesis now expected to its annual 2022 guidance are as follows:•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 sales23•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 billionowned plus licensedowned-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 that are not associated with the Company’sCompany's core operations and that may vary substantially in frequency and magnitude from period-to-period providesfrom net income, diluted earnings per share attributable to Macy's, Inc. shareholders and EBITDA provide useful supplemental measures that assist in evaluating the Company's ability to generate earnings and leverage sales, respectively, and to more readily compare these metrics between past and future periods.24MACY'S, INC.Notes:(1)Represents the period-to-period percentage change in net sales from stores in operation during the 13 and 39 weeks ended October 29, 2022 and the 13 and 39 weeks ended October 30, 2021. Such calculation includes all digital sales and excludes commissions from departments licensed to third parties. Stores impacted by a natural disaster or undergoing significant expansion or shrinkage remain in the comparable sales calculation unless the store, or material portion of the store, is closed for a significant period of time. Definitions and calculations of comparable sales may differ among companies in the retail industry.(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 sales of the departments licensed to third parties) in its net sales. The Company does not, however, include any amounts in respect of licensed department sales (or any commissions earned on such sales) in its comparable sales in accordance with GAAP (i.e., on an owned basis). The amounts of commissions earned on sales of departments licensed to third parties are not material to its net sales for the periods presented.Adjusted EBITDA as a Percent to Net Salesmeasures EBITDA, as adjusted to exclude certain items (“Adjusted EBITDA”), as a percent to netmeasure of changes in comparable sales on an owned-plus-licensed basis, to GAAP net income as a percent to netcomparable sales (i.e., on an owned basis), which the Company believes to be the most directly comparable GAAP financial measure.Macy's, Inc. Macy's Bloomingdale's Decrease in comparable sales on an owned basis (Note 1) (8.2 %) (9.2 %) (2.7 %) Impact of departments licensed to third parties (Note 2) 0.9 % 1.0 % 0.1 % Decrease in comparable sales on an owned-plus-licensed basis (7.3 %) (8.2 %) (2.6 %) 26 Weeks Ended July 29, 2023 vs.
26 Weeks Ended July 30, 2022Macy's, Inc. Macy's Bloomingdale's Decrease in comparable sales on an owned basis (Note 1) (8.1 %) (8.9 %) (3.3 %) Impact of departments licensed to third parties (Note 2) 0.9 % 0.8 % (0.1 %) Decrease in comparable sales on an owned-plus-licensed basis (7.2 %) (8.1 %) (3.4 %) Macy's, Inc. 13 Weeks Ended
July 30, 2022 vs.
13 Weeks Ended
July 31, 202126 Weeks Ended
July 30, 2022 vs.
26 Weeks Ended
July 31, 2021Decrease in comparable sales on an owned basis (Note 1) (1.5 %) 5.1 % Impact of departments licensed to third parties (Note 2) (0.1 %) (0.2 %) Decrease in comparable sales on an owned-plus-licensed basis (1.6 %) 4.9 % 13 Weeks Ended
July 29, 202313 Weeks Ended
July 30, 202226 Weeks Ended
July 29, 202326 Weeks Ended
July 30, 2022(millions) Net income (loss) $ (22) $ 275 $ 133 $ 561 Interest expense - net 36 42 73 89 Losses on early retirement of debt — — — 31 Federal, state and local income tax (benefit) expense (8) 89 48 195 Depreciation and amortization 215 208 433 413 EBITDA $ 221 $ 614 $ 687 $ 1,289 Impairment, restructuring and other costs 4 2 6 10 Settlement charges 122 — 122 — Adjusted EBITDA $ 347 $ 616 $ 815 $ 1,299 ofadjusted net income to GAAP net income and adjusted diluted earnings per share excluding certain items identified below, to GAAP net income and diluted earnings per share, which the Company believes to be the most directly comparable GAAP measures.Second Quarter of 2023 Second Quarter of 2022 Net Income (Loss) Diluted
Earnings (Loss)
Per ShareNet Income Diluted
Earnings
Per Share(millions, except per share figures) As reported As reported $ (22) $ (0.08) $ 275 $ 0.99 Impairment, restructuring and other costs Impairment, restructuring and other costs 4 0.01 2 0.01 Settlement charges Settlement charges 122 0.44 — — Income tax impact of certain items noted above Income tax impact of certain items noted above (33) (0.11) — — As adjusted to exclude certain items above As adjusted to exclude certain items above $ 71 $ 0.26 $ 277 $ 1.00 2023 2022 Net Income Diluted
Earnings
Per ShareNet Income Diluted
Earnings
Per Share(millions, except per share figures) As reported $ 133 $ 0.48 $ 561 $ 1.97 Impairment, restructuring and other costs 6 0.01 10 0.04 Settlement charges 122 0.44 — — Losses on early retirement of debt — — 31 0.11 Income tax impact of certain items noted above (33) (0.11) (10) (0.04) As adjusted to exclude certain items above $ 228 $ 0.82 $ 592 $ 2.08 26New PronouncementsThe Company does not expect that any recently issued accounting pronouncements will have a material effect on its consolidated financial statements.Item 3.Company’sCompany's market risk as described in the Company's 20212022 10-K. For a discussion of the Company’sCompany's exposure to market risk, refer to the Company’sCompany's market risk disclosures set forth in Part II, Item 7A, “Quantitative"Quantitative and Qualitative Disclosures About Market Risk”Risk" of the 20212022 10-K.Item 4.OctoberJuly 29, 2022,2023, 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 of 1934 (the "Exchange Act"). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of OctoberJuly 29, 2022,2023, the Company's disclosure controls and procedures were 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.27Item 1.Legal Proceedings.
| Item 1A. Risk Factors. |
| 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.
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•the possible invalidity of the underlying beliefs and assumptions; |
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•the Company's ability to successfully execute against its five growth vectors, including the ability to realize the anticipated benefits associated with the strategy; |
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•the success of the Company's operational decisions, including product sourcing, merchandise mix and pricing, and marketing and strategic initiatives, such as growing its digital channels, expanding the Company's off-mall store presence and modernizing its technology and supply chain infrastructures; |
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•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; |
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•competitive pressures from department stores, specialty stores, general merchandise stores, manufacturers' outlets and websites, off-price and discount stores, and all other retail channels, including digitally-native retailers, social media and catalogs; |
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•the Company's ability to remain competitive and relevant as consumers' shopping behaviors continue to migrate to digital shopping channels and other shopping channels and to maintain its brand image and reputation; |
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•possible systems failures and/or security breaches or other types of cybercrimes or cybersecurity attacks, including any security breach that results in the theft, transfer or unauthorized disclosure of customer, |
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28
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•the cost of colleague benefits as well as attracting and retaining quality colleagues; |
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•transactions and strategy involving the Company's real estate portfolio; |
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•the seasonal nature of the Company's business; |
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•declines in the Company's credit card revenues; |
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•the effects of weather and natural disasters, including the impact of climate change, 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 our consolidated results of operations, financial position and cash flows; |
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•conditions to, or changes in the timing of, proposed transactions and changes in expected synergies, cost savings and non-recurring charges; |
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•the potential for the incurrence of charges in connection with the impairment of tangible and intangible assets, including goodwill; |
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•possible changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions, including supply chain disruptions, inventory shortage, labor shortages, wage pressures and rising inflation, and their related impact on costs; |
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•possible actions taken or omitted to be taken by third parties, including customers, suppliers, business partners, competitors, banks and other financial institutions, and legislative, regulatory, judicial and other governmental authorities and officials; |
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•changes in relationships with vendors and other product and service providers; |
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•our level of indebtedness; |
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•currency, interest and exchange rates and other capital market, economic and geo-political conditions; |
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•unstable political conditions, civil unrest, terrorist activities and armed conflicts, including the ongoing conflict between Russia and Ukraine; |
|
| ||||||||
22 | ||||||||
31.1 | ||||||||
31.2 | ||||||||
32.1 | ||||||||
32.2 | ||||||||
101 | The following financial statements from Macy's, Inc.'s Quarterly Report on Form 10-Q for the quarter ended | |||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
| ||||||||||
MACY'S, INC. | ||||||||||
| ||||||||||
By: | /s/ ELISA D. GARCIA | |||||||||
Elisa D. Garcia Executive Vice President, Chief Legal Officer and Secretary | ||||||||||
By: | /s/ PAUL GRISCOM | |||||||||
Paul Griscom Senior Vice President and Controller | ||||||||||
Date: August 25, 2023 |
Date: November 30, 2022
31