THE MAY DEPARTMENT STORES COMPANY REPORTS
RESULTS FOR THE FIRST QUARTER OF FISCAL 2004
ST. LOUIS, May 11, 2004 - The May Department Stores Company (NYSE: MAY) today
announced earnings per share, net earnings, and net sales for the first quarter
of fiscal 2004.
For the 13 weeks ended May 1, 2004, earnings per share were 24 cents, compared
with 23 cents per share in the same period a year ago. Net earnings were $76
million, compared with $72 million in the prior year.
First quarter 2004 earnings include store divestiture costs of $7 million, or 2
cents per share. Excluding these costs, 2004 first quarter earnings were $81
million, or 26 cents per share. First quarter 2003 earnings included a $31
million, or 10 cents per share, tax credit that was recorded upon the
resolution of various federal and state income tax issues.
Net sales for the first quarter 2004 were $2.96 billion, an increase of 3.1%,
compared with $2.87 billion in the 2003 first quarter. Store-for-store sales
increased 1.7% for the quarter. Store-for-store sales for the first quarter
increased 2.5%, excluding the remaining 19 stores that May previously announced
it will divest.
First quarter sales showed strong performances in ladies' accessories, foot-
wear, and apparel. The importance of color and more tailored looks contributed
to increases in ladies', juniors', and men's categories.
Handbags and small leather goods remain the must-have accessory. Costume
jewelry, led by earrings, and leather-strap watches were particularly strong,
as were key fashion looks in sunglasses, headwear, hair accessories, and
flowers. Ladies' footwear was fueled by dressier pumps, strappy styles, and
sandals, as well as genuine athletic and athletic-inspired looks.
New styling and product offerings, driven by jackets and skirts, contributed to
growth in tailored ladies' sportswear separates and suits. Juniors' and young
men's apparel responded to this season's fashion trends and performed well.
Men's clothing and dress furnishings outperformed the store, based on the
return to a more dressed-up look. Children's, dresses, and home furnishings
lagged overall store performance.
May opened one new department store during the 2004 first quarter: a Hecht's
store in Wilmington, N.C. Seven additional department stores are planned for
2004: two Foley's stores in Houston and El Paso, Texas; a Filene's in
Dartmouth, Mass.; a Hecht's in Nashville, Tenn.; a Meier & Frank in Portland,
Ore.; a Robinsons-May in Rancho Cucamonga, Calif.; and a location for The Jones
Store in Kansas City, Kansas.
May's Bridal Group opened three David's Bridal stores and three After Hours
Formalwear stores in the first quarter. The Bridal Group plans to open an
additional 27 David's Bridal stores, 17 After Hours stores, and two Priscilla
of Boston stores by year-end.
At the end of the first quarter, May operated 439 department stores under the
names of Lord & Taylor, Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's,
L.S. Ayres, Meier & Frank, Robinsons-May, Strawbridge's, and The Jones Store,
as well as 213 David's Bridal stores, 457 After Hours Formalwear stores, and 10
Priscilla of Boston stores in its Bridal Group. May currently operates in 46
states, the District of Columbia, and Puerto Rico.
# # #
The company discloses earnings and earnings per share on both a GAAP basis and
excluding restructuring costs because it believes these are important metrics,
and they are presented to enhance comparability between years. These metrics
are used internally to evaluate results from operations.
This release also contains forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995. While this release reflects all
available information and management's judgment and estimates of current and
anticipated conditions and circumstances and is prepared with the assistance of
specialists within and outside the company, there are many factors outside of
our control that have an impact on our operations. Such factors include but
are not limited to competitive changes, general and regional economic
conditions, consumer preferences and spending patterns, availability of
adequate locations for building or acquiring new stores, and our ability to
hire and retain qualified associates. Because of these factors, actual
performance could differ materially from that described in forward-looking
statements.
CONDENSED CONSOLIDATED FINANCIAL INFORMATION FOLLOWS
For more information, please contact Sharon Bateman at (314) 342-6494.
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THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)
13 Weeks Ended
May 1, 2004 May 3, 2003
% to % to
millions, except per share) $ Net Sales $ Net Sales
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Net sales $ 2,963 $ 2,873
Cost of sales:
Recurring 2,120 71.6% 2,088 72.7%
Restructuring markdowns 5 0.1 - 0.0
Selling, general, and
administrative expenses 639 21.5 640 22.3
Restructuring costs 2 0.1 - 0.0
Interest expense, net 76 2.6 80 2.7
Earnings before income taxes 121 4.1 65 2.3
Provision (credit) for income taxes 45 37.0* (7) (10.7)*
Net earnings $ 76 2.6% $ 72 2.5%
Diluted earnings per share $ .24 $ .23
Excluding restructuring
costs:
Net earnings $ 81 2.7% $ 72 2.5%
Diluted earnings per share $ .26 $ .23
Dividends paid
per common share $ .24-1/4 $ .24
Diluted average shares
and equivalents 308.3 307.3
* Percent represents effective income tax rate.
Net Sales - Percent Increase From Prior Year
Net sales include merchandise sales and lease department income. Store-for-
store sales compare sales of stores open during both periods beginning the
first day a new store has prior year sales and exclude sales of stores closed
during both periods.
13 Weeks Ended
May 1, 2004
Store-for-
Total Store
3.1% 1.7%
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THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and Subject to Reclassification)
(millions)
May 1, May 3, LIABILITIES AND May 1, May 3,
ASSETS 2004 2003 SHAREOWNERS' EQUITY 2004 2003
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Cash and cash equivalents $ 438 $ 78 Notes payable $ - $ 390
Accounts receivable, net 1,528 1,571 Current maturities of
Merchandise inventories 3,005 3,163 long-term debt 147 170
Other current assets 117 102 Accounts payable and
Total Current Assets 5,088 4,914 accrued expenses 2,321 2,183
Total Current Liabilities 2,468 2,743
Property and equipment, net 5,100 5,518
Goodwill and other intangibles 1,670 1,615 Long-term debt 3,788 3,936
Other assets 126 131 Deferred income taxes 778 794
Other liabilities 504 501
ESOP preference shares 228 257
Unearned compensation - (91)
Shareowners' equity 4,218 4,038
Total Liabilities and
Total Assets $ 11,984 $ 12,178 Shareowners' Equity $ 11,984 $ 12,178
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and Subject to Reclassification)
(millions) 13 Weeks Ended
May 1, May 3,
2004 2003
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Operating activities:
Net earnings $ 76 $ 72
Depreciation and amortization 140 138
Increase in working capital and other (185) (156)
Total operating activities 31 54
Investing activities:
Net additions to property and equipment (95) (186)
Total investing activities (95) (186)
Financing activities:
Net issuances (payments) of notes payable
and long-term debt (9) 232
Net issuances (purchases) of common stock 21 (4)
Dividend payments (74) (73)
Total financing activities (62) 155
Increase (decrease) in cash and cash equivalent (126) 23
Cash and cash equivalents, beginning of period 564 55
Cash and cash equivalents, end of period $ 438 $ 78
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THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Interim Results
The unaudited condensed consolidated results of operations have been prepared
in accordance with the company's accounting policies as described in the 2003
Annual Report to Shareowners and should be read in conjunction with that
report. In the opinion of management, this information is fairly presented and
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair statement of the results for the interim periods have been included;
however, certain items are included in this statement based on estimates for
the entire year. Operating results of periods, which exclude the Christmas
season, may not be indicative of the operating results that may be expected for
the fiscal year.
Reclassifications
Certain prior period amounts have been reclassified to conform with current
year presentation.
Cost of Sales
For the 13 weeks ended May 1, 2004, recurring cost of sales as a percent of net
sales decreased 1.1%, principally because of a 0.9% decrease in the cost of
merchandise and a 0.4% decrease in buying and occupancy costs. In 2004,
restructuring markdowns of $5 million were incurred to liquidate inventory as
stores to be divested were closing.
Selling, General, and Administrative Expenses (SG&A)
SG&A expenses as a percent of net sales decreased from 22.3% in the first
quarter of 2003 to 21.5% in the first quarter of 2004 because of a 0.7%
decrease in payroll and a 0.2% decrease in advertising costs.
Restructuring Costs
In July 2003, the company announced its intention to divest 34 underperforming
department stores. These divestitures will result in total estimated charges
of $380 million, consisting of asset impairments of $317 million, inventory
liquidation losses of $25 million, severance benefits of $23 million, and other
charges of $15 million. Approximately $50 million of the $380 million
represents the cash cost of the store divestitures, not including the benefit
from future tax credits. Of the $380 million of expected total charges, $335
million has been recognized to date, $7 million of which was recognized in the
first quarter of 2004. Asset impairment charges were recorded to reduce store
assets to their estimated fair value because of the shorter period over which
they will be used. Estimated fair values were based on estimated market values
for similar assets. The company is negotiating agreements with landlords and
developers for each store divestiture. Through the end of the 2004 first
quarter, 15 stores have been closed. Severance benefits are recognized as each
store is closed. Severance benefits of $9 million for approximately 1,400
associates and inventory liquidation and other costs of $9 million have been
incurred to date. Remaining amounts will be recognized as each store is
divested.
Income Taxes
The effective tax rate for the first quarter of 2004 was 37.0%, compared with
(10.7)% for the first quarter of 2003. The change is due to a $31 million tax
credit recorded in the first quarter of 2003 upon the resolution of various
federal and state income tax issues. Excluding the $31 million tax credit, the
company's first quarter 2003 estimated effective tax rate was 37.0%.
Trailing Years' Results
Operating results for the trailing years were as follows (millions, except per
share):
May 1, May 3,
2004 2003
Net Sales $ 13,433 $ 13,268
Net Earnings 438 544
Diluted earnings per share $ 1.42 $ 1.76
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