Exhibit 99.1
THE MAY DEPARTMENT STORES COMPANY REPORTS
RESULTS FOR THE SECOND QUARTER AND
FIRST SIX MONTHS OF FISCAL 2004
ST. LOUIS, Aug. 10, 2004 - The May Department Stores Company [NYSE: MAY]
today announced results for the second quarter of fiscal 2004.
For the 13 weeks ended July 31, 2004, earnings per share were 33 cents,
compared with a net loss per share of 39 cents in the similar period a year
ago. Net earnings were $101 million, compared with a net loss of $110 million
the prior year.
Second quarter 2004 earnings included store divestiture costs of $15
million, or 3 cents per share. Excluding these costs, 2004 second quarter
earnings were $110 million, or 36 cents per share. Second quarter 2003 earnings
included store divestiture costs of $318 million, or 69 cents per share.
Excluding these costs, second quarter 2003 earnings were $92 million, or 30
cents per share.
Net sales for the second quarter 2004 were $2.96 billion, a decrease of
1.5%, compared with $3.00 billion in the 2003 second quarter. Store-for-store
sales decreased 2.2% for the quarter. Store-for-store sales for the second
quarter decreased 1.6%, excluding the remaining 15 stores May previously
announced it will divest.
For the six months ended July 31, 2004, earnings per share were 57 cents,
compared with a net loss per share of 16 cents in 2003. Net earnings were
$177 million versus a net loss of $38 million a year ago. Earnings for the first
six months of 2004 include store divestiture costs of $22 million, or 5 cents
per share. Results for the first six months of 2003 include store divestiture
costs of $318 million, or 69 cents per share, and a $31 million, or 10 cents per
share, tax credit recorded following the resolution of various federal and state
income tax issues.
Net sales for the first six months of 2004 were $5.92 billion, an 0.8%
increase, compared with $5.87 billion in the similar 2003 period. Store-for-
store sales decreased 0.2% for the first half of fiscal 2003. Excluding the
remaining 15 stores May previously announced it will divest, year-to-date
store-for-store sales increased 0.4%.
Effective July 31, 2004, May completed its acquisition of the Marshall
Field's department store group. The acquisition includes substantially all the
assets that comprise Marshall Field's, including 62 department stores,
inventory, customer receivables, and distribution centers.
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Despite good sales in a number of merchandise categories, our overall
sales performance did not meet our expectations in second quarter. Sales of
casual sandals, shorts, and other seasonal apparel were not as strong as last
year, and apparel clearance - which is a key July sales driver - was less than
anticipated. Home furnishings lagged the balance of the store's performance.
Fashion accessories, led by handbags, small leathers, jewelry, and
sunglasses, however, continued to perform well. Dressier ladies' sportswear,
ladies' suits, and men's furnishings and tailored clothing also experienced
sales increases, as did young men's. Apparel in petite and women's sizes,
dresses, and children's were weaker merchandise categories.
Early Fall selling had a good start, reflecting the resurgence in demand
for career looks in both ladies' and men's, as well as the importance of denim
and premium denim.
During the second quarter, May's Bridal Group opened seven David's Bridal
stores and four After Hours Formalwear stores. The Bridal Group plans to open
an additional 20 David's Bridal stores and 13 After Hours Formalwear stores by
year-end.
Year-to-date, May has opened one new department store: a Hecht's store in
Wilmington, N.C. In the second half of 2004, seven additional department
stores are planned: two Foley's stores in Houston and El Paso, Texas; a
Filene's store in Dartmouth, Mass.; a Hecht's store in Nashville, Tenn.; a
Meier & Frank store in Portland, Ore.; a Robinsons-May store in Rancho
Cucamonga, Calif.; and a store for The Jones Store in Kansas City, Kan.
With its acquisition of Marshall Field's, May now operates 497 department
stores under the names of Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's,
Lord & Taylor, L.S. Ayres, Marshall Field's, Meier & Frank, Robinsons-May,
Strawbridge's, and The Jones Store, as well as 220 David's Bridal stores, 454
After Hours Formalwear stores, and 10 Priscilla of Boston stores. 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, our
ability to hire and retain qualified associates, and those risks generally
associated with the integration of Marshall Field's with May. Because of
these factors, actual performance could differ materially from that described
in forward-looking statements.
PLEASE NOTE: May's second quarter earnings conference call will be accessible
in a listen-only format at 10:30 a.m. CT today at www.maycompany.com at the
"Webcast" link on the Investor Relations page. Those unable to access the
Webcast may listen to the conference call by dialing 1-800-265-0241 and
entering pass code #57361632.
CONDENSED CONSOLIDATED FINANCIAL INFORMATION FOLLOWS
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THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(Unaudited)
13 Weeks Ended 26 Weeks Ended
July 31, 2004 Aug. 2, 2003 July 31, 2004 Aug. 2, 2003
% to % to % to % to
(millions, except per share) $ Net Sales $ Net Sales $ Net Sales $ Net Sales
Net sales $ 2,956 $ 3,000 $ 5,919 $ 5,873
Cost of sales:
Recurring 2,065 69.9 % 2,118 70.6 % 4,185 70.7 % 4,206 71.6%
Restructuring markdowns 6 0.2 - 0.0 11 0.2 - 0.0
Selling, general, and
administrative expenses 634 21.4 657 21.9 1,273 21.5 1,297 22.1
Restructuring costs 9 0.3 318 10.6 11 0.2 318 5.4
Interest expense, net 82 2.8 80 2.7 158 2.7 160 2.7
Earnings (loss) before
income taxes 160 5.4 (173) (5.8) 281 4.7 (108) (1.8)
Provision (credit) for
income taxes 59 37.0 * (63) 37.0 * 104 37.0 * (70) 65.4 *
Net earnings (loss) $ 101 3.4 % $ (110) (3.6)% $ 177 3.0 % $ (38) (0.6)%
Diluted earnings (loss) per share $ 0.33 $ (0.39) $ 0.57 $ (0.16)
Excluding restructuring
costs:
Net earnings $ 110 3.7 % $ 92 3.1% $ 191 3.2 % $ 163 2.8 %
Diluted earnings per share $ 0.36 $ 0.30 $ 0.62 $ 0.53
Dividends paid
per common share $ 0.24-1/4 $ 0.24 $ 0.48-1/2 $ 0.48
Diluted average shares
and equivalents 307.9 289.8 308.1 289.8
* Percent represents effective income tax rate.
Net Sales - Percent Increase (Decrease) 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 excludes sales of stores closed
during both periods.
13 Weeks Ended 26 Weeks Ended
July 31, 2004 July 31, 2004
Store-for- Store-for
Total Store Total Store
(1.5)% (2.2)% 0.8% (0.2)%
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THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and Subject to Reclassification)
(millions)
July 31, Aug. 2, LIABILITIES AND July 31, Aug. 2,
ASSETS 2004 2003 SHAREOWNERS' EQUITY 2004 2003
Cash and cash equivalents $ 267 $ 77 Notes payable $ 547 $ 138
Accounts receivable, net 2,011 1,510 Current maturities of
Merchandise inventories 3,170 2,926 long-term debt 347 164
Other current assets 103 104 Accounts payable and
Total Current Assets 5,551 4,617 accrued expenses 2,680 2,014
Total Current Liabilities 3,574 2,316
Property and equipment, net 6,145 5,209
Goodwill and other intangibles 3,299 1,627 Long-term debt 5,794 3,934
Other assets 139 131 Deferred income taxes 792 816
Other liabilities 511 504
ESOP preference shares 222 249
Unearned compensation - (91)
Shareowners' equity 4,241 3,856
Total Liabilities and
Total Assets $ 15,134 $ 11,584 Shareowners' Equity $ 15,134 $ 11,584
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and Subject to Reclassification)
(millions) 26 Weeks Ended
July 31, Aug. 2,
2004 2003
Operating activities:
Net earnings (loss) $ 177 $ (38)
Depreciation and amortization 285 280
Asset impairment - 315
Net decrease in working capital and other 103 1
Total operating activities 565 558
Investing activities:
Net additions to property and equipment (226) (333)
Business combinations (3,200) (16)
Total investing activities (3,426) (349)
Financing activities:
Net issuances (payments) of notes payable
and long-term debt 2,692 (28)
Net issuances (purchases) of common stock 21 (13)
Dividend payments (149) (146)
Total financing activities 2,564 (187)
Increase (decrease) in cash and cash equivalents (297) 22
Cash and cash equivalents, beginning of period 564 55
Cash and cash equivalents, end of period $ 267 $ 77
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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.
Business Combinations
Effective July 31, 2004, the company completed its acquisition of the Marshall
Field's department store group. Marshall Field's operates 62 department stores
primarily in the Chicago, Detroit, and Minneapolis metropolitan areas. The
company acquired substantially all of the assets that comprise Marshall
Field's, including stores, inventory, customer receivables, and distribution
centers, and assumed certain liabilities, including accounts payable and
accrued expenses. The company also is acquiring the real estate associated with
nine Mervyn's store locations in the Twin Cities area. The Mervyn's locations
are expected to be transferred during the third quarter 2004. The acquisition
is being financed through $2.2 billion of long-term debt and $1.0 billion of
short-term borrowings and cash on hand. The long-term debt was issued on July
20, 2004, resulting in additional second quarter interest expense of $4
million, or 1 cent per share.
Marshall Field's results of operations will be included in the company's
consolidated statement of earnings beginning August 1, 2004. The company's
July 31, 2004, consolidated balance sheet includes the assets acquired and the
liabilities assumed using a preliminary purchase price allocation. The
purchase price allocation is based on preliminary estimates and is subject to
final third-party valuations. The following amounts for Marshall Field's are
included in the July 31, 2004, consolidated balance sheet (millions):
Cash $ 3
Accounts receivable 559
Merchandise inventories 375
Property and equipment 1,055
Goodwill and other intangibles 1,628
Assumed liabilities/other (420)
Net purchase price $ 3,200
Cost of Sales
For the 13 weeks ended July 31, 2004, recurring cost of sales as a percent of
net sales decreased 0.7%, principally because of a 1.2% decrease in the cost of
merchandise, offset by a 0.3% increase in buying and occupancy costs. For the
26 weeks ended July 31, 2004, recurring cost of sales as a percent of net sales
decreased 0.9%, principally because of a 1.1% decrease in the cost of
merchandise. In addition, $6 million and $11 million of restructuring
markdowns were incurred in the second quarter and first six months of 2004,
respectively, 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 21.9% in the second
quarter 2003 to 21.4% in the second quarter 2004 because of a 0.5% decrease in
payroll. SG&A expenses as a percent of net sales decreased from 22.1% in the
first six months of 2003 to 21.5% in the first six months of 2004 because of a
0.6% decrease in payroll.
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 $35 million, severance benefits of $23 million, and other
charges of $5 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, $350
million has been recognized to date. The company recognized $15 million and $22
million in the second quarter and first six months of 2004, respectively, and
$318 million was recognized in the second quarter and first six months of 2003.
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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 second quarter 2004, 19
stores have been closed. Severance benefits are recognized as each store is
closed. Severance benefits of $10 million for approximately 1,600 associates
and inventory liquidation and other costs of $22 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 six months of 2004 was 37.0%, compared
with 65.4% for the first six months of 2003. The change is due to a $31
million tax credit recorded in the first quarter 2003 upon the resolution of
various federal and state income tax issues. Excluding the $31 million tax
credit, the company's estimated effective income tax rate for the first six
months of 2003 was 37.0%.
Diluted Earnings (Loss) Per Share
The following tables reconcile net earnings and weighted average shares
outstanding to amounts used to calculate basic and diluted earnings (loss) per
share ("EPS") for the periods shown (millions, except per share).
13 Weeks Ended
July 31, 2004 Aug. 2, 2003
Earnings Shares EPS Earnings Shares EPS
Net earnings (loss) $ 101 $ (110)
ESOP preference shares'
dividends (4) (4)
Basic EPS 97 292.1 $ 0.33 (114) 289.8 $ (0.39)
ESOP preference shares 3 15.0 - -
Assumed exercise of options
(treasury stock method) - 0.8 - -
Diluted EPS $ 100 307.9 $ 0.33 $ (114) 289.8 $ (0.39)
26 Weeks Ended
July 31, 2004 Aug. 2, 2003
Earnings Shares EPS Earnings Shares EPS
Net earnings (loss) $ 177 $ (38)
ESOP preference shares'
dividends (8) (8)
Basic EPS 169 291.7 $ 0.58 (46) 289.8 $ (0.16)
ESOP preference shares 7 15.2 - -
Assumed exercise of options
(treasury stock method) - 1.2 - -
Diluted EPS $ 176 308.1 $ 0.57 $ (46) 289.8 $ (0.16)
Early Debt Redemption
On August 1, 2004, the company redeemed its $200 million 8-3/8% debentures due
in 2024. Accordingly, the $200 million principal repayment is classified as
current maturities of long-term debt on the company's consolidated balance
sheet as of July 31, 2004. Early redemption costs of $10 million, or 2 cents
per share, will be recorded in the 2004 third quarter.
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Trailing Years' Results
Operating results for the trailing years were as follows (millions, except per
share):
52 Weeks Ended
July 31, Aug. 2,
2004 2003
Net sales $ 13,389 $13,238
Net earnings $ 649 $ 365
Diluted earnings per share $ 2.14 $ 1.15