4 percent increase in Q2 comparable sales
together with comparable sales of departments licensed to third
parties; comparable sales increase is 3.4 percent
Macy’s, Inc. (NYSE:M) today reported earnings of 80 cents per
diluted share for the second quarter of 2014, ended Aug. 2, 2014.
This represents an increase of 11 percent in earnings per diluted
share from 72 cents in the second quarter of 2013.
Macy’s, Inc.’s diluted earnings per share in the first half of
2014 were $1.40, an increase of 10 percent compared with earnings
per diluted share of $1.27 in the first half of 2013.
“Our sales trend improved at both Macy’s and Bloomingdale’s in
the second quarter, reflecting a rebound in shopping activity once
weather patterns normalized. We also benefitted from a shift in a
major Macy’s promotional event into the first two days of the
quarter. Advancements in our M.O.M. strategies – My Macy’s
localization, Omnichannel integration and Magic Selling customer
engagement – continued to drive sales growth across the country. We
also are very pleased by customer response to improvements at our
Macy’s Herald Square flagship in New York, where we are mid-way
through the third year of an unprecedented remodel project,” said
Terry J. Lundgren, Macy’s, Inc. chairman and chief executive
officer.
“We are approaching the second half of 2014 with confident
optimism in our business strategies, merchandise assortments and
marketing plans, tempered with the reality that many customers
still are not feeling comfortable about spending more in an
uncertain economic environment,” Lundgren said. “Thus, we remain
focused on outperforming our competitors through innovation in
omnichannel, which has added new dimensions in how consumers can
shop us and how our company can satisfy customer demand. This
includes a robust Buy Online Pickup in Store process, which has
been rolled out to all full-line Macy’s stores nationwide so that
it is fully available this fall and into the holiday shopping
season. Moreover, our Millennial strategies have sharpened our
merchandising and marketing to customers in the age range of 13 to
30. This has created new positive energy as our customers begin
back-to-school shopping.”
Sales
Sales in the second quarter of 2014 totaled $6.267 billion, up
3.3 percent from total sales of $6.066 billion in the second
quarter of 2013. Comparable sales together with comparable sales of
departments licensed to third parties were up 4.0 percent in the
second quarter of 2014 over 2013. Second quarter comparable sales
were up 3.4 percent in 2014 compared with 2013.
For the year to date, Macy’s, Inc. sales totaled $12.546
billion, up 0.7 percent from total sales of $12.453 billion in the
first half of 2013. Comparable sales together with comparable sales
of departments licensed to third parties were up 1.5 percent in the
first half of 2014 over 2013. Year-to-date comparable sales were up
0.8 percent in 2014 compared with 2013.
Please see the last page of this news release for important
information regarding the calculation of the company’s comparable
sales and comparable sales together with comparable sales of
departments licensed to third parties.
In August 2014, the company closed Macy’s stores in Bradenton,
FL, and York, PA. In the second half of 2014, the company is
opening three new Macy’s stores in Sarasota, FL, Las Vegas, NV, and
The Bronx in New York City. A new Bloomingdale’s replacement store
will open in Palo Alto, CA.
Operating Income
Macy’s, Inc.’s operating income totaled $571 million or 9.1
percent of sales for the quarter ended Aug. 2, 2014, compared with
operating income of $534 million or 8.8 percent of sales for the
same period last year.
For the first half of 2014, Macy’s, Inc.’s operating income
totaled $1.014 billion or 8.1 percent of sales, compared with
operating income of $969 million or 7.8 percent of sales for the
same period last year.
Cash Flow
Net cash provided by operating activities was $646 million in
the first half of 2014, compared with $664 million in the first six
months of last year. Net cash used by investing activities in the
first half of 2014 was $288 million, compared with $316 million a
year ago. Net cash used by financing activities in the first six
months of 2014 was $1.001 billion, compared with $760 million in
the first half of 2013.
The company repurchased approximately 8.9 million shares of its
common stock for a total of approximately $517 million in the
second quarter of 2014. In the fiscal year to date, the company
repurchased approximately 16.3 million shares of its common stock
for approximately $949 million. At Aug. 2, 2014, the company had
remaining authorization to repurchase up to approximately $2
billion of its common stock.
Looking Ahead
Expectations for the second half of 2014 remain on track, with
guidance for comparable store growth of 2 percent to 3 percent.
However, even with an improved sales trend in the second quarter,
the company was unable to make up its sales shortfall from the
first quarter. This calculates to expectations for a full-year 2014
comparable sales increase of 1.5 percent to 2 percent. Full-year
2014 comparable sales together with comparable sales of departments
licensed to third parties now are expected to increase by 2 percent
to 2.5 percent. Previous guidance was for full-year comparable
sales to increase by 2.5 percent to 3 percent. The company
continues to expect full-year 2014 earnings per diluted share in
the range of $4.40 to $4.50, consistent with guidance previously
provided.
Macy’s, Inc., with corporate offices in Cincinnati and New York,
is one of the nation’s premier retailers, with fiscal 2013 sales of
$27.931 billion. The company operates about 840 stores in 45
states, the District of Columbia, Guam and Puerto Rico under the
names of Macy’s and Bloomingdale’s, as well as the macys.com and
bloomingdales.com websites. The company operates 13 Bloomingdale’s
Outlet stores. Bloomingdale’s in Dubai is operated by Al Tayer
Group LLC under a license agreement.
All statements in this press release that are not statements of
historical fact are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such
statements are based upon the current beliefs and expectations of
Macy’s management and are subject to significant risks and
uncertainties. Actual results could differ materially from those
expressed in or implied by the forward-looking statements contained
in this release because of a variety of factors, including
conditions to, or changes in the timing of, proposed transactions,
prevailing interest rates and non-recurring charges, competitive
pressures from specialty stores, general merchandise stores,
off-price and discount stores, manufacturers’ outlets, the
Internet, mail-order catalogs and television shopping and general
consumer spending levels, including the impact of the availability
and level of consumer debt, the effect of weather and other factors
identified in documents filed by the company with the Securities
and Exchange Commission. In light of these risks and uncertainties,
readers are cautioned not to place undue reliance on
forward-looking statements. Except as may be required by applicable
law, Macy’s disclaims any obligation to update its forward-looking
statements for any reason.
(NOTE: Additional information on Macy’s, Inc., including past
news releases, is available at www.macysinc.com/pressroom. A
webcast of Macy's, Inc.’s call with analysts and investors will be
held today (Aug. 13) at 10:30 a.m. (ET). The webcast is accessible
to the media and general public via the company's website at
www.macysinc.com. Analysts and investors may call in on
1-877-208-2391, passcode 7726216. A replay of the conference call
can be accessed on the website or by calling 1-888 203-1112 (same
passcode) about two hours after the conclusion of the call.
Macy's, Inc. is scheduled to present at the Goldman Sachs Global
Retailing Conference at 8:05 a.m. ET on Wednesday, Sept. 3, in New
York City. Media and investors may access a live audio webcast of
the presentation at www.macysinc.com/ir beginning at 8:05 a.m. on
Sept. 3. A replay of the webcast will be available on the company’s
website.)
MACY’S, INC.
Consolidated
Statements of Income (Unaudited) (Note 1)
(All amounts in millions except
percentages and per share figures)
13 Weeks Ended 13 Weeks Ended
August 2, 2014 August 3, 2013 % to
% to $ Net sales $ Net sales Net sales $ 6,267 $
6,066 Cost of sales (Note 2)
3,672
58.6 % 3,533
58.2 % Gross margin 2,595
41.4 % 2,533 41.8 % Selling, general and administrative
expenses
(2,024 )
(32.3
%)
(1,999 )
(33.0
%) Operating income 571 9.1 % 534 8.8 %
Interest expense – net
(100 )
(96 ) Income before income taxes 471 438
Federal, state and local income tax expense (Note 3)
(179 )
(157 ) Net income
$ 292 $
281 Basic earnings per share
$ .81 $
.73 Diluted earnings per share
$ .80 $
.72 Average common shares: Basic 359.2
382.5 Diluted 365.4 389.3 End of period common shares
outstanding 353.5 377.9 Depreciation and amortization
expense $ 254 $ 253
MACY’S, INC.
Consolidated
Statements of Income (Unaudited)
Notes: (1) Because of the seasonal nature of the
retail business, the results of operations for the 13 weeks ended
August 2, 2014 and August 3, 2013 (which do not include the
Christmas season) are not necessarily indicative of such results
for the fiscal year. (2) Merchandise inventories are valued
at the lower of cost or market using the last-in, first-out (LIFO)
retail inventory method. Application of the LIFO retail inventory
method did not result in the recognition of any LIFO charges or
credits affecting cost of sales for the 13 weeks ended August 2,
2014 or August 3, 2013. (3) Federal, state and local income
taxes differ from the federal income tax statutory rate of 35%,
principally because of the effect of state and local taxes,
including the settlement of various tax issues and tax
examinations.
MACY’S, INC.
Consolidated
Statements of Income (Unaudited) (Note 1)
(All amounts in millions except
percentages and per share figures)
26 Weeks Ended 26 Weeks Ended
August 2, 2014 August 3, 2013 % to
% to $ Net sales $ Net sales Net sales $ 12,546 $
12,453 Cost of sales (Note 2)
7,508
59.8 % 7,444
59.8 % Gross margin 5,038
40.2 % 5,009 40.2 % Selling, general and administrative
expenses
(4,024 )
(32.1
%)
(4,040 )
(32.4
%) Operating income 1,014 8.1 % 969 7.8 %
Interest expense – net
(200 )
(193 ) Income before income taxes 814 776
Federal, state and local income tax expense (Note 3)
(298 )
(278 ) Net income
$ 516 $
498 Basic earnings per share
$ 1.42 $
1.29 Diluted earnings per share
$ 1.40 $
1.27 Average common shares: Basic 362.5
385.3 Diluted 369.0 391.9 End of period common shares
outstanding 353.5 377.9 Depreciation and amortization
expense $ 507 $ 504
MACY’S, INC.
Consolidated
Statements of Income (Unaudited)
Notes: (1) Because of the seasonal nature of the
retail business, the results of operations for the 26 weeks ended
August 2, 2014 and August 3, 2013 (which do not include the
Christmas season) are not necessarily indicative of such results
for the fiscal year. (2) Merchandise inventories are valued
at the lower of cost or market using the last-in, first-out (LIFO)
retail inventory method. Application of the LIFO retail inventory
method did not result in the recognition of any LIFO charges or
credits affecting cost of sales for the 26 weeks ended August 2,
2014 or August 3, 2013. (3) Federal, state and local income
taxes differ from the federal income tax statutory rate of 35%,
principally because of the effect of state and local taxes,
including the settlement of various tax issues and tax
examinations.
MACY’S, INC.
Consolidated Balance
Sheets (Unaudited)
(millions)
August 2, February 1, August 3,
2014
2014 2013 ASSETS: Current Assets: Cash
and cash equivalents $ 1,630 $ 2,273 $ 1,424 Receivables 352 438
347 Merchandise inventories 5,416 5,557 5,357 Prepaid expenses and
other current assets
399
420 387 Total Current Assets 7,797
8,688 7,515 Property and Equipment – net 7,771 7,930 8,001
Goodwill 3,743 3,743 3,743 Other Intangible Assets – net 512 527
543 Other Assets
796 746
629 Total Assets
$
20,619 $ 21,634
$ 20,431 LIABILITIES AND
SHAREHOLDERS’ EQUITY: Current Liabilities: Short-term debt $ 483 $
463 $ 575 Merchandise accounts payable 1,990 1,691 2,064 Accounts
payable and accrued liabilities 2,150 2,810 2,043 Income taxes 120
362 67 Deferred income taxes
393
400 422 Total Current Liabilities
5,136 5,726 5,171 Long-Term Debt 6,742 6,728 6,339 Deferred
Income Taxes 1,287 1,273 1,217 Other Liabilities 1,647 1,658 1,849
Shareholders’ Equity
5,807
6,249 5,855 Total
Liabilities and Shareholders’ Equity
$
20,619 $ 21,634
$ 20,431
MACY’S, INC.
Consolidated
Statements of Cash Flows (Unaudited)
(millions)
26 Weeks Ended 26 Weeks Ended August 2,
2014 August 3, 2013 Cash flows from operating activities: Net
income $ 516 $ 498
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 507 504 Stock-based compensation
expense 38 32
Amortization of financing costs and
premium on acquired debt
(3 ) (5 ) Changes in assets and liabilities: Decrease in
receivables 86 41 (Increase) decrease in merchandise inventories
141 (49 )
Increase in prepaid expenses and other
current assets
(14 ) (21 )
(Increase) decrease in other assets not
separately identified
(31 ) 1 Increase in merchandise accounts payable 276 442
Decrease in accounts payable and accrued
liabilities not separately identified
(621 ) (560 ) Decrease in current income taxes (242 ) (288 )
Increase (decrease) in deferred income taxes 2 (37 )
Increase (decrease) in other liabilities
not separately identified
(9 )
106
Net cash provided by operating
activities
646 664
Cash flows from investing activities: Purchase of property
and equipment (245 ) (206 ) Capitalized software (116 ) (110 )
Disposition of property and equipment 24 5 Other, net
49 (5 ) Net cash used by
investing activities
(288 )
(316 )
Cash flows from financing activities:
Debt issued 500 - Financing costs (4 ) (3 ) Debt repaid (459 ) (7 )
Dividends paid (204 ) (173 ) Increase (decrease) in outstanding
checks (61 ) 2 Acquisition of treasury stock (922 ) (785 ) Issuance
of common stock
149
206 Net cash used by financing activities
(1,001 )
(760 ) Net
decrease in cash and cash equivalents (643 ) (412 ) Cash and cash
equivalents at beginning of period
2,273
1,836 Cash and cash equivalents
at end of period
$ 1,630
$ 1,424
MACY’S, INC.
Important Information
Regarding Non-GAAP Financial Measures
The Company reports its financial results in accordance with
generally accepted accounting principles (GAAP). However,
management believes that certain non-GAAP financial measures
provide users of the Company's financial information with
additional useful information in evaluating operating performance.
See the table below for supplemental financial data and a
corresponding reconciliation to the most directly comparable GAAP
financial measures. This non-GAAP financial measure should be
viewed as supplementing, and not as an alternative or substitute
for, the Company's financial results prepared in accordance with
GAAP. Certain of the items that may be excluded or included in this
non-GAAP financial measure may be significant items that could
impact the Company's financial position, results of operations and
cash flows and should therefore be considered in assessing the
Company's actual financial condition and performance. Additionally,
the amounts received by the Company on account of sales of
departments licensed to third parties are limited to commissions
received on such sales. The methods used by the Company to
calculate its non-GAAP financial measures may differ significantly
from methods used by other companies to compute similar measures.
As a result, any non-GAAP financial measures presented herein may
not be comparable to similar measures provided by other
companies.
Macy's, Inc. believes that providing changes in comparable sales
including the impact of growth in comparable sales of departments
licensed to third parties supplementally to its results of
operations calculated in accordance with GAAP 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 (e.g. the
conversion in 2013 of most of the Company's previously owned
athletic footwear business to licensed Finish Line shops).
13 Weeks 26 Weeks
Guidance Range Ended Ended for the August 2, August 2, 52 Weeks
Ended
2014
2014
January 31, 2015
Increase in comparable sales (Note 1)
3.4 %
0.8 %
1.5% to 2.0%
Impact of growth in comparable sales of
departments licensed to third parties (Note 2)
0.6 %
0.7 %
0.5 %
Comparable sales growth including the
impact of growth in comparable sales of departments licensed to
third parties
4.0 %
1.5 %
2.0% to 2.5%
Notes: (1)
Represents the period-to-period change in
net sales from stores in operation throughout 2014 and 2013 and all
net Internet sales, excluding commissions of departments licensed
to third parties.
(2) Represents the impact on comparable sales of including
the sales of departments licensed to third parties occurring in
stores in operation throughout 2014 and 2013 and via the Internet
in the calculation. 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. (3) See the
cautionary statements set forth under the caption “Looking Ahead”
in this press release and in the documents referred to therein for
important information regarding the risks and uncertainties
associated with forward-looking statements.
Macy’s, Inc.Media:Jim Sluzewski, 513-579-7764orInvestor:Matt
Stautberg, 513-579-7780
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