M 10-Q
Macy's, Inc. (M)
10-Q
2024-05-30
For: 2024-05-04
View Original
Added on
April 04, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________
FORM 10-Q
________________________________
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended May 4, 2024
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number: 1-13536
________________________________
(Exact name of registrant as specified in its charter)
________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of Principal Executive Offices, including Zip Code)
(212 ) 494-1621
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| x | Accelerated Filer | o | ||||||||||||
| Non-Accelerated Filer | o | Smaller Reporting Company | ||||||||||||
| Emerging Growth Company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at May 4, 2024 | |||||||
| Common Stock, $.01 par value per share | ||||||||
TABLE OF CONTENTS
| Page | ||||||||
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MACY’S, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(millions, except per share figures)
| 13 Weeks Ended | ||||||||||||||
| May 4, 2024 | April 29, 2023 | |||||||||||||
| Net sales | $ | $ | ||||||||||||
| Other revenue | ||||||||||||||
| Total revenue | ||||||||||||||
| Cost of sales | ( | ( | ||||||||||||
| Selling, general and administrative expenses | ( | ( | ||||||||||||
| Gains on sale of real estate | ||||||||||||||
| Impairment, restructuring and other costs | ( | ( | ||||||||||||
| Operating income | ||||||||||||||
| Benefit plan income, net | ||||||||||||||
| Interest expense, net | ( | ( | ||||||||||||
| Income before income taxes | ||||||||||||||
| Federal, state and local income tax expense | ( | ( | ||||||||||||
| Net income | $ | $ | ||||||||||||
| Basic earnings per share | $ | $ | ||||||||||||
| Diluted earnings per share | $ | $ | ||||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
3
MACY’S, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(millions)
| 13 Weeks Ended | ||||||||||||||
| May 4, 2024 | April 29, 2023 | |||||||||||||
| Net income | $ | $ | ||||||||||||
| 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 | ||||||||||||||
| Tax effect related to items of other comprehensive income | ( | ( | ||||||||||||
| Total other comprehensive income, net of tax effect | ||||||||||||||
| Comprehensive income | $ | $ | ||||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
4
MACY’S, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(millions)
| May 4, 2024 | February 3, 2024 | April 29, 2023 | ||||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Current Assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||||||||||
| Receivables | ||||||||||||||||||||
| Merchandise inventories | ||||||||||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||||||||
| Total Current Assets | ||||||||||||||||||||
Property and Equipment - net of accumulated depreciation and amortization of $ | ||||||||||||||||||||
| Right of Use Assets | ||||||||||||||||||||
| Goodwill | ||||||||||||||||||||
| Other Intangible Assets – net | ||||||||||||||||||||
| Other Assets | ||||||||||||||||||||
| Total Assets | $ | $ | $ | |||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
| Current Liabilities: | ||||||||||||||||||||
| Merchandise accounts payable | $ | $ | $ | |||||||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||||||||||
| Income taxes | ||||||||||||||||||||
| Total Current Liabilities | ||||||||||||||||||||
| Long-Term Debt | ||||||||||||||||||||
| Long-Term Lease Liabilities | ||||||||||||||||||||
| Deferred Income Taxes | ||||||||||||||||||||
| Other Liabilities | ||||||||||||||||||||
| Shareholders' Equity | ||||||||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | $ | |||||||||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
5
MACY’S, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(millions)
| Common Stock | Additional Paid-In Capital | Accumulated Equity | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders' Equity | ||||||||||||||||||||||||||||||
| Balance at February 3, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||
Common stock dividends ($ | ( | ( | |||||||||||||||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||||||||||||||
| Stock issued under stock plans | ( | ( | |||||||||||||||||||||||||||||||||
| Cumulative-effect adjustment (a) | |||||||||||||||||||||||||||||||||||
| Balance at May 4, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
(a) Represents the cumulative-effect adjustment for the change in inventory valuation method.
The accompanying notes are an integral part of these Consolidated Financial Statements.
6
MACY’S, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - (Continued)
(Unaudited)
(millions)
| Common Stock | Additional Paid-In Capital | Accumulated Equity | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders' Equity | ||||||||||||||||||||||||||||||
| Balance at January 28, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||||||||||||||
Common stock dividends ($ | ( | ( | |||||||||||||||||||||||||||||||||
| Stock repurchases | ( | ( | |||||||||||||||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||||||||||||||
| Stock issued under stock plans | ( | ( | |||||||||||||||||||||||||||||||||
| Balance at April 29, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
7
MACY’S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(millions)
| 13 Weeks Ended | |||||||||||
| May 4, 2024 | April 29, 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Impairment, restructuring and other costs | |||||||||||
| Depreciation and amortization | |||||||||||
| Stock-based compensation expense | |||||||||||
| Gains on sale of real estate | ( | ( | |||||||||
| Benefit plans | |||||||||||
| Amortization of financing costs and premium on acquired debt | |||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Decrease in receivables | |||||||||||
| Increase in merchandise inventories | ( | ( | |||||||||
| (Increase) decrease in prepaid expenses and other current assets | ( | ||||||||||
| Increase in merchandise accounts payable | |||||||||||
| Decrease in accounts payable and accrued liabilities | ( | ( | |||||||||
| Increase in current income taxes | |||||||||||
| Change in other assets and liabilities | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of property and equipment | ( | ( | |||||||||
| Capitalized software | ( | ( | |||||||||
| Disposition of property and equipment | |||||||||||
| Other, net | |||||||||||
| Net cash used by investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Debt repaid | ( | ( | |||||||||
| Dividends paid | ( | ( | |||||||||
| Decrease in outstanding checks | ( | ( | |||||||||
| Acquisition of treasury stock | ( | ||||||||||
| Net cash used by financing activities | ( | ( | |||||||||
| Net decrease in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash end of period | $ | $ | |||||||||
| Supplemental cash flow information: | |||||||||||
| Interest paid | $ | $ | |||||||||
| Interest received | |||||||||||
| Income taxes paid, net of refunds received | |||||||||||
| Restricted cash, end of period | |||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
8
1. Organization and Summary of Significant Accounting Policies
Nature of Operations
Macy's, Inc., together with its subsidiaries (the "Company"), is an omni-channel retail organization operating stores, websites and mobile applications under three nameplates (Macy's, Bloomingdale's and Bluemercury) that sell a wide range of merchandise, including apparel and accessories (men's, women's and kids'), cosmetics, home furnishings and other consumer goods. The Company has stores in 43 states, the District of Columbia, Puerto Rico and Guam. As of May 4, 2024, the Company's operations and operating segments were conducted through Macy's (both mainbox and small format), Macy's Backstage, Bloomingdale's, Bloomingdale's The Outlet, Bloomie's, and Bluemercury.
Bloomingdale's in Dubai, United Arab Emirates and Al Zahra, Kuwait are operated under a license agreement with Al Tayer Insignia, a company of Al Tayer Group, LLC.
A description of the Company's significant accounting policies is included in the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2024 (the "2023 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 2023 10-K.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are subject to inherent uncertainties which may result in actual amounts differing from reported amounts.
The Consolidated Financial Statements for the 13 weeks ended May 4, 2024 and April 29, 2023, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly, in all material respects, the consolidated financial position and results of operations of the Company.
Seasonality
Because of the seasonal nature of the retail business, the results of operations for the 13 weeks ended May 4, 2024 and April 29, 2023 (which do not include the holiday season) are not necessarily indicative of such results for the full fiscal year.
Merchandise Inventories
On February 4, 2024, the Company changed its inventory valuation method. Previously, inventories were principally valued at lower of cost or market using the last-in, first-out (LIFO) retail inventory method (RIM). Commencing in fiscal 2024, inventories are valued at the lower of cost or market using the LIFO cost method. The LIFO cost method is preferable as compared to LIFO RIM because it will improve the cost accuracy and transparency of inventory at the unit level and will better allow the organization to evaluate selling margin realized on each sale. Additionally, it is consistent with the practices of many other retailers, improving comparability. Reported results for periods prior to fiscal 2024 have not been restated due to impracticability as the Company’s systems did not capture historical period-specific information necessary to value the inventory under the cost method. The impact of the change in accounting method had an immaterial effect on the Consolidated Financial Statements as of February 4, 2024.
Under the LIFO cost method, the item-cost method is used to determine inventory cost before the application of any LIFO adjustment, as necessary. This method involves assigning costs to each item individually based on the actual purchase costs of that item. The Company continuously monitors whether the carrying cost of inventory exceeds its market value. Excess inventories may be disposed of through the normal course of business. The Company writes down the carrying value of inventories that are not expected to be sold at or above cost based on historical results.
9
Comprehensive Income
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this update enhance segment reporting by expanding the breadth and frequency of segment disclosures required by public entities. Most notable, registrants will be required to disclose: (1) significant segment expenses regularly provided to the Chief Operating Decisions Maker ("CODM") and included within the reported measure(s) of a segment's profit or loss, (2) the amount and composition of other segment items, (3) how the CODM uses the reported measure(s) of a segment's profit or loss to assess segment performance and decide how to allocate resources, (4) on an interim basis, all segment profit or loss and asset disclosures currently required annually by Topic 280, as well as those introduced by the ASU, and (5) the CODM's title and position. ASU 2023-07 is effective for the Company beginning in the fiscal year ending February 1, 2025. The Company is currently evaluating the impacts of the adoption of ASU 2023-07.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" (ASU 2023-09). The amendments in this update enhance the transparency and decision usefulness of income tax disclosures, primarily through improvements to the rate reconciliation and income taxes paid information, specifically requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation, and (2) income taxes paid disaggregation by jurisdiction. These amendments allow investors to better assess how an entity's operations and tax related risks and planning affects its income tax rate and prospects for future cash flows. ASU 2023-09 is effective for the Company beginning in the fiscal year ending January 31, 2026. The Company is currently evaluating the impacts of the adoption of ASU 2023-09.
2. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
| 13 Weeks Ended | |||||||||||||||||||||||||||||||||||
| May 4, 2024 | April 29, 2023 | ||||||||||||||||||||||||||||||||||
| Net Income | Shares | Net Income | Shares | ||||||||||||||||||||||||||||||||
| (millions, except per share data) | |||||||||||||||||||||||||||||||||||
Net income and average number of shares outstanding | $ | $ | |||||||||||||||||||||||||||||||||
Shares to be issued under deferred compensation and other plans | |||||||||||||||||||||||||||||||||||
| $ | $ | ||||||||||||||||||||||||||||||||||
| Basic earnings per share | $ | $ | |||||||||||||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||||||||||||||
Stock options and restricted stock units | |||||||||||||||||||||||||||||||||||
| $ | $ | ||||||||||||||||||||||||||||||||||
| Diluted earnings per share | $ | $ | |||||||||||||||||||||||||||||||||
In addition to the stock options and restricted stock units reflected in the foregoing table, stock options to purchase 7.8 million and 10.0 million shares of common stock and restricted stock units relating to 3.0 million and 5.4 million shares of common stock were outstanding at May 4, 2024 and April 29, 2023, respectively, but were not included in the computation of diluted earnings per share because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.
10
3. Revenue
Net sales, which mainly consist of retail sales but also include merchandise returns, gift cards and loyalty programs, represented 97 % and 96 % of total revenue for the 13 weeks ended May 4, 2024 and April 29, 2023, respectively. Other revenue generating activities consist of credit card revenues as well as Macy's Media Network revenue.
| 13 Weeks Ended | |||||||||||
| Revenues | May 4, 2024 | April 29, 2023 | |||||||||
| (millions) | |||||||||||
| Women's Accessories, Shoes, Cosmetics and Fragrances | $ | $ | |||||||||
| Women's Apparel | |||||||||||
| Men's and Kids' | |||||||||||
| Home/Other (a) | |||||||||||
| Total Net Sales | |||||||||||
| Credit card revenues, net | $ | $ | |||||||||
| Macy's Media Network revenue, net (b) | |||||||||||
| Other Revenue | |||||||||||
| Total Revenue | $ | $ | |||||||||
(a)Other primarily includes restaurant sales, allowance for merchandise returns adjustments and breakage income from unredeemed gift cards.
Macy's accounted for 84 % of the Company's net sales for the 13 weeks ended May 4, 2024 and 85 % for the 13 weeks ended April 29, 2023. In addition, digital sales accounted for 32
Retail Sales
Retail sales include merchandise sales, inclusive of delivery income, licensed department income, Marketplace income, sales of private brand goods directly to third party retailers and sales of excess inventory to third parties. Sales of merchandise are recorded at point of sale for in-store purchases or the time of shipment to the customer for digital purchases and are reported net of estimated merchandise returns and certain customer incentives. Commissions earned on sales generated by licensed departments and Marketplace are included as a component of total net sales and are recognized as revenue at the time merchandise is sold to customers. Service revenues (e.g., alteration and cosmetic services) are recorded at the time the customer receives the benefit of the service. The Company has elected to present sales taxes on a net basis and sales taxes are included in accounts payable and accrued liabilities until remitted to the taxing authorities.
Merchandise Returns
The Company estimates merchandise returns using historical data and recognizes an allowance that reduces net sales and cost of sales. The liability for merchandise returns is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was $193 million, $136 million and $214 million as of May 4, 2024, February 3, 2024 and April 29, 2023, respectively. Included in prepaid expenses and other current assets is an asset totaling $116 million, $83 million and $127 million as of May 4, 2024, February 3, 2024 and April 29, 2023, respectively, for the recoverable cost of merchandise estimated to be returned by customers.
11
Gift Cards and Customer Loyalty Programs
The Company only offers no-fee, non-expiring gift cards to its customers. At the time gift cards are sold or issued, no revenue is recognized; rather, the Company records an accrued liability to customers. The liability is relieved, and revenue is recognized, equal to the amount redeemed at the time gift cards are redeemed for merchandise. The Company records revenue from unredeemed gift cards (breakage) in net sales on a pro-rata basis over the time period gift cards are actually redeemed. At least three years of historical data, updated annually, is used to determine actual redemption patterns.
The Company maintains customer loyalty programs in which customers earn points based on their purchases. Under the Macy's Star Rewards loyalty program, points are earned based on customers' spending on Macy's private label and co-branded credit cards as well as non-proprietary cards and other forms of tender. Bloomingdale's Loyallist and Bluemercury BlueRewards programs provide tender neutral points-based programs to their customers. The Company recognizes the estimated net amount of the rewards that will be earned and redeemed as a reduction to net sales at the time of the initial transaction and as tender when the points are subsequently redeemed by a customer.
The liability for unredeemed gift cards and customer loyalty programs is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was $349 million, $384 million and $360 million as of May 4, 2024, February 3, 2024 and April 29, 2023, respectively.
Credit Card Revenues
In 2005, in connection with the sale of most of the Company's credit card accounts and related receivable balances to Citibank, the Company and Citibank entered into a long-term marketing and servicing alliance pursuant to the terms of a Credit Card Program Agreement ("Credit Card Program"). Subsequent to this initial arrangement and associated amendments, on December 13, 2021, the Company entered into the sixth amendment to the amended and restated Credit Card Program with Citibank (the "Program Agreement"). The changes to the Credit Card Program's financial structure are not materially different from its previous terms. As part of the Program Agreement, the Company receives payments for providing a combination of interrelated services and intellectual property to Citibank in support of the underlying Credit Card Program. Revenue based on the spending activity of the underlying accounts is recognized as the respective card purchases occur and the Company's profit share is recognized based on the performance of the underlying portfolio. Revenue associated with the establishment of new credit accounts and assisting in the receipt of payments for existing accounts is recognized as such activities occur. Credit card revenues include finance charges, late fees and other revenue generated by the Company’s Credit Card Program, net of fraud losses and expenses associated with establishing new accounts, credit card funding costs and bad debt reserves and are a component of other revenue on the consolidated statements of income.
4. Financing Activities
The Company did not borrow or repay any debt, outside of capital lease activity, during both the 13 weeks ended May 4, 2024 and April 29, 2023.
As of May 4, 2024 and April 29, 2023, the Company had $144 million and $138 million of standby letters of credit outstanding under its ABL Credit Facility, respectively, which reduced the available borrowing capacity to $2,856 million and $2,862 million, respectively. The Company had no
12
5. Retirement Plans
The Company has defined contribution plans that cover substantially all employees who work 1,000 hours or more in a year. In addition, the Company has a funded defined benefit plan ("Pension Plan") and an unfunded defined benefit supplementary retirement plan ("SERP"), which provides benefits, for certain employees, in excess of qualified plan limitations. Effective January 1, 2012, the Pension Plan was closed to new participants, with limited exceptions, and effective January 2, 2012, the SERP was closed to new participants.
In February 2013, the Company announced changes to the Pension Plan and SERP whereby eligible employees no longer earn future pension service credits after December 31, 2013, with limited exceptions. All retirement benefits attributable to service in subsequent periods are provided through defined contribution plans.
In addition, certain retired employees currently are provided with specified health care and life insurance benefits ("Postretirement Obligations"). Eligibility requirements for such benefits vary, but generally state that benefits are available to eligible employees who were hired prior to a certain date and retire after a certain age with specified years of service. Certain employees are subject to having such benefits modified or terminated.
The defined contribution plan expense and actuarially determined components of the net periodic benefit cost (income) associated with the defined benefit plans are as follows:
| 13 Weeks Ended | |||||||||||
| May 4, 2024 | April 29, 2023 | ||||||||||
| (millions) | |||||||||||
| 401(k) Qualified Defined Contribution Plan | $ | $ | |||||||||
| Pension Plan | |||||||||||
| Interest cost | $ | $ | |||||||||
| Expected return on assets | ( | ( | |||||||||
| Recognition of net actuarial loss | |||||||||||
| $ | ( | $ | ( | ||||||||
| Supplementary Retirement Plan | |||||||||||
| Interest cost | $ | $ | |||||||||
| Recognition of net actuarial loss | |||||||||||
| $ | $ | ||||||||||
| Total Retirement Expense | $ | $ | |||||||||
| Postretirement Obligations | |||||||||||
| Interest cost | $ | $ | |||||||||
| Recognition of net actuarial gain | ( | ( | |||||||||
| $ | ( | $ | ( | ||||||||
13
6. Fair Value Measurements
The Company's financial assets are required to be measured at fair value on a recurring basis, by level within the hierarchy as defined by applicable accounting standards.
Level 1: Quoted prices in active markets for identical assets
Level 2: Significant observable inputs for the assets
Level 3: Significant unobservable inputs for the assets
The following table shows the estimated fair value of the Company's marketable equity and debt securities:
| Fair Value Measurements | ||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
| (millions) | ||||||||||||||||||||||||||
| May 4, 2024 | $ | $ | $ | $ | ||||||||||||||||||||||
| February 3, 2024 | ||||||||||||||||||||||||||
| April 29, 2023 | ||||||||||||||||||||||||||
Other financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, receivables, certain short-term investments and other assets, short-term debt, merchandise accounts payable, accounts payable and accrued liabilities and long-term debt. With the exception of long-term debt, the carrying amount of these financial instruments approximates fair value because of the short maturity of these instruments. The fair values of long-term debt, excluding capitalized leases, are generally estimated based on quoted market prices for identical or similar instruments, and are classified as Level 2 measurements within the hierarchy as defined by applicable accounting standards.
The following table shows the estimated fair value of the Company's long-term debt:
| Notional Amount | Carrying Amount | Fair Value | ||||||||||||||||||
| (millions) | ||||||||||||||||||||
| May 4, 2024 | $ | $ | $ | |||||||||||||||||
| February 3, 2024 | ||||||||||||||||||||
| April 29, 2023 | ||||||||||||||||||||
7. Supplier Finance Programs
The Company has agreements with third-party financial institutions to facilitate supply chain finance ("SCF") programs. The programs allow qualifying suppliers to sell their receivables, on an invoice level at the selection of the supplier, from the Company to the financial institution and negotiate their outstanding receivable arrangements and associated fees directly with the financial institution. Macy's, Inc. is not party to the agreements between the supplier and the financial institution. The supplier invoices that have been confirmed as valid under the SCF programs require payment in full by the financial institution to the supplier by the original maturity date of the invoice, or discounted payment at an earlier date as agreed upon with the supplier. The Company's obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted by a supplier’s participation in the SCF programs.
All outstanding amounts related to suppliers participating in the SCF programs are recorded upon confirmation with the third-party institutions in in the consolidated balance sheets, and associated payments are included in operating activities in the consolidated statements of cash flows. The Company's outstanding obligations as of May 4, 2024, February 3, 2024 and April 29, 2023 were $125 million, $112 million and $102 million, respectively.
14
MACY'S, INC.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
For purposes of the following discussion, all references to "first quarter of 2024" and "first quarter of 2023" are to the Company's 13-week fiscal periods ended May 4, 2024 and April 29, 2023, respectively.
The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes included elsewhere in this report, as well as the financial and other information included in the 2023 10-K. The following discussion contains forward-looking statements that reflect the Company's plans, estimates and beliefs. The Company's actual results could materially differ from those discussed in these forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this report (particularly in "Risk Factors" and in "Forward-Looking Statements") and in the 2023 10-K (particularly in "Risk Factors" and in "Forward-Looking Statements"). This discussion includes Non-GAAP financial measures. For information about these measures, see the disclosure under the caption "Important Information Regarding Non-GAAP Financial Measures".
Quarterly Overview
The Company continues to view fiscal 2024 as a transition and investment year as it implements its new strategy, A Bold New Chapter, which is designed to return the Company to enterprise growth, unlock shareholder value, improve the omni-channel experience and better serve its customers. During the first quarter of 2024, the Company was encouraged by customer response to A Bold New Chapter through progress of its initiatives, as follows:
•.Strengthen the Macy's nameplate
◦Rationalize store base: At the end of fiscal 2024, the Company announced it had identified approximately 150 underproductive Macy's locations for closure over the next three years (collectively, the "non-go-forward" locations), which will allow for monetization of assets at the non-go-forward locations and prioritization of investments in the approximately 350 remaining Macy's locations (collectively, the "go-forward" locations) where the Company believes it has the most opportunity to improve square footage productivity. For the non-go-forward Macy's locations and distribution centers, the Company is able to be thoughtful and strategic with its approach to monetization and is encouraged by the pace of deal activity.
◦Launch of First 50 Stores: The First 50 locations are a key component of the Macy's Bold New Chapter growth strategy as they are an early leading indicator for the go-forward Macy's locations and ultimately the entire Macy's, Inc. go-forward business' ability to return to growth. They serve as pilots to test ideas with new product, visual merchandising and staffing initiatives. Along with positive comparable sales growth, the First 50 locations Net Promoter Scores increased approximately 500 basis points from the prior year and were over 250 basis points above all other Macy's locations.
◦Revitalize assortment: The Company is focused on offering newness across categories. In the first quarter of 2024, Macy's introduced and expanded distribution in several market brands within apparel to address areas of opportunity where it has experienced softness in both women's and men's assortments. Beauty remained a standout category and key traffic driver, driven by fragrances. Macy's believes it has the opportunity to offset softness in the big ticket and home categories and is actively working on the market brand matrix with plans to begin a complete refresh of its home private brands in fiscal 2025. Macy's private brand apparel initiative is progressing as planned. The Company has completed the majority of its planned brand exits and reimagined and launched several new brands. In the first quarter of 2024, I.N.C. and Style & Co., which have led the initiative, continued to outperform the Macy's women's apparel segment and Macy's introduced its newest private brand, State of Day. The Company plans to refresh its kid's private brands in the summer of 2024 and introduce a new men's contemporary apparel brand later in the year.
◦Rollout of additional Macy's small format stores: The Company opened one Macy's small format during the first quarter and plans to open 11 more this year, bringing the total number of Macy's small format locations to an expected 24 by the end of fiscal 2024.
◦Grow digital: Digital continues to serve as both a gateway to the Macy's brand and is a source of commerce and omni engagement. Under new leadership, the team is making progress on optimizing the customer journey, including addressing places of greatest friction, and enhancing the shopping experience across platforms. In the first quarter of 2024, Macy's launched a baby registry, including over 150 new brands across all baby categories. Macy's digital visits increased 2.3% while the conversion rate decreased 14 basis points compared to the first quarter of 2023.
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•.Accelerate luxury growth
◦Accelerate Bloomingdale's growth:The Company continues to expect to open approximately 15 small format (Bloomie's and Bloomingdale's the Outlet) locations through fiscal 2026, including three later in fiscal 2024. Comparable sales at the small format locations outperformed the broader Bloomingdale's fleet. Contemporary apparel, private brands and beauty continue to be well-received and serve as growth engines for the brand.
◦Accelerate Bluemercury growth: The first quarter of 2024 marked the 13th consecutive quarter of comparable sales growth for Bluemercury, driven by continued strength in skincare and the expansion of key brand partners. The Company's plans to open at least 30 new locations and remodel approximately 30 existing locations through fiscal 2026 is underway, with one new location and three remodels slated for the second quarter of 2024. These stores will look to incorporate learnings from recent remodels, including an elevated aesthetic, expanded assortment, and an enhanced selling model.
•.Simplify and modernize end-to-end operations
◦The Company is actively advancing on solutions to consolidate capacity, increase automation and reduce costs across the network. While still in its early stages, during the first quarter of 2024, the Company benefited from the flow through of the consolidation of technology vendors and savings from offshoring efforts.
Certain financial highlights for the first quarter of 2024 as compared to the first quarter of 2023 are as follows:
•Macy's, Inc. comparable sales declined 1.2% on an owned basis and declined 0.3% on an owned-plus-licensed-plus-marketplace basis.
◦Macy's, Inc. go-forward business comparable sales, inclusive of go-forward locations and digital, declined 0.9% on an owned basis and increased 0.1% on an owned-plus-licensed-plus-marketplace basis.
•Company's nameplate highlights include:
◦Macy's comparable sales declined 1.6% on an owned basis and declined 0.4% on an owned-plus-licensed-plus-marketplace basis.
▪Go-forward locations comparable sales increased 0.1% on both an owned and owned-plus-licensed basis.
▪First 50 locations comparable sales, included within go-forward locations comparable sales, increased 3.3% on an owned basis and increased 3.4% on an owned-plus-licensed basis.
▪Non-First 50 go-forward locations comparable sales, included within go-forward locations comparable sales, decreased 1.2% on an owned basis and decreased 1.3% on an owned-plus-licensed basis.
▪Macy’s non-go-forward locations comparable sales decreased 4.5% on both an owned and owned-plus-licensed basis.
◦Bloomingdale's comparable sales increased 0.8% on an owned basis and increased 0.3% on an owned-plus-licensed-plus-marketplace basis1.
◦Bluemercury comparable sales increased 4.3% on an owned basis.
•Other revenues were $154 million, down $37 million.
•Gross margin rate was 39.2%, down 80 basis points.
•Selling, general and administrative ("SG&A") expense was $1,911 million, down $39 million. SG&A expense as a percent of total revenue was 38.2%, up 50 basis points.
•Net income was $62 million, down $93 million.
•Earnings before interest, taxes, depreciation and amortization ("EBITDA") was $345 million compared to EBITDA of $466 million. On an adjusted basis, EBITDA was $364 million compared to $468 million.
•Diluted earnings per share was $0.22 compared to $0.56, and adjusted diluted earnings per share was $0.27 compared to $0.56.
•Merchandise inventories were up 1.7%.
1 Bloomingdale's excludes one non-go-forward location.
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Results of Operations
| First Quarter of 2024 | First Quarter of 2023 | ||||||||||||||||||||||||||||||||||
| Amount | % to Net Sales | % to Total Revenue | Amount | % to Net Sales | % to Total Revenue | ||||||||||||||||||||||||||||||
| (dollars in millions, except per share figures) | |||||||||||||||||||||||||||||||||||
| Net sales | $ | 4,846 | $ | 4,982 | |||||||||||||||||||||||||||||||
| Other revenue | 154 | 3.2 | % | 191 | 3.8 | % | |||||||||||||||||||||||||||||
| Total revenue | 5,000 | 5,173 | |||||||||||||||||||||||||||||||||
| Cost of sales | (2,946) | (60.8) | % | (2,988) | (60.0) | % | |||||||||||||||||||||||||||||
| Selling, general and administrative expenses | (1,911) | (38.2) | % | (1,950) | (37.7) | % | |||||||||||||||||||||||||||||
| Gains on sale of real estate | 1 | — | % | 11 | 0.2 | % | |||||||||||||||||||||||||||||
| Impairment, restructuring and other costs | (19) | (0.4) | % | (2) | — | % | |||||||||||||||||||||||||||||
| Operating income | 125 | 2.5 | % | 244 | 4.7 | % | |||||||||||||||||||||||||||||
| Diluted earnings per share | $ | 0.22 | $ | 0.56 | |||||||||||||||||||||||||||||||
| Supplemental Financial Measures | |||||||||||||||||||||||||||||||||||
| Gross margin (a) | $ | 1,900 | 39.2 | % | $ | 1,994 | 40.0 | % | |||||||||||||||||||||||||||
| Decrease in comparable sales | (1.2) | % | (7.9) | % | |||||||||||||||||||||||||||||||
| Supplemental Non-GAAP Financial Measures | |||||||||||||||||||||||||||||||||||
| Decrease in comparable sales on an owned-plus-licensed-plus-marketplace basis | (0.3) | % | (7.2) | % | |||||||||||||||||||||||||||||||
| Adjusted diluted earnings per share | $ | 0.27 | $ | 0.56 | |||||||||||||||||||||||||||||||
| EBITDA | $ | 345 | $ | 466 | |||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 364 | $ | 468 | |||||||||||||||||||||||||||||||
(a)Gross margin is defined as net sales less cost of sales.
See pages 21 to 23 for reconciliations of the supplemental non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.
Comparison of the First Quarter of 2024 and the First Quarter of 2023
| First Quarter of 2024 | First Quarter of 2023 | |||||||||||||
| Net sales | $ | 4,846 | $ | 4,982 | ||||||||||
| Decrease in comparable sales | (1.2) | % | (7.9) | % | ||||||||||
| Decrease in comparable sales on an owned-plus-licensed-plus-marketplace basis | (0.3) | % | (7.2) | % | ||||||||||
Net sales for the first quarter of 2024 decreased for Macy’s but grew for Bloomingdale's and Bluemercury. During the quarter, net sales were impacted by ongoing macroeconomic conditions as consumers benefited from strong wage and job growth, offset by continued inflationary pressures. Macy's experienced strong performance in the First 50 locations, which benefited from enhanced merchandising through elevated product rollouts across top markets and new brands. Beyond apparel, performance was strong in beauty, particularly fragrances. The big ticket, home and handbag categories continued to underperform.
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| First Quarter of 2024 | First Quarter of 2023 | |||||||||||||||||||||||||
| $ | % to Net Sales | $ | % to Net Sales | |||||||||||||||||||||||
| Credit card revenues, net | $ | 117 | 2.4 | % | $ | 162 | 3.3 | % | ||||||||||||||||||
| Macy's Media Network, net | 37 | 0.8 | % | 29 | 0.6 | % | ||||||||||||||||||||
| Other revenue | $ | 154 | 3.2 | % | $ | 191 | 3.8 | % | ||||||||||||||||||
The decrease in other revenues was primarily driven by a $45 million decrease in credit card revenues. This decrease was primarily driven by expected higher delinquency rates and net credit losses within the portfolio. Macy's Media Network grew $8 million, or 28% from the first quarter of 2023, due to increased vendor engagement.
| First Quarter of 2024 | First Quarter of 2023 | |||||||||||||
| Cost of sales | $ | (2,946) | (2,988) | |||||||||||
| As a percent to net sales | 60.8 | % | 60.0 | % | ||||||||||
| Gross margin | $ | 1,900 | $ | 1,994 | ||||||||||
| As a percent to net sales | 39.2 | % | 40.0 | % | ||||||||||
Gross margin rate and merchandise margin rate decreased 80 basis points and 100 basis points, respectively, in the first quarter of 2024 compared to the first quarter of 2023. The decline primarily reflected additional discounting for slower-moving warm weather products. Delivery expense as a percent of net sales improved 20 basis points from the first quarter of 2023 reflecting ongoing efforts to improve supply chain efficiency. Inventory increased 1.7% year-over-year.
| First Quarter of 2024 | First Quarter of 2023 | |||||||||||||
| SG&A expenses | $ | (1,911) | $ | (1,950) | ||||||||||
| As a percent to total revenue | 38.2 | % | 37.7 | % | ||||||||||
SG&A expenses decreased 2.0% in the first quarter of 2024 compared to the first quarter of 2023 due to continued cost discipline. The increase in SG&A expenses as a percent to total revenue in the first quarter of 2024 was due to a decline in total revenue compared to the first quarter of 2023.
| First Quarter of 2024 | First Quarter of 2023 | |||||||||||||
| Net interest expense | $ | (31) | $ | (37) | ||||||||||
The decrease in net interest expense in the first quarter of 2024 compared to the first quarter of 2023 was primarily driven by an increase in interest income on liquid investments.
| First Quarter of 2024 | First Quarter of 2023 | |||||||||||||
| Effective tax rate | 36.7 | % | 26.5 | % | ||||||||||
| Federal income statutory rate | 21 | % | 21 | % | ||||||||||
Income tax expense decreased $20 million in the first quarter of 2024 compared to the first quarter of 2023 due to lower income before income taxes. The income tax expense of $36 million and $56 million, or 36.7% and 26.5% of pretax income, for the 13 weeks ended May 4, 2024 and April 29, 2023, respectively, reflect a different effective tax rate as compared to the Company’s federal income tax statutory rate of 21%. The income tax effective rates for the 13 weeks ended May 4, 2024 and April 29, 2023 were impacted primarily by the effect of state and local taxes and the vesting and cancellation of certain stock-based compensation awards.
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Liquidity and Capital Resources
The Company's principal sources of liquidity are cash from operations, cash on hand and the 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.
Merchandise purchase obligations represent future merchandise payables for inventory purchased from various suppliers through contractual arrangements and are expected to be funded through cash from operations.
Capital Allocation
The Company'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 predictable dividends and share repurchases with excess cash.
The Company ended the first quarter of 2024 with a cash and cash equivalents balance of $876 million, an increase of $273 million from $603 million at the end of the first quarter of 2023. The Company is party to the ABL Credit Facility with certain financial institutions providing for a $3,000 million asset-based credit facility.
| 2024 | 2023 | |||||||||||||
| Net cash provided by operating activities | $ | 129 | $ | 105 | ||||||||||
| Net cash used by investing activities | (217) | (270) | ||||||||||||
| Net cash used by financing activities | (70) | (94) | ||||||||||||
Operating Activities
The increase in net cash provided by operating activities was primarily driven by a decrease in payments of accounts payable and accrued liabilities, partially offset by lower net income.
Investing Activities
The Company's capital expenditures were $229 million in the first quarter of 2024 compared to $296 million in the first quarter of 2023. Capital expenditures in the current year are primarily focused on digital and technology investments as well as omni-channel capabilities.
Financing Activities
Dividends
The Company paid dividends totaling $48 million and $45 million in the first quarters of 2024 and 2023, respectively.
On May 16, 2024, the Company announced that its Board of Directors declared a regular quarterly dividend of 17.37 cents per share on its common stock, which will be paid on July 1, 2024, to Macy's shareholders of record at the close of business on June 14, 2024. Subsequent dividends will be subject to approval of the Board of Directors, which will depend on market and other conditions.
Stock Repurchases
On February 22, 2022, the Board of Directors authorized a new $2,000 million share repurchase program, which does not have an expiration date. During the first quarter of 2023, the Company repurchased approximately 1.4 million shares of its common stock at an average cost of $17.57 per share on the open market under its share repurchase program. The Company did not repurchase any shares of its common stock during the first quarter of 2024. As of May 4, 2024, $1,375 million remained available under the authorization. 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. During the first quarter of 2023, the Company also withheld approximately $12 million of shares for tax purposes associated with the issuance of certain stock awards.
Debt Transactions
As of May 4, 2024 and April 29, 2023, the Company had $144 million and $138 million of standby letters of credit outstanding under its ABL Credit Facility, respectively, which reduced the available borrowing capacity to $2,856 million and $2,862 million, respectively. The Company had no outstanding borrowings under the ABL Credit Facility as of May 4, 2024 and April 29, 2023.
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Contractual Obligations
As of May 4, 2024, other than the financing transactions discussed in Note 4 to the accompanying Consolidated Financial Statements, there were no material changes to the Company's contractual obligations and commitments outside the ordinary course of business since February 3, 2024, as reported in the Company's 2023 Form 10-K.
Guarantor Summarized Financial Information
The Company had $3,007 million aggregate principal amount of senior unsecured notes and senior unsecured debentures (collectively the "Unsecured Notes") outstanding as of both May 4, 2024 and February 3, 2024 with maturities ranging from 2025 to 2043. The Unsecured Notes constitute debt obligations of Macy's Retail Holdings, LLC ("MRH" 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's existing and future senior unsecured obligations, senior to any of the Company's future subordinated indebtedness, and are structurally subordinated to all existing and future obligations of each of the Company's subsidiaries that do not guarantee the Unsecured Notes. Holders of the Company's secured indebtedness, including any borrowings under the ABL Credit Facility, will have a priority claim on the assets that secure such secured indebtedness; therefore, the Unsecured Notes and the related guarantees are effectively subordinated to all of the Subsidiary Issuer's and Parent and their subsidiaries’ existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness.
The following tables include combined financial information of the Obligor Group. Investments in subsidiaries of $9,331 million and $9,423 million as of May 4, 2024 and February 3, 2024, respectively, have been excluded from the Summarized Balance Sheets. Equity in earnings of non-Guarantor subsidiaries of $355 million for the 13 weeks ended May 4, 2024, 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.
Summarized Balance Sheets
| May 4, 2024 | February 3, 2024 | ||||||||||
| (in millions) | |||||||||||
| ASSETS | |||||||||||
| Current Assets | $ | 909 | $ | 1,028 | |||||||
| Noncurrent Assets | 6,303 | 6,145 | |||||||||
| LIABILITIES | |||||||||||
| Current Liabilities | $ | 1,667 | $ | 1,800 | |||||||
| Noncurrent Liabilities (a) | 10,685 | 10,654 | |||||||||
(a)Includes net amounts due to non-Guarantor subsidiaries of $4,301 million and $6,784 million as of May 4, 2024 and February 3, 2024, respectively.
Summarized Statement of Operations
| 13 Weeks Ended May 4, 2024 | |||||
| (in millions) | |||||
| Net sales | $ | 194 | |||
| Consignment commission income (a) | 756 | ||||
| Other revenue | 35 | ||||
| Cost of sales | (97) | ||||
| Operating loss | (327) | ||||
| Loss before income taxes (b) | (292) | ||||
| Net loss | (198) | ||||
(a)Income pertains to transactions with ABL Borrower, a non-Guarantor subsidiary.
(b)Includes $95 million of dividend income from non-Guarantor subsidiaries for the 13 weeks ended May 4, 2024, respectively.
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Important Information Regarding Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures provide users of the Company's financial information with additional useful information in evaluating operating performance. Management believes that providing supplemental changes in comparable sales on an owned-plus-licensed-plus-marketplace basis, which includes the impact of growth in comparable sales of departments licensed to third parties and marketplace sales, assists in evaluating the Company's ability to generate sales growth, whether through owned businesses, departments licensed to third parties or marketplace sales, on a comparable basis, and in evaluating the impact of changes in the manner in which certain departments are operated. Earnings 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 that are not associated with the Company's core operations and that may vary substantially in frequency and magnitude from period-to-period from 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. 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.
Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the Company's financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the Company's financial position, results of operations or cash flows and should therefore be considered in assessing the Company's actual and future financial condition and performance. Additionally, the amounts received by the Company on account of sales of departments licensed to third parties and marketplace sales are limited to commissions received on such sales. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies.
Changes in Comparable Sales
The following is a tabular reconciliation of the non-GAAP financial measure of changes in comparable sales on an owned-plus-licensed-plus-marketplace basis, to GAAP comparable sales (i.e., on an owned basis), which the Company believes to be the most directly comparable GAAP financial measure.
13 Weeks Ended May 4, 2024 vs. 13 Weeks Ended April 29, 2023 | |||||||||||
| Macy's, Inc. | Macy's | ||||||||||
| Decrease in comparable sales on an owned basis (Note 1) | (1.2 | %) | (1.6 | %) | |||||||
| Impact of departments licensed to third parties and marketplace sales (Note 2) | 0.9 | % | 1.2 | % | |||||||
| Decrease in comparable sales on an owned-plus-licensed-plus-marketplace basis | (0.3 | %) | (0.4 | %) | |||||||
13 Weeks Ended May 4, 2024 vs. 13 Weeks Ended April 29, 2023 | |||||||||||||||||||||||
| Macy's, Inc. go-forward business | Macy's go-forward business | Bloomingdale's (a) | Bluemercury | ||||||||||||||||||||
| Increase (decrease) in comparable sales on an owned basis (Note 1) | (0.9) | % | (1.3) | % | 0.8 | % | 4.3 | % | |||||||||||||||
| Impact of departments licensed to third parties and marketplace sales (Note 2) | 1.0 | % | 1.3 | % | (0.5 | %) | — | % | |||||||||||||||
| Increase in comparable sales on an owned-plus-licensed-plus-marketplace basis | 0.1 | % | — | % | 0.3 | % | 4.3 | % | |||||||||||||||
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13 Weeks Ended May 4, 2024 vs. 13 Weeks Ended April 29, 2023 | |||||||||||||||||||||||
| Macy's First 50 locations | Macy's Non-First 50 go-forward locations | Macy's go-forward locations | Macy's non-go-forward locations | ||||||||||||||||||||
| Increase (decrease) in comparable sales on an owned basis (Note 1) | 3.3 | % | (1.2 | %) | 0.1 | % | (4.5 | %) | |||||||||||||||
| Impact of departments licensed to third parties (Note 2) | 0.1 | % | (0.1 | %) | — | % | — | % | |||||||||||||||
| Increase (decrease) in comparable sales on an owned-plus-licensed basis | 3.4 | % | (1.3 | %) | 0.1 | % | (4.5 | %) | |||||||||||||||
Notes:
(1)Represents the period-to-period percentage change in net sales from stores in operation for one full fiscal year for the 13 weeks ended May 4, 2024 and April 29, 2023. Such calculation includes all digital sales and excludes commissions from departments licensed to third parties and marketplace. 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, including marketplace sales, in the calculation of comparable sales. Macy’s and Bloomingdale’s license third parties to operate certain departments in their stores and online, including Macy’s and Bloomingdale’s digital Marketplace, and receive commissions from these third parties based on a percentage of their net sales, while Bluemercury does not participate in licensed or marketplace businesses. In its financial statements prepared in conformity with GAAP, the Company includes these commissions (rather than sales of the departments licensed to third parties and marketplace) in its net sales. The Company does not, however, include any amounts in respect of licensed department or marketplace 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 and from the digital marketplace are not material to its net sales for the periods presented.
EBITDA and Adjusted EBITDA
The following is a tabular reconciliation of the non-GAAP financial measure EBITDA and Adjusted EBITDA to GAAP net income, which the Company believes to be the most directly comparable GAAP measure.
| 13 Weeks Ended May 4, 2024 | 13 Weeks Ended April 29, 2023 | ||||||||||
| (millions) | |||||||||||
| Net income | $ | 62 | $ | 155 | |||||||
| Interest expense - net | 31 | 37 | |||||||||
| Federal, state and local income tax expense | 36 | 56 | |||||||||
| Depreciation and amortization | 216 | 218 | |||||||||
| EBITDA | $ | 345 | $ | 466 | |||||||
| Impairment, restructuring and other costs | 19 | 2 | |||||||||
| Adjusted EBITDA | $ | 364 | $ | 468 | |||||||
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MACY'S, INC.
Adjusted Net Income and Adjusted Diluted Earnings Per Share
The following is a tabular reconciliation of the non-GAAP financial measures adjusted net income to GAAP net income and adjusted diluted earnings per share to GAAP diluted earnings per share, which the Company believes to be the most directly comparable GAAP measures.
| 13 Weeks Ended May 4, 2024 | 13 Weeks Ended April 29, 2023 | ||||||||||||||||||||||
| Net Income | Diluted Earnings Per Share | Net Income | Diluted Earnings Per Share | ||||||||||||||||||||
| (millions, except per share figures) | |||||||||||||||||||||||
| As reported | $ | 62 | $ | 0.22 | $ | 155 | $ | 0.56 | |||||||||||||||
| Impairment, restructuring and other costs | 19 | 0.07 | 2 | — | |||||||||||||||||||
| Income tax impact of certain items noted above | (4) | (0.02) | — | — | |||||||||||||||||||
| As adjusted to exclude certain items above | $ | 77 | $ | 0.27 | $ | 157 | $ | 0.56 | |||||||||||||||
Critical Accounting Estimates
Commencing in fiscal 2024, the Company no longer considers merchandise inventories be a critical accounting estimate due to the change in inventory valuation method from LIFO RIM to LIFO cost. Certain operational management judgments and estimates, such as the amount and timing of permanent markdowns to clear unproductive or slow-moving inventory, do not impact inventory valuation under LIFO cost to the same extent as they previously did under LIFO RIM.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes to the Company's market risk as described in the Company's 2023 10-K. For a discussion of the Company's exposure to market risk, refer to the Company's market risk disclosures set forth in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" of the 2023 10-K.
Item 4. Controls and Procedures.
The Company's Chief Executive Officer and Chief Financial Officer have carried out, as of May 4, 2024, 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 May 4, 2024, 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.
From time to time adoption of new accounting pronouncements, major organizational restructuring and realignment occurs for which the Company reviews its internal control over financial reporting. As a result of this review, there were no changes in the Company's internal control over financial reporting that occurred during the Company's most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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MACY'S, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and its subsidiaries are involved in various proceedings that are incidental to the normal course of their businesses. As of the date of this report, the Company does not expect that any of such proceedings will have a material adverse effect on the Company’s financial position or results of operations.
Item 1A. Risk Factors.
There have been no material changes to the Risk Factors described in Part I, Item 1A."Risk Factors" in the Company's 2023 Form 10-K.
Item 5. Other Information.
Forward-Looking Statements
This report and other reports, statements and information previously or subsequently filed by the Company with the Securities and Exchange Commission contain or may contain forward-looking statements. Such statements are based upon the beliefs and assumptions of, and on information available to, the management of the Company at the time such statements are made. The following are or may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995: (i) statements preceded by, followed by or that include the words "may," "will," "could," "should," "believe," "expect," "future," "potential," "anticipate," "intend," "plan," "think," "estimate" or "continue" or the negative or other variations thereof and (ii) statements regarding matters that are not historical facts. Such forward-looking statements are subject to various risks and uncertainties, including risks and uncertainties relating to:
•the possible invalidity of the underlying beliefs and assumptions;
•the Company's ability to successfully implement A Bold New Chapter strategy, including the ability to realize the anticipated benefits within the time frame or at all;
•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;
•general consumer shopping behaviors and spending levels, including the shift of consumer spending to digital channels, the impact of changes in general economic conditions, consumer disposable income levels, consumer confidence levels, the availability, cost and level of consumer debt, and the costs of basic necessities and other goods;
•competitive pressures from department stores, specialty stores, general merchandise stores, manufacturers' outlets and websites, off-price and discount stores, and all other retail channels, including digitally-native retailers, social media and catalogs;
•the Company's ability to remain competitive and relevant as consumers' shopping behaviors continue to migrate to digital shopping channels and other shopping channels;
•the Company's ability to maintain its brand image and reputation;
•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, employee or company information, or the failure to comply with various laws applicable to the Company in the event of such a breach;
•the cost of colleagues, inclusive of inflation and cost of benefits as well as attracting and retaining quality colleagues;
•transactions and strategy involving the Company's real estate portfolio;
•the seasonal nature of the Company's business;
•declines in the Company's credit card revenues;
•the effects of weather and natural disasters, including the impact of climate change and health pandemics, 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;
•conditions to, or changes in the timing of, proposed transactions and changes in expected synergies, cost savings and non-recurring charges;
•the potential for the incurrence of charges in connection with the impairment of tangible and intangible assets, including goodwill;
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MACY'S, INC.
•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;
•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;
•changes in relationships with vendors and other product and service providers;
•our level of indebtedness;
•currency, interest and exchange rates and other capital market, economic and geo-political conditions;
•unstable political conditions, civil unrest, terrorist activities and armed conflicts, including the ongoing conflict between Russia and Ukraine and the Israel-Hamas war;
•the possible inability of the Company's manufacturers or transporters to deliver products in a timely manner or meet the Company's quality standards;
•the Company's reliance on foreign sources of production, including risks related to the disruption of imports by labor disputes, regional and global health pandemics, and regional political and economic conditions;
•duties, taxes, other charges and quotas on imports;
•labor shortages;
•the Company's ability to declare and pay future dividends and continue its share repurchases; and
•the Company's ability to execute on its strategies or achieve expectations related to environmental, social, and governance matters.
In addition to any risks and uncertainties specifically identified in the text surrounding such forward-looking statements, the statements in the immediately preceding sentence and the statements under captions such as "Risk Factors" in reports, statements and information filed by the Company with the SEC from time to time constitute cautionary statements identifying important factors that could cause actual amounts, results, events and circumstances to differ materially from those expressed in or implied by such forward-looking statements.
Trading Arrangements
None of the Company's directors or "officers" (as defined in Rule 16a-1(f) promulgated under the Exchange Act) adopted terminated
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Item 6. Exhibits.
| 10.1+ | ||||||||
| 10.2+ | ||||||||
| 18 | ||||||||
| 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 May 4, 2024, filed on May 30, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Changes in Shareholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements. | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||
________________________
+ Portions of the exhibit have been omitted pursuant to a request for confidential treatment or because it is both not material and is of the type the registrant treats as confidential.
* Constitutes a compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MACY'S, INC. | ||||||||
| By: | /s/ TRACY M. PRESTON | |||||||
| Tracy M. Preston Chief Legal Officer and Corporate Secretary | ||||||||
| By: | /s/ PAUL GRISCOM | |||||||
Paul Griscom Senior Vice President and Controller | ||||||||
Date: May 30, 2024 | ||||||||
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