8-K
Macy's, Inc. (M)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 25, 2020
MACY'S, INC.
(Exact name of Registrant as Specified in its Charter)
| Delaware | 1-13536 | 13-3324058 |
|---|---|---|
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
151 West 34th Street, New York, New York
10001
(Address of Principal Executive Offices)
(212) 494-1602
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $.01 par value per share | M | New York Stock Exchange |
| Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | 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. | ☐ |
| Item 2.02. | Results of Operations and Financial Condition. | ||
|---|---|---|---|
| On February 25, 2020, Macy’s, Inc. ("Macy’s") issued a press release announcing Macy’s financial condition, results of operations and cash flows as of and for the 13 and 52 weeks ended February 1, 2020. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.<br><br>Macy’s reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). The press release referred to above contains non-GAAP financial measures of changes in comparable sales on an owned plus licensed basis, changes in comparable sales on an owned plus licensed basis adjusted for the 53rd week calendar shift, earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted net income and adjusted diluted earnings per share attributable to Macy’s, Inc. shareholders. Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share exclude impairment, restructuring, store closing and other costs, settlement charges and losses on the early retirement of debt. A section has been included at the end of the press release that contains important additional information regarding these non-GAAP financial measures including reconciliation to the most directly comparable GAAP financial measure. | |||
| Item 9.01. | Financial Statements and Exhibits. | ||
| (d) | Exhibits | ||
| 99.1 | Press Release of Macy's dated February 25, 2020. | ||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL Document) |
| MACY'S, INC. | |
|---|---|
| SIGNATURE | |
| 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 hereunto duly authorized. | |
| MACY'S, INC. | |
| Dated: February 25, 2020 | By: /s/ Felicia Williams |
| Name: Felicia Williams | |
| Title: Senior Vice President, Controller and Enterprise Risk |
Exhibit
1
Macy’s, Inc. Reports Fourth Quarter and Fiscal 2019 Earnings
and Reiterates 2020 Guidance
| • | Annual comparable sales of (0.8)% on an owned basis; (0.7)% on an owned plus licensed basis |
|---|---|
| • | Annual Diluted EPS of $1.81 and Annual Adjusted Diluted EPS of $2.91 |
| --- | --- |
| • | Strong execution of Holiday 2019 with significant trend improvement in sales from the third quarter |
| --- | --- |
| • | Enters 2020 with solid plan for transition year; reiterates previously provided 2020 guidance |
| --- | --- |
NEW YORK--February 25, 2020-- Macy’s, Inc. (NYSE: M) today reported results for the fourth quarter and fiscal 2019 and reiterated its previously provided annual sales and earnings guidance for fiscal 2020.
Financial Highlights
| Fourth Quarter | Full Year | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (All amounts in millions except percentages and per share figures) | 2019 | 2018 | 2019 | 2018 | ||||||||
| Net sales | $ | 8,337 | $ | 8,455 | $ | 24,560 | $ | 24,971 | ||||
| Comparable sales | ||||||||||||
| Owned | (0.6 | )% | 0.4 | % | (0.8 | )% | 1.7 | % | ||||
| Owned plus licensed | (0.5 | )% | 0.7 | % | (0.7 | )% | 2.0 | % | ||||
| 53^rd^ week shifted calendar (owned plus licensed)* | 2.0 | % | 2.4 | % | ||||||||
| Net income attributable to Macy’s, Inc. shareholders | $ | 340 | $ | 740 | $ | 564 | $ | 1,108 | ||||
| Earnings before interest, taxes, depreciation and amortization | $ | 777 | $ | 1,287 | $ | 1,924 | $ | 2,661 | ||||
| Diluted earnings per share | $ | 1.09 | $ | 2.37 | $ | 1.81 | $ | 3.56 | ||||
| Adjusted Net income attributable to Macy’s, Inc. shareholders | $ | 661 | $ | 850 | $ | 906 | $ | 1,301 | ||||
| Adjusted Earnings before interest, taxes, depreciation and amortization | $ | 1,160 | $ | 1,399 | $ | 2,336 | $ | 2,877 | ||||
| Adjusted Diluted earnings per share | $ | 2.12 | $ | 2.73 | $ | 2.91 | $ | 4.18 |
*Comparable sales adjusted for the impact of the 53^rd^ week reflect a shift of the company's 2017 calendar to align with 2018 on a like-for-like basis.
Note: Adjusted metrics reflect the exclusion of certain items from the respective financial measures. Please see the final pages of this news release for important information regarding the nature of such excluded amounts and calculation of the company’s non-GAAP financial measures.
“Taken as a whole, 2019 did not play out as we intended for Macy's, Inc. However, we executed well during the Holiday 2019 season. We were pleased with the significant trend improvement in the fourth quarter, including a meaningful sales uptick in the 10 shopping days before Christmas. Together with disciplined expense management, our solid sales results in the fourth quarter allowed us to deliver stronger-than-expected earnings results. Importantly, we exited the year with a clean inventory position,” said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc.
2019 Asset Sale Gains
Asset sale gains for the fourth quarter of 2019 totaled $95 million pre-tax, or $71 million after-tax and $0.23 per diluted share attributable to Macy's, Inc. This compares to the fourth quarter of 2018, when asset sale gains totaled $278 million pre-tax, or $204 million after-tax and $0.65 per diluted share attributable to Macy's, Inc.
Asset sale gains for fiscal 2019 totaled $162 million pre-tax, or $120 million after-tax and $0.38 per diluted share attributable to Macy's, Inc. This compares to fiscal 2018, when asset sale gains totaled $389 million pre-tax, or $287 million after-tax and $0.92 per diluted share attributable to Macy's, Inc.
2
Polaris Strategy
On February 4, 2020, Macy’s, Inc. announced its Polaris strategy, a three-year plan designed to stabilize profitability and position the company for sustainable, profitable growth.
“We have a clear perspective of where Macy’s, Inc. and our brands - Macy’s, Bloomingdale's, and Bluemercury-- fit into American retail today. We know 2020 will be a transition year as we make significant structural changes to the business. I am confident that the Polaris strategy we shared earlier this month will allow us to stabilize margin in 2020 and position the company for healthy growth,” continued Gennette.
The five major components of the Polaris strategy are:
| • | Strengthen Customer Relationships: Build customer lifetime value, expand Star Rewards loyalty program with the launch of Loyalty 3.0 in early February and accelerate personalization and monetization. |
|---|---|
| • | Curate Quality Fashion: Drive disciplined merchandise category roles, be the best destination for the best brands and balance sales and margin. |
| --- | --- |
| • | Accelerate Digital Growth: Enhance the digital experience across the Macy’s website and app, grow omni-channel customer base and improve profitability. |
| --- | --- |
| • | Optimize the Store Portfolio: Continue the Growth treatment for stores in the best malls, expand off-mall profitably, and test and prove a retail ecosystem model with a mix of Macy’s store formats within a geographic market. |
| --- | --- |
| • | Reset Cost Base: Right-size the organization and expense base, improve working capital and balance top-line and bottom-line growth. |
| --- | --- |
The company is updating the estimated total costs related to Polaris to approximately $400 million to $420 million. In 2019, the company recognized Polaris-related costs of approximately $318 million, of which approximately $161 million were non-cash impairment charges associated with store closures and campus consolidations and $157 million were cash costs related to restructuring activities. The remaining costs to be recorded in 2020 are expected to be cash.
2020 Guidance
Macy's, Inc. is reiterating its previously provided annual guidance for 2020.
| Fiscal 2020 | |
|---|---|
| Net Sales | $23.6B to $23.9B |
| Comparable Sales | |
| Owned | Approximately 40 basis points better than owned plus licensed |
| Owned plus licensed | (2.5)% to (1.5)% |
| Adjusted diluted earnings per share | $2.45 to $2.65 |
| Asset sale gains | Approximately $100M |
| Adjusted diluted earnings per share, excluding asset sale gains | $2.20 to $2.40 |
| Annual tax rate | 23.25% |
Complete guidance can be found in the presentation posted on the company’s investor relations website at www.macysinc.com/investors.
NOTE: Additional information on Macy’s, Inc., including past news releases, is available at www.macysinc.com/pressroom. The company will webcast a call with financial analysts and investors today (February 25, 2020) at 8:00 a.m. ET. Macy’s, Inc.’s webcast, along with the associated presentation, will be accessible to the media and general public via the company's website at www.macysinc.com. Analysts and investors may call in on 1-800-458-4121, passcode 5793262. A replay of the conference call and slides can be accessed on the company's website or by calling 1-888-203-1112 (same passcode) about two hours after the conclusion of the call.
3
Macy’s, Inc. is scheduled to present at the Bank of America Merrill Lynch Global Consumer & Retail Technology Conference at 8:00 a.m. ET on Tuesday, March 10, 2020, in New York City. Media and investors may access a live audio webcast of the presentation at www.macysinc.com/investors. A replay of the webcast will be available on the company's website.
Important Information Regarding Financial Measures
Please see the final pages of this news release for important information regarding the calculation of the company’s non-GAAP financial measures.
About Macy's, Inc.
Macy’s, Inc. (NYSE: M) is one of the nation’s premier omni-channel fashion retailers, with fiscal 2019 sales of $24.6 billion. The company comprises three retail brands, Macy’s, Bloomingdale’s and Bluemercury. Macy’s, Inc. is headquartered in New York, New York. For more information, please visit www.macysinc.com.
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 Macy’s ability to successfully implement its Polaris strategy, including the ability to realize the anticipated benefits within the expected time frame or at all, conditions to, or changes in the timing of proposed real estate and other transactions, prevailing interest rates and non-recurring charges, the effect of potential changes to trade policies, store closings, competitive pressures from specialty stores, general merchandise stores, off-price and discount stores, manufacturers’ outlets, the Internet, catalogs and television shopping and general consumer spending levels, including the impact of the availability and level of consumer debt, possible systems failures and/or security breaches, the potential for the incurrence of charges in connection with the impairment of intangible assets, including goodwill, Macy’s reliance on foreign sources of production, including risks related to the disruption of imports by labor disputes, regional or global health pandemics, and regional political and economic conditions, the effect of weather and other factors identified in documents filed by the company with the Securities and Exchange Commission. Macy’s disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Contacts:
Media – Blair Rosenberg
646-429-6032
media@macys.com
Investors – Mike McGuire
513-579-7780
investors@macys.com
4
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 | |||||||
|---|---|---|---|---|---|---|---|---|
| February 1, 2020 | February 2, 2019 | |||||||
| % to<br><br>Net sales | % to<br><br>Net sales | |||||||
| Net sales | ||||||||
| Credit card revenues, net | 239 | 2.9 | % | 240 | 2.8 | % | ||
| Cost of sales | (5,266 | ) | (63.2 | %) | (5,288 | ) | (62.5 | %) |
| Selling, general and administrative expenses | (2,509 | ) | (30.1 | %) | (2,538 | ) | (30.0 | %) |
| Gains on sale of real estate | 95 | 1.1 | % | 278 | 3.2 | % | ||
| Restructuring, impairment, store closings and other costs | (337 | ) | (4.0 | %) | (97 | ) | (1.1 | %) |
| Operating income | 559 | 6.7 | % | 1,050 | 12.4 | % | ||
| Benefit plan income, net | 8 | 8 | ||||||
| Settlement charges | (46 | ) | (15 | ) | ||||
| Interest expense, net | (42 | ) | (49 | ) | ||||
| Losses on early retirement of debt | (30 | ) | (28 | ) | ||||
| Income before income taxes | 449 | 966 | ||||||
| Federal, state and local income tax expense | (109 | ) | (226 | ) | ||||
| Net income | 340 | 740 | ||||||
| Net loss attributable to noncontrolling interest | — | — | ||||||
| Net income attributable to Macy's, Inc. shareholders | ||||||||
| Basic earnings per share attributable to<br><br>Macy's, Inc. shareholders | ||||||||
| Diluted earnings per share attributable to <br> Macy's, Inc. shareholders | ||||||||
| Average common shares: | ||||||||
| Basic | 309.9 | 308.4 | ||||||
| Diluted | 311.5 | 311.9 | ||||||
| End of period common shares outstanding | 309.0 | 307.5 | ||||||
| Supplemental Financial Measures: | ||||||||
| Gross Margin (Note 2) | 36.8 | % | 37.5 | % | ||||
| Depreciation and amortization expense |
All values are in US Dollars.
5
MACY’S, INC.
Consolidated Statements of Income (Unaudited) (Note 1)
(All amounts in millions except percentages and per share figures)
| 52 Weeks Ended | 52 Weeks Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| February 1, 2020 | February 2, 2019 | |||||||
| % to<br><br>Net sales | % to<br><br>Net sales | |||||||
| Net sales | ||||||||
| Credit card revenues, net | 771 | 3.1 | % | 768 | 3.1 | % | ||
| Cost of sales | (15,171 | ) | (61.8 | %) | (15,215 | ) | (60.9 | %) |
| Selling, general and administrative expenses | (8,998 | ) | (36.6 | %) | (9,039 | ) | (36.2 | %) |
| Gains on sale of real estate | 162 | 0.6 | % | 389 | 1.5 | % | ||
| Restructuring, impairment, store closings and other costs | (354 | ) | (1.4 | %) | (136 | ) | (0.5 | %) |
| Operating income | 970 | 3.9 | % | 1,738 | 7.0 | % | ||
| Benefit plan income, net | 31 | 39 | ||||||
| Settlement charges | (58 | ) | (88 | ) | ||||
| Interest expense, net | (185 | ) | (236 | ) | ||||
| Losses on early retirement of debt | (30 | ) | (33 | ) | ||||
| Income before income taxes | 728 | 1,420 | ||||||
| Federal, state and local income tax expense | (164 | ) | (322 | ) | ||||
| Net income | 564 | 1,098 | ||||||
| Net loss attributable to noncontrolling interest | — | 10 | ||||||
| Net income attributable to Macy's, Inc. shareholders | ||||||||
| Basic earnings per share attributable to<br><br>Macy's, Inc. shareholders | ||||||||
| Diluted earnings per share attributable to <br> Macy's, Inc. shareholders | ||||||||
| Average common shares: | ||||||||
| Basic | 309.7 | 307.7 | ||||||
| Diluted | 311.4 | 311.4 | ||||||
| End of period common shares outstanding | 309.0 | 307.5 | ||||||
| Supplemental Financial Measures: | ||||||||
| Gross Margin (Note 2) | 38.2 | % | 39.1 | % | ||||
| Depreciation and amortization expense |
All values are in US Dollars.
6
MACY’S, INC.
Consolidated Balance Sheets (Unaudited) (Note 1)
(millions)
| February 1, 2020 | February 2, 2019 | |||
|---|---|---|---|---|
| ASSETS: | ||||
| Current Assets: | ||||
| Cash and cash equivalents | $ | 685 | $ | 1,162 |
| Receivables | 409 | 400 | ||
| Merchandise inventories | 5,188 | 5,263 | ||
| Prepaid expenses and other current assets | 528 | 620 | ||
| Total Current Assets | 6,810 | 7,445 | ||
| Property and Equipment – net | 6,633 | 6,637 | ||
| Right of Use Assets | 2,668 | — | ||
| Goodwill | 3,908 | 3,908 | ||
| Other Intangible Assets – net | 439 | 478 | ||
| Other Assets | 714 | 726 | ||
| Total Assets | $ | 21,172 | $ | 19,194 |
| LIABILITIES AND SHAREHOLDERS’ EQUITY: | ||||
| Current Liabilities: | ||||
| Short-term debt | $ | 539 | $ | 43 |
| Merchandise accounts payable | 1,682 | 1,655 | ||
| Accounts payable and accrued liabilities | 3,448 | 3,366 | ||
| Income taxes | 81 | 168 | ||
| Total Current Liabilities | 5,750 | 5,232 | ||
| Long-Term Debt | 3,621 | 4,708 | ||
| Long-Term Lease Liabilities | 2,918 | — | ||
| Deferred Income Taxes | 1,169 | 1,238 | ||
| Other Liabilities | 1,337 | 1,580 | ||
| Shareholders' Equity: | ||||
| Macy's, Inc. | 6,377 | 6,436 | ||
| Noncontrolling interest | — | — | ||
| Total Shareholders' Equity | 6,377 | 6,436 | ||
| Total Liabilities and Shareholders’ Equity | $ | 21,172 | $ | 19,194 |
7
MACY’S, INC.
Consolidated Statements of Cash Flows (Unaudited) (Note 1 and Note 3)
(millions)
| 52 Weeks Ended | 52 Weeks Ended | |||||
|---|---|---|---|---|---|---|
| February 1, 2020 | February 2, 2019 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 564 | $ | 1,098 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Restructuring, impairment, store closings and other costs | 354 | 136 | ||||
| Settlement charges | 58 | 88 | ||||
| Depreciation and amortization | 981 | 962 | ||||
| Benefit plans | 31 | 30 | ||||
| Stock-based compensation expense | 38 | 63 | ||||
| Gains on sale of real estate | (162 | ) | (389 | ) | ||
| Deferred income taxes | (6 | ) | 112 | |||
| Amortization of financing costs and premium on acquired debt | 4 | (15 | ) | |||
| Changes in assets and liabilities: | ||||||
| Increase in receivables | (9 | ) | (61 | ) | ||
| (Increase) decrease in merchandise inventories | 75 | (87 | ) | |||
| Decrease in prepaid expenses and other current assets | 89 | 21 | ||||
| Increase in merchandise accounts payable | 40 | 55 | ||||
| Increase (decrease) in accounts payable and accrued liabilities | (257 | ) | 14 | |||
| Decrease in current income taxes | (60 | ) | (136 | ) | ||
| Change in other assets and liabilities | (132 | ) | (156 | ) | ||
| Net cash provided by operating activities | 1,608 | 1,735 | ||||
| Cash flows from investing activities: | ||||||
| Purchase of property and equipment | (902 | ) | (657 | ) | ||
| Capitalized software | (255 | ) | (275 | ) | ||
| Disposition of property and equipment | 185 | 474 | ||||
| Other, net | (30 | ) | 2 | |||
| Net cash used by investing activities | (1,002 | ) | (456 | ) | ||
| Cash flows from financing activities: | ||||||
| Debt issuance costs | (3 | ) | — | |||
| Debt repaid | (597 | ) | (1,149 | ) | ||
| Dividends paid | (466 | ) | (463 | ) | ||
| Increase (decrease) in outstanding checks | (62 | ) | 16 | |||
| Acquisition of treasury stock | (1 | ) | — | |||
| Issuance of common stock | 6 | 45 | ||||
| Proceeds from noncontrolling interest | — | 7 | ||||
| Net cash used by financing activities | (1,123 | ) | (1,544 | ) | ||
| Net decrease in cash, cash equivalents and restricted cash | (517 | ) | (265 | ) | ||
| Cash, cash equivalents and restricted cash beginning of period | 1,248 | 1,513 | ||||
| Cash, cash equivalents and restricted cash end of period | $ | 731 | $ | 1,248 |
8
MACY’S, INC.
Consolidated Financial Statements (Unaudited)
Notes:
| (1) | The results for the 13 and 52 weeks ended February 1, 2020 reflect the adoption of Accounting Standards Update 2016-02 (ASU 2016-02), Leases, on February 3, 2019, utilizing the modified retrospective approach which allowed for transition in the period of adoption. |
|---|---|
| (2) | Gross margin is defined as net sales less cost of sales. |
| --- | --- |
| (3) | Restricted cash of $46 million and $86 million have been included with cash and cash equivalents for the 52 weeks ended February 1, 2020 and February 2, 2019, respectively. Further, reclassifications were made to certain prior period amounts to conform with the classifications of such amounts in the most recent period. |
| --- | --- |
9
MACY’S, INC.
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 basis and changes in comparable sales on an owned plus licensed basis adjusted for the 53^rd^ week calendar shift, which include adjusting for growth in comparable sales of departments licensed to third parties, assists in evaluating the company's ability to generate sales growth, whether through owned businesses or departments licensed to third parties, 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 from EBITDA, net income and diluted earnings per share attributable to Macy's, Inc. shareholders that are not associated with the company’s core operations and that may vary substantially in frequency and magnitude from period-to-period provides useful supplemental measures that assist in evaluating the company's ability to generate earnings and to more readily compare these metrics between past and future periods.
The reconciliation of the forward-looking non-GAAP financial measure of changes in comparable sales on an owned plus licensed basis to GAAP comparable sales (i.e., on an owned basis) is in the same manner as illustrated below, except that the impact of growth in comparable sales of departments licensed to third parties is the only reconciling item. In addition, the company does not provide the most directly comparable forward-looking GAAP measure of diluted earnings per share attributable to Macy’s, Inc. shareholders excluding certain items because the timing and amount of excluded items are unreasonably difficult to fully and accurately estimate.
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 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.
10
MACY’S, INC.
Important Information Regarding Non-GAAP Financial Measures
(All amounts in millions except percentages and per share figures)
Changes in Comparable Sales
| 13 Weeks Ended February 1, 2020 | 52 Weeks Ended February 1, 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Decrease in comparable sales on an owned basis (Note 4) | (0.6 | )% | (0.8 | )% | ||||||
| Comparable sales growth impact of departments licensed to third parties (Note 5) | 0.1 | % | 0.1 | % | ||||||
| Decrease in comparable sales on an owned plus licensed basis | (0.5 | )% | (0.7 | )% | 13 Weeks Ended February 2, 2019 | 52 Weeks Ended February 2, 2019 | ||||
| --- | --- | --- | --- | --- | ||||||
| Increase in comparable sales on an owned basis (Note 4) | 0.4 | % | 1.7 | % | ||||||
| Comparable sales growth impact of departments licensed to third parties (Note 5) | 0.3 | % | 0.3 | % | ||||||
| Increase in comparable sales on an owned plus licensed basis | 0.7 | % | 2.0 | % | ||||||
| Impact of 53^rd^ Week Shifted Calendar | 1.3 | % | 0.4 | % | ||||||
| 53^rd^ Week Shifted Calendar comparable sales on an owned plus licensed basis (Note 6) | 2.0 | % | 2.4 | % |
Notes:
| (4) | Represents the period-to-period percentage change in net sales from stores in operation throughout the year presented and the immediately preceding year and all online sales, excluding commissions from departments licensed to third parties. Stores impacted by a natural disaster or undergoing significant expansion or shrinkage remain in the comparable sales calculation unless the store, or material portion of the store, is closed for a significant period of time. Definitions and calculations of comparable sales may differ among companies in the retail industry. |
|---|---|
| (5) | Represents the impact of including the sales of departments licensed to third parties occurring in stores in operation throughout the year presented and the immediately preceding year and all online sales in the calculation of comparable sales. The company licenses third parties to operate certain departments in its stores and online and receives commissions from these third parties based on a percentage of their net sales. In its financial statements prepared in conformity with GAAP, the company includes these commissions (rather than sales of the departments licensed to third parties) in its net sales. The company does not, however, include any amounts in respect of licensed department sales (or any commissions earned on such sales) in its comparable sales in accordance with GAAP (i.e., on an owned basis). The amounts of commissions earned on sales of departments licensed to third parties are not material to its net sales for the periods presented. |
| --- | --- |
| (6) | Represents comparable sales on an owned plus licensed basis that incorporates a shift of the company's fiscal 2017 calendar to align with fiscal 2018 on a like-for-like basis as a result of the 53^rd^ week in fiscal 2017. |
| --- | --- |
11
MACY’S, INC.
Important Information Regarding Non-GAAP Financial Measures
(All amounts in millions except percentages and per share figures)
Earnings before Interest, Taxes, Depreciation and Amortization, Net Income and Diluted Earnings Per Share Attributable to Macy's, Inc. Shareholders, Excluding Certain Items
Non-GAAP financial measures, excluding certain items below, are reconciled to the most directly comparable GAAP measure as follows:
| • | EBITDA and adjusted EBITDA are reconciled to GAAP net income attributable to Macy’s, Inc. shareholders. |
|---|---|
| • | Adjusted net income attributable to Macy’s, Inc. shareholders is reconciled to GAAP net income attributable to Macy’s, Inc. shareholders. |
| --- | --- |
| • | Adjusted diluted earnings per share attributable to Macy’s, Inc. shareholders is reconciled to GAAP diluted earnings per share attributable to Macy’s, Inc shareholders. |
| --- | --- |
| Adjusted EBITDA | 13 Weeks Ended | 13 Weeks Ended | |||
|---|---|---|---|---|---|
| February 1, 2020 | February 2, 2019 | ||||
| Net income attributable to Macy's, Inc. shareholders | $ | 340 | $ | 740 | |
| Interest expense, net | 42 | 49 | |||
| Losses on early retirement of debt | 30 | 28 | |||
| Federal, state and local income tax expense | 109 | 226 | |||
| Depreciation and amortization | 256 | 244 | |||
| EBITDA | 777 | 1,287 | |||
| Restructuring, impairment, store closings and other costs | 337 | 97 | |||
| Settlement charges | 46 | 15 | |||
| Adjusted EBITDA | $ | 1,160 | $ | 1,399 | |
| 52 Weeks Ended | 52 Weeks Ended | ||||
| --- | --- | --- | --- | --- | |
| February 1, 2020 | February 2, 2019 | ||||
| Net income attributable to Macy's, Inc. shareholders | $ | 564 | $ | 1,108 | |
| Interest expense, net | 185 | 236 | |||
| Losses on early retirement of debt | 30 | 33 | |||
| Federal, state and local income tax expense | 164 | 322 | |||
| Depreciation and amortization | 981 | 962 | |||
| EBITDA | 1,924 | 2,661 | |||
| Restructuring, impairment, store closings and other costs (Note 7) | 354 | 128 | |||
| Settlement charges | 58 | 88 | |||
| Adjusted EBITDA | $ | 2,336 | $ | 2,877 |
Note 7: The above pre-tax adjustments for the 52 weeks ended February 2, 2019 exclude impairment, restructuring and other costs attributable to the noncontrolling interest shareholder of $8 million.
12
MACY’S, INC.
Important Information Regarding Non-GAAP Financial Measures
(All amounts in millions except percentages and per share figures)
| Adjusted Net Income and Adjusted Diluted Earnings Per Share Attributable to Macy's, Inc. Shareholders | 13 Weeks Ended | 13 Weeks Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| February 1, 2020 | February 2, 2019 | ||||||||||||
| Net Income Attributable to Macy's, Inc. Shareholders | Diluted Earnings Per Share | Net Income Attributable to Macy's, Inc. Shareholders | Diluted Earnings Per Share | ||||||||||
| As reported | $ | 340 | $ | 1.09 | $ | 740 | $ | 2.37 | |||||
| Restructuring, impairment, store closings and other costs | 337 | 1.08 | 97 | 0.31 | |||||||||
| Settlement charges | 46 | 0.15 | 15 | 0.05 | |||||||||
| Losses on early retirement of debt | 30 | 0.10 | 28 | 0.09 | |||||||||
| Income tax impact of certain items identified above | (92 | ) | (0.30 | ) | (30 | ) | (0.09 | ) | |||||
| As adjusted | $ | 661 | $ | 2.12 | $ | 850 | $ | 2.73 | |||||
| 52 Weeks Ended | 52 Weeks Ended | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| February 1, 2020 | February 2, 2019 | ||||||||||||
| Net Income Attributable to Macy's, Inc. Shareholders | Diluted Earnings Per Share | Net Income Attributable to Macy's, Inc. Shareholders | Diluted Earnings Per Share | ||||||||||
| As reported | $ | 564 | $ | 1.81 | $ | 1,108 | $ | 3.56 | |||||
| Restructuring, impairment, store closings and other costs (Note 8) | 354 | 1.13 | 128 | 0.41 | |||||||||
| Settlement charges | 58 | 0.19 | 88 | 0.28 | |||||||||
| Losses on early retirement of debt | 30 | 0.10 | 33 | 0.11 | |||||||||
| Income tax impact of certain items identified above | (100 | ) | (0.32 | ) | (56 | ) | (0.18 | ) | |||||
| As adjusted | $ | 906 | $ | 2.91 | $ | 1,301 | $ | 4.18 |
Note 8: The above pre-tax adjustment for the 52 weeks ended February 2, 2019 exclude impairment, restructuring and other costs attributable to the noncontrolling interest shareholder of $8 million.