Macy’s, Inc. Reports Third Quarter 2022 Results

Comparable sales down 3.1% on an owned basis and down 2.7% on an owned-plus-licensed basis

Inventories up 4% versus 2021, reflecting ongoing planning and supply chain discipline

Diluted EPS of $0.39 and Adjusted diluted EPS of $0.52

Reaffirms annual sales guidance and raises Adjusted diluted EPS guidance

NEW YORK, November 17, 2022--(BUSINESS WIRE)--Macy’s, Inc. (NYSE: M) today reported financial results for the third quarter of 2022 and updated its annual guidance.

"Our Polaris strategy is working. In the third quarter, we achieved solid top line results and a strong beat to our bottom line guidance. Macy’s brand position as a style and fashion source resonated with our customers, while luxury continued to outperform at Bloomingdale’s and Bluemercury," said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc. "Retail is detail, and our talented and agile team are executing well to compete. We know the consumer is under increasing pressure and has choices on where to spend. As a leading gifting destination with fresh inventory across the value spectrum, we are ready to meet our customers’ needs this holiday season."

"We are operating from a position of strong financial health – with appropriate levels of inventory, a strong balance sheet with ample liquidity, investment grade credit metrics and fixed interest rate debt in a rising interest rate environment. We have the tools, data-driven processes and talented teams to manage through this uncertain time and are committed to long-term, profitable growth," added Adrian Mitchell, chief financial officer of Macy’s, Inc.

Third Quarter Highlights

Comparisons are to third quarter 2021 unless noted otherwise. Comparisons to 2019 are provided, where appropriate, to benchmark performance given the impact of the pandemic.

• Diluted earnings per share of $0.39 and Adjusted diluted earnings per share of $0.52.

  • This compares to diluted earnings per share of $0.76 and Adjusted diluted earnings per share of $1.23 in the third quarter of 2021.

  • This compares to diluted earnings per share of $0.01 and Adjusted diluted earnings per share of $0.07 in the third quarter of 2019.

• Net sales of $5.2 billion, down 3.9% versus the third quarter of 2021; up 1.1% versus the third quarter of 2019.

  • Digital sales decreased 9% versus the third quarter of 2021; up 35% versus the third quarter of 2019.

  • Brick-and-mortar sales decreased 1% versus the third quarter of 2021; down 9% versus the third quarter of 2019.

• Comparable sales down 3.1% on an owned basis and down 2.7% on an owned-plus-licensed basis; up 5.6% and 6.0%, respectively, versus the third quarter of 2019.

• Highlights of the company's nameplates include:

  • Macy’s comparable sales were down 4.4% on an owned basis and down 4.0%, on an owned-plus-licensed basis.

    • 43.6 million active customers shopped the Macy’s brand, on a trailing twelve-month basis, a 2% increase compared to the prior year.

    • Star Rewards program members made up approximately 70% of the total Macy's brand owned-plus-licensed sales on a trailing twelve-month basis, up approximately 5 percentage points versus the prior year.

    • The company continued to see strength in occasion-based categories, including career and tailored sportswear, fragrances, shoes, dresses and luggage.

  • Bloomingdale’s comparable sales on an owned basis were up 5.3% and on an owned-plus-licensed basis were up 4.1%.

    • 4.1 million active customers shopped the Bloomingdale’s brand, on a trailing twelve-month basis, a 9% increase over the prior year.

    • Results were driven by strength across women’s, men’s and kid’s contemporary and dressy apparel, women’s shoes as well as luggage.

  • Bluemercury comparable sales were up 14.0% on an owned and owned-plus-licensed basis.

    • Approximately 650,000 active customers shopped the Bluemercury brand, on a trailing twelve-month basis, a 15% increase over the prior year.

• Inventory turnover, on a trailing twelve-month basis, was relatively flat to 2021 and improved 15% over 2019.

  • Inventory was up 4% year-over-year and down 12% versus 2019, reflecting disciplined inventory management in an environment of continued supply chain volatility and industry-wide elevated inventory levels, as well as lean inventory levels experienced in 2021. The company strategically brought in seasonal merchandise earlier to strengthen its competitive position for Holiday and has the added capacity to chase in-season trends.

• Gross margin for the quarter was 38.7%, down from 41.0% in the third quarter of 2021.

  • Merchandise margin decline was driven by a year-over-year increase in promotional and permanent markdowns within the Macy’s brand, as the company sold through slower moving categories including casual apparel, soft home, and warmer weather seasonal goods.

  • Delivery expense as a percent of net sales was relatively consistent with the prior year. Higher fuel costs more than offset the impact of a 2-percentage point decline in digital penetration and reductions in cost-per-package.

• Selling, general and administrative ("SG&A") expense of $2.1 billion, a $84 million increase.

  • SG&A expense as a percent of sales was 39.3%, 300 basis points higher compared to the third quarter of 2021 and an improvement of 330 basis points compared to the third quarter of 2019.

  • The prior year quarter benefited from a significant number of open positions due to the tight labor market. The positions have since largely been filled.

  • The company is adjusting colleague compensation to remain competitive and attract the best talent, while simultaneously remaining disciplined in its SG&A productivity efforts.

• Net credit card revenue of $206 million, down $7 million.

  • Represented 3.9% of sales, in line with the prior year period.

  • Performance driven by lower-than-expected bad debt levels, larger balances within the portfolio as well as higher-than-expected spend on co-brand credit cards.

Financial Highlights

All amounts in millions except percentages and per share figures	Third Quarter
	2022	2021
Net sales	$5,230	$5,440
Comparable Sales
Owned	(3.1%)
Owned plus licensed	(2.7%)
Net Income	$108	$239
Earnings before interest, taxes, depreciation and amortization (EBITDA)	$392	$757
Diluted earnings per share (EPS)	$0.39	$0.76
Adjusted Net income	$143	$386
Adjusted EBITDA	$439	$765
Adjusted Diluted EPS	$0.52	$1.23

2022 Guidance

The company is reaffirming its annual 2022 sales guidance and raising its earnings guidance to account for improved expectations for credit card revenue and interest expense, lower benefit plan income, and updated shares outstanding estimates. The full update to guidance can be found in the presentation posted to macysinc.com/investors.

	Guidance as of November 17, 2022	Guidance as of August 23, 2022
Net sales	unchanged	$24,340 million to $24,580 million
Adjusted EBITDA as a percent of sales	unchanged	Approximately 10.5%
Adjusted diluted earnings per share*	$4.07 - $4.27	$4.00 - $4.20
* Adjusted diluted EPS does not consider the impact of any potential future share repurchases associated with the company’s current share repurchase authorization.

Conference Call and Webcasts

A webcast of Macy's, Inc.’s call with analysts and investors to report its third quarter 2022 sales and earnings will be held today (November 17, 2022) at 8:00 a.m. ET. Macy’s, Inc.’s webcast, along with the associated presentation, is accessible to the media and general public via the company's website at www.macysinc.com/investors. Analysts and investors may call 1-866-580-3963, using passcode 2252807. A replay of the conference call will be available on the company’s website or by calling 1-866-583-1035 (using the same passcode) about two hours after the conclusion of the call. Additional information on Macy’s, Inc., including past news releases, is available at www.macysinc.com/pressroom.

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.

At Macy’s, Inc. (NYSE: M), we are a trusted source for quality brands at great values from off-price to luxury. Across our iconic nameplates, including Macy’s, Bloomingdale’s and Bluemercury, we help our customers express their unique style and celebrate special moments, big and small. Headquartered in New York City, we operate one of retail’s largest e-commerce businesses integrated with a nationwide footprint to deliver the most convenient and seamless shopping experience. Our purpose is to create a brighter future with bold representation – so we can realize the full potential of every one of us. For more information, visit macysinc.com.

Forward-Looking Statements

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 and catalogs 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, inflation, labor shortages, the amount and timing of future dividends and share repurchases and other factors identified in documents filed by the company with the Securities and Exchange Commission, including under the captions "Forward-Looking Statements" and "Risk Factors" in the company’s Annual Report on Form 10-K for the year ended January 29, 2022. 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.

MACY’S, INC. Consolidated Statements of Income (Unaudited) (Note 1) (All amounts in millions except percentages and per share figures)
		13 Weeks Ended October 29, 2022								13 Weeks Ended October 30, 2021
						% to								% to
		$				Net sales				$				Net sales
Net sales		$	5,230							$	5,440
Credit card revenues, net			206				3.9	%			213				3.9	%
Cost of sales			(3,204	)			(61.3	%)			(3,207	)			(59.0	%)
Selling, general and administrative expenses			(2,057	)			(39.3	%)			(1,973	)			(36.3	%)
Gains on sale of real estate			32				0.6	%			50				0.9	%
Impairment, restructuring and other costs			(15	)			(0.3	%)			—				—
Operating income			192				3.7	%			523				9.6	%
Benefit plan income, net			7								17
Settlement charges			(32	)							(8	)
Interest expense, net			(42	)							(53	)
Losses on early retirement of debt			—								(185	)
Income before income taxes			125								294
Federal, state and local income tax expense (Note 2)			(17	)							(55	)
Net income		$	108							$	239
Basic earnings per share		$	0.40							$	0.78
Diluted earnings per share		$	0.39							$	0.76
Average common shares:
Basic			272.0								306.9
Diluted			277.7								313.8
End of period common shares outstanding			271.0								299.3
Supplemental Financial Measures:
Gross Margin (Note 3)		$	2,026				38.7	%		$	2,233				41.0	%
Depreciation and amortization expense		$	225							$	225

MACY’S, INC. Consolidated Statements of Income (Unaudited) (Note 1) (All amounts in millions except percentages and per share figures)
		39 Weeks Ended October 29, 2022								39 Weeks Ended October 30, 2021
						% to								% to
		$				Net sales				$				Net sales
Net sales		$	16,178							$	15,794
Credit card revenues, net			601				3.7	%			568				3.6	%
Cost of sales			(9,856	)			(60.9	%)			(9,449	)			(59.8	%)
Selling, general and administrative expenses			(5,918	)			(36.6	%)			(5,618	)			(35.6	%)
Gains on sale of real estate			74				0.5	%			61				0.4	%
Impairment, restructuring and other costs			(25	)			(0.2	%)			(21	)			(0.1	%)
Operating income			1,054				6.5	%			1,335				8.5	%
Benefit plan income, net			21								49
Settlement charges			(32	)							(90	)
Interest expense, net			(131	)							(211	)
Losses on early retirement of debt			(31	)							(199	)
Income before income taxes			881								884
Federal, state and local income tax expense (Note 2)			(213	)							(197	)
Net income		$	668							$	687
Basic earnings per share		$	2.43							$	2.21
Diluted earnings per share		$	2.37							$	2.17
Average common shares:
Basic			275.6								310.3
Diluted			282.0								317.0
End of period common shares outstanding			271.0								299.3
Supplemental Financial Measures:
Gross Margin (Note 3)		$	6,322				39.1	%		$	6,345				40.2	%
Depreciation and amortization expense		$	638							$	668

MACY’S, INC. Consolidated Balance Sheets (Unaudited) (Note 1) (millions)
		October 29, 2022				January 29, 2022				October 30, 2021
ASSETS:
Current Assets:
Cash and cash equivalents		$	326			$	1,712			$	316
Receivables			204				297				212
Merchandise inventories			6,403				4,383				6,141
Prepaid expenses and other current assets (Note 4)			415				366				922
Total Current Assets			7,348				6,758				7,591
Property and Equipment – net			5,831				5,665				5,600
Right of Use Assets			2,699				2,808				2,808
Goodwill			828				828				828
Other Intangible Assets – net			433				435				435
Other Assets			1,091				1,096				1,017
Total Assets		$	18,230			$	17,590			$	18,279
LIABILITIES AND SHAREHOLDERS’ EQUITY:			...