Macy’s, Inc. (NYSE: M) today reported a loss
of 14 cents per diluted share from continuing operations for the first
quarter of 2008, ended May 3, 2008. These results include two unusual
items (described below) that negatively impacted first quarter 2008
earnings by 16 cents per diluted share. Excluding these items, the
company would have earned 2 cents per diluted share from continuing
operations in the first quarter of 2008.
The first unusual item relates to the consolidation of three Macy’s
divisions announced in February 2008, which is expected to save
approximately $100 million per year beginning in 2009 (approximately $60
million in savings for the partial year in 2008). In the first quarter
of 2008, the company booked consolidation costs of $87 million ($55
million after tax or 13 cents per diluted share). First quarter 2008
results also include a reserve of $23 million ($14 million after tax or
3 cents per diluted share) for a potential settlement of litigation
related to a wage and hour class-action lawsuit in California. A
settlement is contingent on final agreement and court approval.
In the first quarter of 2007, Macy’s, Inc.
earned 11 cents per diluted share from continuing operations. Excluding
May Company merger integration costs of $36 million ($22 million after
tax or 5 cents per diluted share), first quarter 2007 diluted earnings
per share from continuing operations were 16 cents.
“Given the very difficult economic
environment, our company performed relatively well compared to the
competition in the first quarter. Macy’s, Inc.’s
same-store sales for the quarter, while below last year, were
significantly better than most of our largest competitors, continuing a
trend from the fourth quarter of 2007. This indicates that customers are
preferring Macy’s and we appear to be
capturing market share even in this period of weak consumer spending.
Earnings per share are on track to deliver the annual guidance provided
at the outset of the year,” said Terry J.
Lundgren, Macy’s, Inc. chairman, president
and chief executive officer. “We are running
the business with discipline given the weakened level of consumer
confidence, as demonstrated by inventory levels at the end of the
quarter that were about 4 percent below a year ago. And as we begin
implementation of new My Macy’s localization
initiatives across the country, we are optimistic that our plans for
tailored assortments and an improved shopping experience in every
location will further enhance our store-level execution.”
Sales
Sales in the first quarter totaled $5.747 billion, a decrease of 2.9
percent compared to sales of $5.921 billion in the same period last
year. On a same-store basis, Macy’s, Inc.’s
first quarter sales were down 2.6 percent.
In the first quarter of 2008, the company opened a new Macy’s
store in Westminster, CO, and closed a Macy’s
store in Memphis, TN, and a Macy’s furniture
store in Richmond, VA.
Operating Income
Macy’s, Inc.’s
operating income totaled $30 million or 0.5 percent of sales for the
quarter ended May 3, 2008, compared with operating income of $208
million or 3.5 percent of sales for the same period last year. Macy’s,
Inc.’s first quarter 2008 operating income
included $87 million in division consolidation costs and a $23 million
reserve for the potential litigation settlement. Excluding these costs,
operating income for the first quarter of 2008 was $140 million or 2.4
percent of sales. First quarter 2007 operating income included $36
million in May Company integration costs. Excluding these costs,
operating income for the first quarter of 2007 was $244 million or 4.1
percent of sales. The gross margin rate in the first quarter of 2008
declined by 120 basis points primarily because of a higher level of
merchandise clearance which was expected in light of a slowing economy
and the resulting sales trends. SG&A as a percent to sales was up by 90
basis points primarily because of weak sales as well as the reserve for
a potential litigation settlement.
Cash Flow
Net cash provided by continuing operating activities was $21 million in
the first quarter of 2008, compared with $370 million of cash used by
continuing operating activities in the first quarter last year. Net cash
used by continuing investing activities in the first quarter of 2008 was
$99 million, compared with $31 million a year ago. Net cash used by
continuing financing activities was $139 million in the first quarter of
2008, compared with $309 million in the first quarter last year.
The company repurchased no shares of its common stock in the first
quarter of 2008 and anticipates no share repurchases for the remainder
of fiscal 2008. At May 3, 2008, the company had remaining authorization
to repurchase up to approximately $850 million of its common stock.
Looking Ahead
Macy’s, Inc. is reaffirming previously
provided guidance for same-store sales in fiscal 2008 to be in the range
of down 1.0 percent to up 1.5 percent, with earnings per share on a
diluted basis of $1.85 to $2.15, excluding one-time division
consolidation costs. The company expects to book approximately $60
million in division consolidation costs in the final three quarters of
2008.
Macy's, Inc., with corporate offices in Cincinnati and New York, is one
of the nation's premier retailers, with fiscal 2007 sales of $26.3
billion. The company operates more than 850 department stores in 45
states, the District of Columbia, Guam and Puerto Rico under the names
of Macy's and Bloomingdale's. The company also operates macys.com,
bloomingdales.com and Bloomingdale's By Mail. Prior to June 1, 2007,
Macy's, Inc. was known as Federated Department Stores, Inc.
All statements in this press release that are not statements of
historical fact are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are
based upon the current beliefs and expectations of Macy’s
management and are subject to significant risks and uncertainties.
Actual results could differ materially from those expressed in or
implied by the forward-looking statements contained in this release
because of a variety of factors, including conditions to, or changes in
the timing of, proposed transactions, prevailing interest rates,
competitive pressures from specialty stores, general merchandise stores,
manufacturers' outlets, off-price and discount stores, new and
established forms of home shopping (including the Internet, mail-order
catalogs and television) and general consumer spending levels, including
the impact of the availability and level of consumer debt, the effect of
weather and other factors identified in documents filed by the company
with the Securities and Exchange Commission.
(NOTE: Additional information on Macy’s,
Inc., including past news releases, is available at www.macysinc.com/pressroom.
A webcast of Macy's, Inc.’s first quarter
earnings call with analysts will be held beginning at 10:30 a.m. ET on
Wednesday, May 14. The webcast is accessible to the media and general
public either via the company's Web site at www.macysinc.com
or by calling in on 1-888-596-2573 (913-312-0379 for international
callers), passcode 4101446.)
