Diluted 2013 EPS is $3.86, or $4.00 as adjusted, +16% vs. prior year
Macy’s, Inc. (NYSE:M) today reported continued sales and earnings growth in the fourth quarter and full year 2013, ended Feb. 1, 2014. In its guidance for 2014, the company expects continued improvement in sales and earnings in the coming year from its core business strategies – My Macy’s localization, Omnichannel integration and Magic Selling – which are known by the acronym of M.O.M.
Fourth quarter 2013 earnings were $2.16 per diluted share, or $2.31 excluding items described below. This represents an increase of 18 percent, or 13 percent excluding items described below, over the comparable period a year ago. Comparable sales for the fourth quarter of 2013 grew by 1.4 percent, and by 2.3 percent for comparable sales combined with comparable sales from departments licensed to third parties.
For the full year 2013, earnings were $3.86 per diluted share, or $4.00 excluding items described below. This represents an increase of 19 percent, or 16 percent excluding items described below, over fiscal 2012. The $4.00 per share exceeds management’s initial guidance provided at the beginning of the year for earnings per share, excluding items described below, to be in the range of $3.90 to $3.95 per share in fiscal 2013. Comparable sales for fiscal 2013 grew by 1.9 percent, and by 2.8 percent for comparable sales combined with comparable sales from departments licensed to third parties.
“Macy’s, Inc. had a strong year in 2013, and we are proud of the continued improvement in our ability to serve evolving customer needs at Macy’s and Bloomingdale’s. This was our fifth consecutive year of double-digit growth in earnings per share and our fourth consecutive year of comparable sales growth. In fact, our total sales have grown by more than $4.4 billion in the past four years,” said Terry J. Lundgren, chairman, president and chief executive officer of Macy’s, Inc. “Having generated this sustained level of momentum, we continue to drive for further growth through progressively deeper implementation of the M.O.M. strategies that have set Macy’s, Inc. apart from other retailers.
“As previously announced, our company’s comparable sales together with comparable sales from departments licensed to third parties rose by 4.3 percent in the combined November/December holiday shopping period and November/December comparable sales were up by 3.6 percent. While we had expected a sales decline in January because of the calendar shift, the month was down further than we had expected and we are very disappointed with sales performance in January. In part, poor January sales were due to the unusually harsh winter weather across much of the country.
At one time or another during January, 244 Macy’s and Bloomingdale’s stores were closed because of weather, and the business remained sluggish until Valentine’s Day,” he said. “Once warm spring weather arrives and our full assortment of fresh spring merchandise is in place, we believe customers will return to a more normalized pattern of shopping. But based on our experience in January and early February, we are watching business trends closely.
“As has been the case since we began implementing these strategies in the 2008/2009 period, our competitive advantage is in the unique combination of localization, omnichannel and enhanced customer engagement. Customers are able to shop for and buy the products that they want and prefer in our stores, via mobile devices and on computers in a shopping environment that delivers outstanding value and is supported with great service,” Lundgren said. “Our M.O.M. strategy is enabled by a unique organizational structure which is unlikely to be copied by our competitors because of the financial resources and talent required. We have been developing M.O.M. for years, and it is an enduring formula that we believe continues to hold significant promise for the future.”
Sales
Sales in the 13-week fourth quarter of 2013 totaled $9.202 billion, down 1.6 percent from total sales of $9.350 billion in the 14-week fourth quarter of 2012. On a comparable sales basis, Macy’s, Inc.’s fourth quarter sales were up 1.4 percent in 2013 over 2012. Together with sales from departments licensed to third parties, fourth quarter 2013 sales on a comparable basis were up 2.3 percent.
For the 52 weeks of 2013, Macy’s, Inc. sales totaled $27.931 billion, up 0.9 percent from total sales of $27.686 billion in the 53 weeks of fiscal 2012. On a comparable sales basis, Macy’s, Inc.’s 2013 sales were up 1.9 percent in 2013 over 2012. Together with sales from departments licensed to third parties, 2013 sales on a comparable basis were up 2.8 percent.
The company’s comparable sales include net sales from stores open at least one full fiscal year, as well as online sales at macys.com and bloomingdales.com. The company licenses third parties to operate certain departments in its stores and receives commissions from these third parties based on a percentage of their net sales. Neither the licensed department sales nor the commissions received are included in the calculation of comparable sales.
Please see the last page of this news release for important information regarding the calculation of the company’s comparable sales together with comparable sales from departments licensed to third parties. The company believes that the combination of the two provides a useful measure for assessing changes in total customer demand at Macy’s and Bloomingdale’s.
In fiscal 2013, the company opened six stores and closed seven stores. Macy’s opened new stores in Victorville, CA, and Gurnee, IL, as well as a replacement store in Bay Shore, NY, and new men’s store in Las Vegas, NV. Bloomingdale’s opened a new store in Glendale, CA, and a new Bloomingdale’s Outlet store in Rosemont, IL. As previously announced, Macy’s closed stores in Mesa, AZ; Overland Park, KS; Florissant and St. Louis, MO; Irondequoit, NY; and Murray, UT. The Macy’s men’s and furniture store in downtown Sacramento, CA, was consolidated into a nearby full-line store.
Operating Income
Macy’s, Inc.’s operating income totaled $1.349 billion or 14.7 percent of sales for the 13-week quarter ended Feb. 1, 2014, compared with operating income of $1.391 billion or 14.9 percent of sales for the 14-week fourth quarter of fiscal 2012. Macy’s, Inc.’s fourth quarter 2013 operating income included expenses and asset impairment charges of $88 million associated with previously announced store closings, cost reduction initiatives and related items. Excluding these items, operating income for the fourth quarter of 2013 was $1.437 billion or 15.6 percent of sales. Fourth quarter 2012 operating income included asset impairment charges and other costs and expenses of $5 million primarily associated with store closings. Excluding these items, operating income for the fourth quarter of 2012 was $1.396 billion or 14.9 percent of sales.
For the 52 weeks of fiscal 2013, Macy’s, Inc.’s operating income totaled $2.678 billion or 9.6 percent of sales, compared with operating income of $2.661 billion or 9.6 percent of sales for the 53 weeks of fiscal 2012. Macy’s, Inc.’s fiscal 2013 operating income included expenses and asset impairment changes of $88 million associated with previously announced store closings, cost reduction initiatives and related items. Excluding these items, operating income for fiscal 2013 was $2.766 billion or 9.9 percent of sales. Macy’s, Inc.’s fiscal 2012 operating income included asset impairment charges and other costs and expenses of $5 million associated with store closings. Excluding these items, operating income for fiscal 2012 was $2.666 billion or 9.6 percent of sales.
Earnings Per Share
Earnings were $2.16 per diluted share for the 13-week fourth quarter of 2013. Diluted earnings per share were $2.31 in the fourth quarter of 2013, excluding pre-tax expenses and asset impairment charges of $88 million ($54 million after tax or 15 cents per diluted share) associated with previously announced store closings, cost reduction initiatives and related items. The fourth quarter charges of $88 million were lower than the estimate of $120 million to $135 million provided in the company’s Jan. 8 news release on cost reduction initiatives. This was primarily the result of lower severance expense as the company was able to place more associates than expected in new jobs within the company in the course of its workforce reductions.
In the 14-week fourth quarter of 2012, earnings were $1.83 per diluted share. Diluted earnings per share were $2.05 in the fourth quarter of 2012, excluding pre-tax expenses of $133 million ($85 million after tax or 21 cents per share) associated with the early retirement of approximately $700 million of outstanding debt, and asset impairment charges and other costs and expenses of approximately $5 million ($3 million after tax or 1 cent per share) related primarily to store closings.
For the 52 weeks of fiscal 2013, Macy’s, Inc. earned $3.86 per diluted share. Earnings per diluted share were $4.00 for fiscal 2013, excluding pre-tax expenses and asset impairment charges of $88 million ($54 million after tax or 14 cents per diluted share) associated with previously announced store closings, cost reduction initiatives and related items.
For the 53 weeks of fiscal 2012, Macy’s, Inc. earned $3.24 per diluted share. Earnings per diluted share were $3.46 for fiscal 2012, excluding pre-tax expenses of $137 million ($87 million after tax or 21 cents per share) associated with the early retirement of approximately $873 million of outstanding debt, and asset impairment charges and other costs and expenses of approximately $5 million ($3 million after tax or 1 cent per share) related primarily to store closings.
Cash Flow
Net cash provided by operating activities was $2.549 billion in fiscal 2013, compared with $2.179 billion in fiscal 2012. Net cash used by investing activities in fiscal 2013 was $788 million, compared with $781 million in the previous year. Thus, net cash provided before financing activities was $1.761 billion in fiscal 2013, compared with $1.398 billion in fiscal 2012.
Capital expenditures were below plan by $62 million in fiscal 2013, and the company expects that approximately $50 million of this amount will be added to 2014.
In fiscal 2013, the company repurchased approximately 33.6 million shares of its common stock for approximately $1.6 billion. At Feb. 1, 2014, the company had remaining authorization to repurchase up to approximately $1.4 billion of its common stock.
Looking Ahead
The company is reiterating its annual sales and earning guidance, initially provided on January 8, 2014. Comparable sales growth in fiscal 2014 is expected in the range of 2.5 percent to 3 percent. Earnings of $4.40 to $4.50 per share are expected in 2014. Capital expenditures for 2014 are expected to be approximately $1.05 billion, which includes amounts delayed from 2013.
The company has announced plans for new Macy’s stores in Sarasota, FL; Las Vegas, NV; and The Bronx, NY, in fiscal 2014. A new Bloomingdale’s will open in Palo Alto, CA, to replace an older store in the same shopping center.
Macy’s, Inc., with corporate offices in Cincinnati and New York, is one of the nation’s premier retailers, with fiscal 2013 sales of $27.931 billion. The company operates about 840 stores in 45 states, the District of Columbia, Guam and Puerto Rico under the names of Macy’s and Bloomingdale’s, as well as the macys.com and bloomingdales.com websites. The company also operates 13 Bloomingdale’s Outlet stores. Bloomingdale’s in Dubai is operated by Al Tayer Group LLC under a license agreement.
By press release
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