Macy’s, Inc. Reports Second Quarter Earnings of 80 Cents Per Diluted Share, an Increase of 11 Percent

  Macy’s, Inc. Reports Second Quarter Earnings of 80 Cents Per Diluted Share,
  an Increase of 11 Percent

 4 percent increase in Q2 comparable sales together with comparable sales of
   departments licensed to third parties; comparable sales increase is 3.4
                                   percent

Business Wire

CINCINNATI -- August 13, 2014

Macy’s, Inc. (NYSE:M) today reported earnings of 80 cents per diluted share
for the second quarter of 2014, ended Aug. 2, 2014. This represents an
increase of 11 percent in earnings per diluted share from 72 cents in the
second quarter of 2013.

Macy’s, Inc.’s diluted earnings per share in the first half of 2014 were
$1.40, an increase of 10 percent compared with earnings per diluted share of
$1.27 in the first half of 2013.

“Our sales trend improved at both Macy’s and Bloomingdale’s in the second
quarter, reflecting a rebound in shopping activity once weather patterns
normalized. We also benefitted from a shift in a major Macy’s promotional
event into the first two days of the quarter. Advancements in our M.O.M.
strategies – My Macy’s localization, Omnichannel integration and Magic Selling
customer engagement – continued to drive sales growth across the country. We
also are very pleased by customer response to improvements at our Macy’s
Herald Square flagship in New York, where we are mid-way through the third
year of an unprecedented remodel project,” said Terry J. Lundgren, Macy’s,
Inc. chairman and chief executive officer.

“We are approaching the second half of 2014 with confident optimism in our
business strategies, merchandise assortments and marketing plans, tempered
with the reality that many customers still are not feeling comfortable about
spending more in an uncertain economic environment,” Lundgren said. “Thus, we
remain focused on outperforming our competitors through innovation in
omnichannel, which has added new dimensions in how consumers can shop us and
how our company can satisfy customer demand. This includes a robust Buy Online
Pickup in Store process, which has been rolled out to all full-line Macy’s
stores nationwide so that it is fully available this fall and into the holiday
shopping season. Moreover, our Millennial strategies have sharpened our
merchandising and marketing to customers in the age range of 13 to 30. This
has created new positive energy as our customers begin back-to-school
shopping.”

Sales

Sales in the second quarter of 2014 totaled $6.267 billion, up 3.3 percent
from total sales of $6.066 billion in the second quarter of 2013. Comparable
sales together with comparable sales of departments licensed to third parties
were up 4.0 percent in the second quarter of 2014 over 2013. Second quarter
comparable sales were up 3.4 percent in 2014 compared with 2013.

For the year to date, Macy’s, Inc. sales totaled $12.546 billion, up 0.7
percent from total sales of $12.453 billion in the first half of 2013.
Comparable sales together with comparable sales of departments licensed to
third parties were up 1.5 percent in the first half of 2014 over 2013.
Year-to-date comparable sales were up 0.8 percent in 2014 compared with 2013.

Please see the last page of this news release for important information
regarding the calculation of the company’s comparable sales and comparable
sales together with comparable sales of departments licensed to third parties.

In August 2014, the company closed Macy’s stores in Bradenton, FL, and York,
PA. In the second half of 2014, the company is opening three new Macy’s stores
in Sarasota, FL, Las Vegas, NV, and The Bronx in New York City. A new
Bloomingdale’s replacement store will open in Palo Alto, CA.

Operating Income

Macy’s, Inc.’s operating income totaled $571 million or 9.1 percent of sales
for the quarter ended Aug. 2, 2014, compared with operating income of $534
million or 8.8 percent of sales for the same period last year.

For the first half of 2014, Macy’s, Inc.’s operating income totaled $1.014
billion or 8.1 percent of sales, compared with operating income of $969
million or 7.8 percent of sales for the same period last year.

Cash Flow

Net cash provided by operating activities was $646 million in the first half
of 2014, compared with $664 million in the first six months of last year. Net
cash used by investing activities in the first half of 2014 was $288 million,
compared with $316 million a year ago. Net cash used by financing activities
in the first six months of 2014 was $1.001 billion, compared with $760 million
in the first half of 2013.

The company repurchased approximately 8.9 million shares of its common stock
for a total of approximately $517 million in the second quarter of 2014. In
the fiscal year to date, the company repurchased approximately 16.3 million
shares of its common stock for approximately $949 million. At Aug. 2, 2014,
the company had remaining authorization to repurchase up to approximately $2
billion of its common stock.

Looking Ahead

Expectations for the second half of 2014 remain on track, with guidance for
comparable store growth of 2 percent to 3 percent. However, even with an
improved sales trend in the second quarter, the company was unable to make up
its sales shortfall from the first quarter. This calculates to expectations
for a full-year 2014 comparable sales increase of 1.5 percent to 2 percent.
Full-year 2014 comparable sales together with comparable sales of departments
licensed to third parties now are expected to increase by 2 percent to 2.5
percent. Previous guidance was for full-year comparable sales to increase by
2.5 percent to 3 percent. The company continues to expect full-year 2014
earnings per diluted share in the range of $4.40 to $4.50, consistent with
guidance previously provided.

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 operates 13
Bloomingdale’s Outlet stores. Bloomingdale’s in Dubai is operated by Al Tayer
Group LLC under a license agreement.

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 and
non-recurring charges, competitive pressures from specialty stores, general
merchandise stores, off-price and discount stores, manufacturers’ outlets, the
Internet, mail-order catalogs and television shopping 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. In light of
these risks and uncertainties, readers are cautioned not to place undue
reliance on forward-looking statements. Except as may be required by
applicable law, Macy’s disclaims any obligation to update its forward-looking
statements for any reason.

(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 call
with analysts and investors will be held today (Aug. 13) at 10:30 a.m. (ET).
The webcast is accessible to the media and general public via the company's
website at www.macysinc.com. Analysts and investors may call in on
1-877-208-2391, passcode 7726216. A replay of the conference call can be
accessed on the website or by calling 1-888 203-1112 (same passcode) about two
hours after the conclusion of the call.

Macy's, Inc. is scheduled to present at the Goldman Sachs Global Retailing
Conference at 8:05 a.m. ET on Wednesday, Sept. 3, in New York City. Media and
investors may access a live audio webcast of the presentation at
www.macysinc.com/ir beginning at 8:05 a.m. on Sept. 3. A replay of the webcast
will be available on the company’s website.)


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
                             August 2, 2014             August 3, 2013
                                         % to                      % to
                             $            Net sales     $            Net sales
                                                                     
Net sales                    $ 6,267                    $ 6,066
                                                                     
Cost of sales (Note 2)        3,672     58.6   %       3,533     58.2   %
                                                                     
Gross margin                   2,595      41.4   %        2,533      41.8   %
                                                                     
Selling, general and          (2,024 )   (32.3  %)      (1,999 )   (33.0  %)
administrative expenses
                                                                     
Operating income               571        9.1    %        534        8.8    %
                                                                     
Interest expense – net        (100   )                  (96    )
                                                                     
Income before income           471                        438
taxes
                                                                     
Federal, state and local
income tax expense (Note      (179   )                  (157   )
3)
                                                                     
Net income                   $ 292                     $ 281    
                                                                     
Basic earnings per share     $ .81                     $ .73    
                                                                     
Diluted earnings per         $ .80                     $ .72    
share
                                                                     
Average common shares:
Basic                          359.2                      382.5
Diluted                        365.4                      389.3
                                                                     
End of period common           353.5                      377.9
shares outstanding
                                                                     
Depreciation and             $ 254                      $ 253
amortization expense
                                                                     

     
MACY’S, INC.

Consolidated Statements of Income (Unaudited)

Notes:

        Because of the seasonal nature of the retail business, the results of
(1)     operations for the 13 weeks ended August 2, 2014 and August 3, 2013
        (which do not include the Christmas season) are not necessarily
        indicative of such results for the fiscal year.
        
        Merchandise inventories are valued at the lower of cost or market
        using the last-in, first-out (LIFO) retail inventory method.
(2)     Application of the LIFO retail inventory method did not result in the
        recognition of any LIFO charges or credits affecting cost of sales for
        the 13 weeks ended August 2, 2014 or August 3, 2013.
        
        Federal, state and local income taxes differ from the federal income
(3)     tax statutory rate of 35%, principally because of the effect of state
        and local taxes, including the settlement of various tax issues and
        tax examinations.
        


MACY’S, INC.

Consolidated Statements of Income (Unaudited) (Note 1)

(All amounts in millions except percentages and per share figures)


                                                   
                             26 Weeks Ended             26 Weeks Ended
                             August 2, 2014             August 3, 2013
                                         % to                      % to
                             $            Net sales     $            Net sales
                                                                     
Net sales                    $ 12,546                   $ 12,453
                                                                     
Cost of sales (Note 2)        7,508     59.8   %       7,444     59.8   %
                                                                     
Gross margin                   5,038      40.2   %        5,009      40.2   %
                                                                     
Selling, general and          (4,024 )   (32.1  %)      (4,040 )   (32.4  %)
administrative expenses
                                                                     
Operating income               1,014      8.1    %        969        7.8    %
                                                                     
Interest expense – net        (200   )                  (193   )
                                                                     
Income before income           814                        776
taxes
                                                                     
Federal, state and local
income tax expense (Note      (298   )                  (278   )
3)
                                                                     
Net income                   $ 516                     $ 498    
                                                                     
Basic earnings per share     $ 1.42                    $ 1.29   
                                                                     
Diluted earnings per         $ 1.40                    $ 1.27   
share
                                                                     
Average common shares:
Basic                          362.5                      385.3
Diluted                        369.0                      391.9
                                                                     
End of period common           353.5                      377.9
shares outstanding
                                                                     
Depreciation and             $ 507                      $ 504
amortization expense
                                                                     

     
MACY’S, INC.
        
Consolidated Statements of Income (Unaudited)
        
Notes:
        
        Because of the seasonal nature of the retail business, the results of
(1)     operations for the 26 weeks ended August 2, 2014 and August 3, 2013
        (which do not include the Christmas season) are not necessarily
        indicative of such results for the fiscal year.
        
        Merchandise inventories are valued at the lower of cost or market
        using the last-in, first-out (LIFO) retail inventory method.
(2)     Application of the LIFO retail inventory method did not result in the
        recognition of any LIFO charges or credits affecting cost of sales for
        the 26 weeks ended August 2, 2014 or August 3, 2013.
        
        Federal, state and local income taxes differ from the federal income
(3)     tax statutory rate of 35%, principally because of the effect of state
        and local taxes, including the settlement of various tax issues and
        tax examinations.
        

                                                                
MACY’S, INC.
                                                                     
Consolidated Balance Sheets (Unaudited)

(millions)
                                                                     
                                           August 2,   February 1,   August 3,
                                           2014        2014          2013
ASSETS:
Current Assets:
Cash and cash equivalents                  $  1,630    $   2,273     $  1,424
Receivables                                   352          438          347
Merchandise inventories                       5,416        5,557        5,357
Prepaid expenses and other current           399         420         387
assets
Total Current Assets                          7,797        8,688        7,515
                                                                     
Property and Equipment – net                  7,771        7,930        8,001
Goodwill                                      3,743        3,743        3,743
Other Intangible Assets – net                 512          527          543
Other Assets                                 796         746         629
                                                                     
Total Assets                               $  20,619   $   21,634    $  20,431
                                                                     
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Short-term debt                            $  483      $   463       $  575
Merchandise accounts payable                  1,990        1,691        2,064
Accounts payable and accrued                  2,150        2,810        2,043
liabilities
Income taxes                                  120          362          67
Deferred income taxes                        393         400         422
Total Current Liabilities                     5,136        5,726        5,171
                                                                     
Long-Term Debt                                6,742        6,728        6,339
Deferred Income Taxes                         1,287        1,273        1,217
Other Liabilities                             1,647        1,658        1,849
Shareholders’ Equity                         5,807       6,249       5,855
                                                                     
Total Liabilities and Shareholders’        $  20,619   $   21,634    $  20,431
Equity
                                                                        


MACY’S, INC.

Consolidated Statements of Cash Flows (Unaudited)

(millions)
                                                           
                                             26 Weeks Ended     26 Weeks Ended
                                             August 2, 2014     August 3, 2013
Cash flows from operating activities:
Net income                                   $   516            $   498
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization                    507                504
Stock-based compensation expense                 38                 32
Amortization of financing costs and              (3      )          (5      )
premium on acquired debt
Changes in assets and liabilities:
Decrease in receivables                          86                 41
(Increase) decrease in merchandise               141                (49     )
inventories
Increase in prepaid expenses and other           (14     )          (21     )
current assets
(Increase) decrease in other assets not          (31     )          1
separately identified
Increase in merchandise accounts payable         276                442
Decrease in accounts payable and accrued         (621    )          (560    )
liabilities not separately identified
Decrease in current income taxes                 (242    )          (288    )
Increase (decrease) in deferred income           2                  (37     )
taxes
Increase (decrease) in other liabilities        (9      )         106     
not separately identified
Net cash provided by operating                  646              664     
activities
                                                                
Cash flows from investing activities:
Purchase of property and equipment               (245    )          (206    )
Capitalized software                             (116    )          (110    )
Disposition of property and equipment            24                 5
Other, net                                      49               (5      )
Net cash used by investing activities           (288    )         (316    )
                                                                
Cash flows from financing activities:
Debt issued                                      500                -
Financing costs                                  (4      )          (3      )
Debt repaid                                      (459    )          (7      )
Dividends paid                                   (204    )          (173    )
Increase (decrease) in outstanding               (61     )          2
checks
Acquisition of treasury stock                    (922    )          (785    )
Issuance of common stock                        149              206     
Net cash used by financing activities           (1,001  )         (760    )
                                                                
Net decrease in cash and cash                    (643    )          (412    )
equivalents
Cash and cash equivalents at beginning          2,273            1,836   
of period
                                                                
Cash and cash equivalents at end of          $   1,630         $   1,424   
period
                                                                            

                                 MACY’S, INC.

         Important Information Regarding Non-GAAP Financial Measures

The Company reports its financial results in accordance with 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. See the table below for supplemental financial data and a
corresponding reconciliation to the most directly comparable GAAP financial
measures. This non-GAAP financial measure 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 this non-GAAP financial measure may be significant items that
could impact the Company's financial position, results of operations and cash
flows and should therefore be considered in assessing the Company's actual
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.

Macy's, Inc. believes that providing changes in comparable sales including the
impact of growth in comparable sales of departments licensed to third parties
supplementally to its results of operations calculated in accordance with GAAP
assists in evaluating the Company's ability to generate sales growth, whether
through owned businesses or departments licensed to third parties, on a
comparable basis, and in evaluating the impact of changes in the manner in
which certain departments are operated (e.g. the conversion in 2013 of most of
the Company's previously owned athletic footwear business to licensed Finish
Line shops).

                                                       
                                  13 Weeks      26 Weeks      Guidance Range
                                  Ended         Ended         for the
                                  August 2,     August 2,     52 Weeks Ended
                                  2014          2014          January 31, 2015
                                                              
Increase in comparable sales      3.4    %      0.8    %      1.5% to 2.0%
(Note 1)
                                                              
Impact of growth in
comparable sales of               0.6    %      0.7    %      0.5       %
departments licensed to third
parties (Note 2)
                                                              
Comparable sales growth
including the impact of
growth in comparable sales of     4.0    %      1.5    %      2.0% to 2.5%
departments licensed to third
parties
                                                              

     
Notes:
        Represents the period-to-period change in net sales from stores in
(1)     operation throughout 2014 and 2013 and all net Internet sales,
        excluding commissions of departments licensed to third parties.
        
        Represents the impact on comparable sales of including the sales of
        departments licensed to third parties occurring in stores in operation
        throughout 2014 and 2013 and via the Internet in the calculation. The
        Company licenses third parties to operate certain departments in its
        stores and online and receives commissions from these third parties
(2)     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.
        
        See the cautionary statements set forth under the caption “Looking
(3)     Ahead” in this press release and in the documents referred to therein
        for important information regarding the risks and uncertainties
        associated with forward-looking statements.

Contact:

Macy’s, Inc.
Media:
Jim Sluzewski, 513-579-7764
or
Investor:
Matt Stautberg, 513-579-7780
 
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