Macy's, Inc. - Quarter Report: 2017 April (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 29, 2017
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-13536
![g129830g60l10.jpg](https://www.sec.gov/Archives/edgar/data/0000794367/000079436717000081/g129830g60l10.jpg)
Incorporated in Delaware | I.R.S. Employer Identification No. | |
13-3324058 |
7 West Seventh Street
Cincinnati, Ohio 45202
(513) 579-7000
and
151 West 34th Street
New York, New York 10001
(212) 494-1602
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o | Emerging growth company o |
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class | Outstanding at May 27, 2017 | |
Common Stock, $0.01 par value per share | 304,506,714 shares |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
2
MACY’S, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(millions, except per share figures)
13 Weeks Ended | |||||||
April 29, 2017 | April 30, 2016 | ||||||
Net sales | $ | 5,338 | $ | 5,771 | |||
Cost of sales | (3,306 | ) | (3,516 | ) | |||
Gross margin | 2,032 | 2,255 | |||||
Selling, general and administrative expenses | (1,812 | ) | (1,966 | ) | |||
Settlement charges | — | (13 | ) | ||||
Operating income | 220 | 276 | |||||
Interest expense | (86 | ) | (99 | ) | |||
Premiums on early retirement of debt | (3 | ) | — | ||||
Interest income | 2 | 1 | |||||
Income before income taxes | 133 | 178 | |||||
Federal, state and local income tax expense | (63 | ) | (63 | ) | |||
Net income | 70 | 115 | |||||
Net loss attributable to noncontrolling interest | 1 | 1 | |||||
Net income attributable to Macy's, Inc. shareholders | $ | 71 | $ | 116 | |||
Basic earnings per share attributable to Macy's, Inc. shareholders | $ | .23 | $ | .37 | |||
Diluted earnings per share attributable to Macy's, Inc. shareholders | $ | .23 | $ | .37 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
3
MACY’S, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(millions)
13 Weeks Ended | |||||||
April 29, 2017 | April 30, 2016 | ||||||
Net income | $ | 70 | $ | 115 | |||
Other comprehensive income (loss): | |||||||
Actuarial loss on postretirement benefit plans, before tax | — | (36 | ) | ||||
Settlement charges, before tax | — | 13 | |||||
Amortization of net actuarial loss on post employment and postretirement benefit plans included in net income, before tax | 9 | 9 | |||||
Tax effect related to items of other comprehensive income | (3 | ) | 6 | ||||
Total other comprehensive income (loss), net of tax effect | 6 | (8 | ) | ||||
Comprehensive income | 76 | 107 | |||||
Comprehensive loss attributable to noncontrolling interest | 1 | 1 | |||||
Comprehensive income attributable to Macy's, Inc. shareholders | $ | 77 | $ | 108 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
4
MACY’S, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(millions)
April 29, 2017 | January 28, 2017 | April 30, 2016 | |||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 1,201 | $ | 1,297 | $ | 734 | |||||
Receivables | 345 | 522 | 399 | ||||||||
Merchandise inventories | 5,626 | 5,399 | 5,738 | ||||||||
Income tax receivable | — | — | 19 | ||||||||
Prepaid expenses and other current assets | 397 | 408 | 490 | ||||||||
Total Current Assets | 7,569 | 7,626 | 7,380 | ||||||||
Property and Equipment - net of accumulated depreciation and amortization of $5,013, $4,856 and $5,500 | 6,886 | 7,017 | 7,475 | ||||||||
Goodwill | 3,897 | 3,897 | 3,897 | ||||||||
Other Intangible Assets – net | 496 | 498 | 511 | ||||||||
Other Assets | 793 | 813 | 898 | ||||||||
Total Assets | $ | 19,641 | $ | 19,851 | $ | 20,161 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current Liabilities: | |||||||||||
Short-term debt | $ | 313 | $ | 309 | $ | 642 | |||||
Merchandise accounts payable | 2,028 | 1,423 | 2,015 | ||||||||
Accounts payable and accrued liabilities | 2,905 | 3,563 | 2,690 | ||||||||
Income taxes | 355 | 352 | — | ||||||||
Total Current Liabilities | 5,601 | 5,647 | 5,347 | ||||||||
Long-Term Debt | 6,412 | 6,562 | 6,990 | ||||||||
Deferred Income Taxes | 1,482 | 1,443 | 1,536 | ||||||||
Other Liabilities | 1,846 | 1,877 | 2,134 | ||||||||
Shareholders' Equity: | |||||||||||
Macy's, Inc. | 4,302 | 4,323 | 4,148 | ||||||||
Noncontrolling interest | (2 | ) | (1 | ) | 6 | ||||||
Total Shareholders’ Equity | 4,300 | 4,322 | 4,154 | ||||||||
Total Liabilities and Shareholders’ Equity | $ | 19,641 | $ | 19,851 | $ | 20,161 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
5
MACY’S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(millions)
13 Weeks Ended | |||||||
April 29, 2017 | April 30, 2016 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 70 | $ | 115 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Settlement charges | — | 13 | |||||
Depreciation and amortization | 243 | 260 | |||||
Stock-based compensation expense | 13 | 16 | |||||
Gains on sale of real estate | (68 | ) | (14 | ) | |||
Amortization of financing costs and premium on acquired debt | — | (1 | ) | ||||
Changes in assets and liabilities: | |||||||
Decrease in receivables | 170 | 158 | |||||
Increase in merchandise inventories | (227 | ) | (232 | ) | |||
Increase in prepaid expenses and other current assets | (11 | ) | (22 | ) | |||
Increase in merchandise accounts payable | 573 | 425 | |||||
Decrease in accounts payable, accrued liabilities and other items not separately identified | (551 | ) | (499 | ) | |||
Increase (decrease) in current income taxes | 3 | (246 | ) | ||||
Increase in deferred income taxes | 36 | 53 | |||||
Decrease in other liabilities not separately identified | (17 | ) | (18 | ) | |||
Net cash provided by operating activities | 234 | 8 | |||||
Cash flows from investing activities: | |||||||
Purchase of property and equipment | (117 | ) | (153 | ) | |||
Capitalized software | (60 | ) | (75 | ) | |||
Disposition of property and equipment | 96 | 16 | |||||
Other, net | 21 | 1 | |||||
Net cash used by investing activities | (60 | ) | (211 | ) | |||
Cash flows from financing activities: | |||||||
Debt issued | 3 | — | |||||
Debt repaid | (149 | ) | (3 | ) | |||
Dividends paid | (115 | ) | (112 | ) | |||
Increase (decrease) in outstanding checks | (10 | ) | 43 | ||||
Acquisition of treasury stock | (1 | ) | (130 | ) | |||
Issuance of common stock | 2 | 26 | |||||
Proceeds from noncontrolling interest | — | 4 | |||||
Net cash used by financing activities | (270 | ) | (172 | ) | |||
Net decrease in cash and cash equivalents | (96 | ) | (375 | ) | |||
Cash and cash equivalents beginning of period | 1,297 | 1,109 | |||||
Cash and cash equivalents end of period | $ | 1,201 | $ | 734 | |||
Supplemental cash flow information: | |||||||
Interest paid | $ | 76 | $ | 80 | |||
Interest received | 2 | 1 | |||||
Income taxes paid (net of refunds received) | 16 | 257 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
6
MACY’S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
Nature of Operations
Macy's, Inc. and subsidiaries (the "Company") is an omnichannel retail organization operating stores, websites and mobile applications under three brands (Macy's, Bloomingdale's and bluemercury) that sell a wide range of merchandise, including apparel and accessories (men's, women's and children's), cosmetics, home furnishings and other consumer goods. The Company's operations are conducted through approximately 840 Macy's, Macy's Backstage, Bloomingdale's, Bloomingdale's The Outlet and bluemercury stores in 45 states, the District of Columbia, Guam and Puerto Rico, as well as macys.com, bloomingdales.com and bluemercury.com. In addition, Bloomingdale's in Dubai, United Arab Emirates and Al Zahra, Kuwait are operated under a license agreement with Al Tayer Insignia, a company of Al Tayer Group, LLC.
A description of the Company's significant accounting policies is included in the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 2017 (the "2016 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 2016 10-K.
Use of Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are subject to inherent uncertainties, which may result in actual amounts differing from reported amounts.
The Consolidated Financial Statements for the 13 weeks ended April 29, 2017 and April 30, 2016, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly, in all material respects, the consolidated financial position and results of operations of the Company.
Seasonality
Because of the seasonal nature of the retail business, the results of operations for the 13 weeks ended April 29, 2017 and April 30, 2016 (which do not include the Christmas season) are not necessarily indicative of such results for the full fiscal year.
Reclassifications
Certain reclassifications were made to prior years’ amounts to conform to the classifications of such amounts for the most recent fiscal period.
Comprehensive Income
Total comprehensive income represents the change in equity during a period from sources other than transactions with shareholders and, as such, includes net income. For the Company, the only other components of total comprehensive income for the 13 weeks ended April 29, 2017 and April 30, 2016 relate to post employment and postretirement plan items. Settlement charges incurred are included as a separate component of operating expenses in the Consolidated Statements of Income. Amortization reclassifications out of accumulated other comprehensive loss are included in the computation of net periodic benefit cost (income) and are included in selling, general and administrative expenses on the Consolidated Statements of Income. See Note 4, "Benefit Plans," for further information.
Newly Adopted Accounting Pronouncements
The Company adopted Accounting Standards Update ("ASU") No. 2016-09, Improvements to Employee Share-Based Payment Accounting, effective January 29, 2017. This standard was issued to simplify several aspects of the accounting for share-based payment awards, including the income tax consequences, financial statement classification and forfeiture considerations of such awards. Upon adoption, the Company began to recognize, on a prospective basis, all excess tax benefits and tax deficiencies as income tax benefit or expense, respectively, in its Consolidated Statements of Income. This resulted in the recognition of approximately $11 million of additional income tax expense associated with net tax deficiencies for awards that were exercised, vested or expired in the 13 weeks ended April 29, 2017. Additionally, excess tax benefits have been classified as an operating activity along with other income tax cash flows in the Consolidated Statements of Cash Flows. The Company has elected to adopt such presentation on a prospective basis.
7
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
2. Earnings Per Share Attributable to Macy's, Inc. Shareholders
The following tables set forth the computation of basic and diluted earnings per share attributable to Macy's, Inc. shareholders:
13 Weeks Ended | |||||||||||||||||||||
April 29, 2017 | April 30, 2016 | ||||||||||||||||||||
Net Income | Shares | Net Income | Shares | ||||||||||||||||||
(millions, except per share data) | |||||||||||||||||||||
Net income attributable to Macy's, Inc. shareholders and average number of shares outstanding | $ | 71 | 305.0 | $ | 116 | 309.7 | |||||||||||||||
Shares to be issued under deferred compensation and other plans | — | 0.9 | |||||||||||||||||||
$ | 71 | 305.0 | $ | 116 | 310.6 | ||||||||||||||||
Basic earnings per share attributable to Macy's, Inc. shareholders | $ | .23 | $ | .37 | |||||||||||||||||
Effect of dilutive securities: | |||||||||||||||||||||
Stock options, restricted stock and restricted stock units | 1.9 | 2.9 | |||||||||||||||||||
$ | 71 | 306.9 | $ | 116 | 313.5 | ||||||||||||||||
Diluted earnings per share attributable to Macy's, Inc. shareholders | $ | .23 | $ | .37 |
In addition to the stock options, restricted stock and restricted stock units reflected in the foregoing tables, stock options to purchase 16.2 million shares of common stock and restricted stock units relating to 1.6 million shares of common stock were outstanding at April 29, 2017, but were not included in the computation of diluted earnings per share for the 13 weeks ended April 29, 2017 because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.
In addition to the stock options, restricted stock and restricted stock units reflected in the foregoing tables, stock options to purchase 11.2 million shares of common stock and restricted stock units relating to 1.0 million shares of common stock were outstanding at April 30, 2016, but were not included in the computation of diluted earnings per share for the 13 weeks ended April 30, 2016 because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.
8
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
3. Financing Activities
The following table shows the detail of debt repayments:
13 Weeks Ended | |||||||
April 29, 2017 | April 30, 2016 | ||||||
(millions) | |||||||
6.7% debentures due 2034 | $ | 11 | $ | — | |||
6.375% senior notes due 2037 | 135 | — | |||||
9.5% amortizing debentures due 2021 | 2 | 2 | |||||
9.75% amortizing debentures due 2021 | 1 | 1 | |||||
$ | 149 | $ | 3 |
During the 13 weeks ended April 29, 2017, the Company repurchased $146 million face value of senior notes and debentures. The debt repurchases were made in the open market for a total cost of $149 million, including expenses related to the transactions. Such repurchases resulted in the recognition of additional interest expense of $3 million during the 13 weeks ended April 29, 2017. This additional interest expense is presented as premium on early retirement of debt on the Consolidated Statements of Income.
4. Benefit Plans
The Company has defined contribution plans which cover substantially all employees who work 1,000 hours or more in a year. In addition, the Company has a funded defined benefit plan ("Pension Plan") and an unfunded defined benefit supplementary retirement plan ("SERP"), which provides benefits, for certain employees, in excess of qualified plan limitations. Effective January 1, 2012, the Pension Plan was closed to new participants, with limited exceptions, and effective January 2, 2012, the SERP was closed to new participants.
In February 2013, the Company announced changes to the Pension Plan and SERP whereby eligible employees no longer earn future pension service credits after December 31, 2013, with limited exceptions. All retirement benefits attributable to service in subsequent periods are provided through defined contribution plans.
In addition, certain retired employees currently are provided with specified health care and life insurance benefits ("Postretirement Obligations"). Eligibility requirements for such benefits vary, but generally state that benefits are available to eligible employees who were hired prior to a certain date and retire after a certain age with specified years of service. Certain employees are subject to having such benefits modified or terminated.
9
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The defined contribution plan expense and actuarially determined components of the net periodic benefit cost (income) associated with the defined benefit plans are as follows:
13 Weeks Ended | |||||||
April 29, 2017 | April 30, 2016 | ||||||
(millions) | |||||||
401(k) Qualified Defined Contribution Plan | $ | 21 | $ | 24 | |||
Non-Qualified Defined Contribution Plan | $ | — | $ | — | |||
Pension Plan | |||||||
Service cost | $ | 1 | $ | 1 | |||
Interest cost | 27 | 28 | |||||
Expected return on assets | (56 | ) | (56 | ) | |||
Recognition of net actuarial loss | 8 | 8 | |||||
Amortization of prior service credit | — | — | |||||
$ | (20 | ) | $ | (19 | ) | ||
Supplementary Retirement Plan | |||||||
Service cost | $ | — | $ | — | |||
Interest cost | 6 | 6 | |||||
Recognition of net actuarial loss | 2 | 2 | |||||
Amortization of prior service cost | — | — | |||||
$ | 8 | $ | 8 | ||||
Total Retirement Expense | $ | 9 | $ | 13 | |||
Postretirement Obligations | |||||||
Service cost | $ | — | $ | — | |||
Interest cost | 1 | 2 | |||||
Recognition of net actuarial gain | (1 | ) | (1 | ) | |||
Amortization of prior service cost | — | — | |||||
$ | — | $ | 1 |
During the 13 weeks ended April 30, 2016, the Company incurred $13 million of non-cash settlement charges relating to the Company's defined benefit plans. These charges relate to the pro-rata recognition of net actuarial losses associated with the Company's defined benefit plans and are a result of an increase in lump sum distributions associated with store closings, a voluntary separation program and organizational restructuring, in addition to periodic distribution activity.
10
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
5. Fair Value Measurements
The following table shows the Company's financial assets that are required to be measured at fair value on a recurring basis, by level within the hierarchy as defined by applicable accounting standards:
April 29, 2017 | April 30, 2016 | ||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements | ||||||||||||||||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||
(millions) | |||||||||||||||||||||||||||||||
Marketable equity and debt securities | $ | 90 | $ | 21 | $ | 69 | $ | — | $ | 125 | $ | 17 | $ | 108 | $ | — |
Other financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, receivables, short-term debt, merchandise accounts payable, accounts payable and accrued liabilities and long-term debt. With the exception of long-term debt, the carrying amount of these financial instruments approximates fair value because of the short maturity of these instruments. The fair values of long-term debt, excluding capitalized leases, are generally estimated based on quoted market prices for identical or similar instruments, and are classified as Level 2 measurements within the hierarchy as defined by applicable accounting standards.
The following table shows the estimated fair value of the Company's long-term debt:
April 29, 2017 | April 30, 2016 | ||||||||||||||||||||||
Notional Amount | Carrying Amount | Fair Value | Notional Amount | Carrying Amount | Fair Value | ||||||||||||||||||
(millions) | |||||||||||||||||||||||
Long-term debt | $ | 6,310 | $ | 6,385 | $ | 6,251 | $ | 6,870 | $ | 6,962 | $ | 7,113 |
6. Condensed Consolidating Financial Information
Certain debt obligations of the Company, which constitute debt obligations of Macy's Retail Holdings, Inc. ("Subsidiary Issuer"), a 100%-owned subsidiary of Macy's, Inc. ("Parent"), are fully and unconditionally guaranteed by Parent. In the following condensed consolidating financial statements, "Other Subsidiaries" includes all other direct subsidiaries of Parent, including bluemercury, Inc., FDS Bank, West 34th Street Insurance Company New York, Macy's Merchandising Corporation, Macy's Merchandising Group, Inc. and its subsidiaries Macy's Merchandising Group (Hong Kong) Limited, Macy's Merchandising Group Procurement, LLC, Macy's Merchandising Group International, LLC, Macy's Merchandising Group International (Hong Kong) Limited, and its majority-owned subsidiary Macy's China Limited. "Subsidiary Issuer" includes operating divisions and non-guarantor subsidiaries of the Subsidiary Issuer on an equity basis. The assets and liabilities and results of operations of the non-guarantor subsidiaries of the Subsidiary Issuer are also reflected in "Other Subsidiaries."
Condensed Consolidating Statements of Comprehensive Income for the 13 weeks ended April 29, 2017 and April 30, 2016, Condensed Consolidating Balance Sheets as of April 29, 2017, April 30, 2016 and January 28, 2017, and the related Condensed Consolidating Statements of Cash Flows for the 13 weeks ended April 29, 2017 and April 30, 2016 are presented on the following pages.
11
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the 13 Weeks Ended April 29, 2017
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Net sales | $ | — | $ | 2,056 | $ | 5,126 | $ | (1,844 | ) | $ | 5,338 | ||||||||
Cost of sales | — | (1,378 | ) | (3,772 | ) | 1,844 | (3,306 | ) | |||||||||||
Gross margin | — | 678 | 1,354 | — | 2,032 | ||||||||||||||
Selling, general and administrative expenses | (1 | ) | (704 | ) | (1,107 | ) | — | (1,812 | ) | ||||||||||
Operating income (loss) | (1 | ) | (26 | ) | 247 | — | 220 | ||||||||||||
Interest (expense) income, net: | |||||||||||||||||||
External | 1 | (85 | ) | — | — | (84 | ) | ||||||||||||
Intercompany | — | (34 | ) | 34 | — | — | |||||||||||||
Premium on early retirement of debt | — | (3 | ) | — | — | (3 | ) | ||||||||||||
Equity in earnings (loss) of subsidiaries | 71 | (9 | ) | — | (62 | ) | — | ||||||||||||
Income (loss) before income taxes | 71 | (157 | ) | 281 | (62 | ) | 133 | ||||||||||||
Federal, state and local income tax benefit (expense) | — | 30 | (93 | ) | — | (63 | ) | ||||||||||||
Net income (loss) | 71 | (127 | ) | 188 | (62 | ) | 70 | ||||||||||||
Net loss attributable to noncontrolling interest | — | — | 1 | — | 1 | ||||||||||||||
Net income (loss) attributable to Macy's, Inc. shareholders | $ | 71 | $ | (127 | ) | $ | 189 | $ | (62 | ) | $ | 71 | |||||||
Comprehensive income (loss) | $ | 77 | $ | (121 | ) | $ | 192 | $ | (72 | ) | $ | 76 | |||||||
Comprehensive loss attributable to noncontrolling interest | — | — | 1 | — | 1 | ||||||||||||||
Comprehensive income (loss) attributable to Macy's, Inc. shareholders | $ | 77 | $ | (121 | ) | $ | 193 | $ | (72 | ) | $ | 77 |
12
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the 13 Weeks Ended April 30, 2016
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Net sales | $ | — | $ | 2,454 | $ | 5,374 | $ | (2,057 | ) | $ | 5,771 | ||||||||
Cost of sales | — | (1,604 | ) | (3,969 | ) | 2,057 | (3,516 | ) | |||||||||||
Gross margin | — | 850 | 1,405 | — | 2,255 | ||||||||||||||
Selling, general and administrative expenses | (1 | ) | (882 | ) | (1,083 | ) | — | (1,966 | ) | ||||||||||
Settlement charges | — | (3 | ) | (10 | ) | — | (13 | ) | |||||||||||
Operating income (loss) | (1 | ) | (35 | ) | 312 | — | 276 | ||||||||||||
Interest (expense) income, net: | |||||||||||||||||||
External | 1 | (99 | ) | — | — | (98 | ) | ||||||||||||
Intercompany | — | (58 | ) | 58 | — | — | |||||||||||||
Equity in earnings (loss) of subsidiaries | 116 | 10 | — | (126 | ) | — | |||||||||||||
Income (loss) before income taxes | 116 | (182 | ) | 370 | (126 | ) | 178 | ||||||||||||
Federal, state and local income tax benefit (expense) | — | 61 | (124 | ) | — | (63 | ) | ||||||||||||
Net income (loss) | 116 | (121 | ) | 246 | (126 | ) | 115 | ||||||||||||
Net loss attributable to noncontrolling interest | — | — | 1 | — | 1 | ||||||||||||||
Net income (loss) attributable to Macy's, Inc. shareholders | $ | 116 | $ | (121 | ) | $ | 247 | $ | (126 | ) | $ | 116 | |||||||
Comprehensive income (loss) | $ | 108 | $ | (129 | ) | $ | 241 | $ | (113 | ) | $ | 107 | |||||||
Comprehensive loss attributable to noncontrolling interest | — | — | 1 | — | 1 | ||||||||||||||
Comprehensive income (loss) attributable to Macy's, Inc. shareholders | $ | 108 | $ | (129 | ) | $ | 242 | $ | (113 | ) | $ | 108 |
13
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Balance Sheet
As of April 29, 2017
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
ASSETS: | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 779 | $ | 99 | $ | 323 | $ | — | $ | 1,201 | |||||||||
Receivables | — | 118 | 227 | — | 345 | ||||||||||||||
Merchandise inventories | — | 2,560 | 3,066 | — | 5,626 | ||||||||||||||
Prepaid expenses and other current assets | — | 71 | 326 | — | 397 | ||||||||||||||
Total Current Assets | 779 | 2,848 | 3,942 | — | 7,569 | ||||||||||||||
Property and Equipment – net | — | 3,293 | 3,593 | — | 6,886 | ||||||||||||||
Goodwill | — | 3,315 | 582 | — | 3,897 | ||||||||||||||
Other Intangible Assets – net | — | 49 | 447 | — | 496 | ||||||||||||||
Other Assets | — | 45 | 748 | — | 793 | ||||||||||||||
Deferred Income Taxes | 24 | — | — | (24 | ) | — | |||||||||||||
Intercompany Receivable | 920 | — | 1,833 | (2,753 | ) | — | |||||||||||||
Investment in Subsidiaries | 3,003 | 3,535 | — | (6,538 | ) | — | |||||||||||||
Total Assets | $ | 4,726 | $ | 13,085 | $ | 11,145 | $ | (9,315 | ) | $ | 19,641 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Short-term debt | $ | — | $ | 306 | $ | 7 | $ | — | $ | 313 | |||||||||
Merchandise accounts payable | — | 841 | 1,187 | — | 2,028 | ||||||||||||||
Accounts payable and accrued liabilities | 22 | 916 | 1,967 | — | 2,905 | ||||||||||||||
Income taxes | 317 | 6 | 32 | — | 355 | ||||||||||||||
Total Current Liabilities | 339 | 2,069 | 3,193 | — | 5,601 | ||||||||||||||
Long-Term Debt | — | 6,395 | 17 | — | 6,412 | ||||||||||||||
Intercompany Payable | 18 | 2,801 | (66 | ) | (2,753 | ) | — | ||||||||||||
Deferred Income Taxes | — | 704 | 802 | (24 | ) | 1,482 | |||||||||||||
Other Liabilities | 67 | 498 | 1,281 | — | 1,846 | ||||||||||||||
Shareholders' Equity: | |||||||||||||||||||
Macy's, Inc. | 4,302 | 618 | 5,920 | (6,538 | ) | 4,302 | |||||||||||||
Noncontrolling Interest | — | — | (2 | ) | — | (2 | ) | ||||||||||||
Total Shareholders' Equity | 4,302 | 618 | 5,918 | (6,538 | ) | 4,300 | |||||||||||||
Total Liabilities and Shareholders' Equity | $ | 4,726 | $ | 13,085 | $ | 11,145 | $ | (9,315 | ) | $ | 19,641 |
14
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Balance Sheet
As of April 30, 2016
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
ASSETS: | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 287 | $ | 112 | $ | 335 | $ | — | $ | 734 | |||||||||
Receivables | — | 158 | 241 | — | 399 | ||||||||||||||
Merchandise inventories | — | 2,707 | 3,031 | — | 5,738 | ||||||||||||||
Income tax receivable | 66 | — | — | (47 | ) | 19 | |||||||||||||
Prepaid expenses and other current assets | — | 121 | 369 | — | 490 | ||||||||||||||
Total Current Assets | 353 | 3,098 | 3,976 | (47 | ) | 7,380 | |||||||||||||
Property and Equipment – net | — | 3,840 | 3,635 | — | 7,475 | ||||||||||||||
Goodwill | — | 3,315 | 582 | — | 3,897 | ||||||||||||||
Other Intangible Assets – net | — | 50 | 461 | — | 511 | ||||||||||||||
Other Assets | — | 154 | 744 | — | 898 | ||||||||||||||
Deferred Income Taxes | 23 | — | — | (23 | ) | — | |||||||||||||
Intercompany Receivable | — | — | 3,433 | (3,433 | ) | — | |||||||||||||
Investment in Subsidiaries | 4,651 | 3,810 | — | (8,461 | ) | — | |||||||||||||
Total Assets | $ | 5,027 | $ | 14,267 | $ | 12,831 | $ | (11,964 | ) | $ | 20,161 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Short-term debt | $ | — | $ | 641 | $ | 1 | $ | — | $ | 642 | |||||||||
Merchandise accounts payable | — | 872 | 1,143 | — | 2,015 | ||||||||||||||
Accounts payable and accrued liabilities | 34 | 1,192 | 1,464 | — | 2,690 | ||||||||||||||
Income taxes | — | 9 | 38 | (47 | ) | — | |||||||||||||
Total Current Liabilities | 34 | 2,714 | 2,646 | (47 | ) | 5,347 | |||||||||||||
Long-Term Debt | — | 6,971 | 19 | — | 6,990 | ||||||||||||||
Intercompany Payable | 787 | 2,646 | — | (3,433 | ) | — | |||||||||||||
Deferred Income Taxes | — | 726 | 833 | (23 | ) | 1,536 | |||||||||||||
Other Liabilities | 58 | 547 | 1,529 | — | 2,134 | ||||||||||||||
Shareholders' Equity: | |||||||||||||||||||
Macy's, Inc. | 4,148 | 663 | 7,798 | (8,461 | ) | 4,148 | |||||||||||||
Noncontrolling Interest | — | — | 6 | — | 6 | ||||||||||||||
Total Shareholders' Equity | 4,148 | 663 | 7,804 | (8,461 | ) | 4,154 | |||||||||||||
Total Liabilities and Shareholders' Equity | $ | 5,027 | $ | 14,267 | $ | 12,831 | $ | (11,964 | ) | $ | 20,161 |
15
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Balance Sheet
As of January 28, 2017
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
ASSETS: | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 938 | $ | 81 | $ | 278 | $ | — | $ | 1,297 | |||||||||
Receivables | — | 169 | 353 | — | 522 | ||||||||||||||
Merchandise inventories | — | 2,565 | 2,834 | — | 5,399 | ||||||||||||||
Prepaid expenses and other current assets | — | 84 | 324 | — | 408 | ||||||||||||||
Total Current Assets | 938 | 2,899 | 3,789 | — | 7,626 | ||||||||||||||
Property and Equipment – net | — | 3,397 | 3,620 | — | 7,017 | ||||||||||||||
Goodwill | — | 3,315 | 582 | — | 3,897 | ||||||||||||||
Other Intangible Assets – net | — | 51 | 447 | — | 498 | ||||||||||||||
Other Assets | — | 47 | 766 | — | 813 | ||||||||||||||
Deferred Income Taxes | 26 | — | — | (26 | ) | — | |||||||||||||
Intercompany Receivable | 375 | — | 2,428 | (2,803 | ) | — | |||||||||||||
Investment in Subsidiaries | 3,137 | 3,540 | — | (6,677 | ) | — | |||||||||||||
Total Assets | $ | 4,476 | $ | 13,249 | $ | 11,632 | $ | (9,506 | ) | $ | 19,851 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Short-term debt | $ | — | $ | 306 | $ | 3 | $ | — | $ | 309 | |||||||||
Merchandise accounts payable | — | 590 | 833 | — | 1,423 | ||||||||||||||
Accounts payable and accrued liabilities | 16 | 1,064 | 2,483 | — | 3,563 | ||||||||||||||
Income taxes | 71 | 16 | 265 | — | 352 | ||||||||||||||
Total Current Liabilities | 87 | 1,976 | 3,584 | — | 5,647 | ||||||||||||||
Long-Term Debt | — | 6,544 | 18 | — | 6,562 | ||||||||||||||
Intercompany Payable | — | 2,803 | — | (2,803 | ) | — | |||||||||||||
Deferred Income Taxes | — | 688 | 781 | (26 | ) | 1,443 | |||||||||||||
Other Liabilities | 66 | 500 | 1,311 | — | 1,877 | ||||||||||||||
Shareholders' Equity: | |||||||||||||||||||
Macy's, Inc. | 4,323 | 738 | 5,939 | (6,677 | ) | 4,323 | |||||||||||||
Noncontrolling Interest | — | — | (1 | ) | — | (1 | ) | ||||||||||||
Total Shareholders' Equity | 4,323 | 738 | 5,938 | (6,677 | ) | 4,322 | |||||||||||||
Total Liabilities and Shareholders' Equity | $ | 4,476 | $ | 13,249 | $ | 11,632 | $ | (9,506 | ) | $ | 19,851 |
16
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Cash Flows
For the 13 Weeks Ended April 29, 2017
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net income (loss) | $ | 71 | $ | (127 | ) | $ | 188 | $ | (62 | ) | $ | 70 | |||||||
Equity in (earnings) loss of subsidiaries | (71 | ) | 9 | — | 62 | — | |||||||||||||
Dividends received from subsidiaries | 211 | — | — | (211 | ) | — | |||||||||||||
Depreciation and amortization | — | 89 | 154 | — | 243 | ||||||||||||||
(Increase) decrease in working capital | 244 | 130 | (485 | ) | — | (111 | ) | ||||||||||||
Other, net | 7 | 22 | 3 | — | 32 | ||||||||||||||
Net cash provided (used) by operating activities | 462 | 123 | (140 | ) | (211 | ) | 234 | ||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Purchase of property and equipment and capitalized software, net | — | 93 | (174 | ) | — | (81 | ) | ||||||||||||
Other, net | — | — | 21 | — | 21 | ||||||||||||||
Net cash provided (used) by investing activities | — | 93 | (153 | ) | — | (60 | ) | ||||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Debt repaid, net of debt issued | — | (149 | ) | 3 | — | (146 | ) | ||||||||||||
Dividends paid | (155 | ) | — | (171 | ) | 211 | (115 | ) | |||||||||||
Common stock acquired, net of issuance of common stock | 2 | — | (1 | ) | — | 1 | |||||||||||||
Intercompany activity, net | (476 | ) | (18 | ) | 494 | — | — | ||||||||||||
Other, net | 8 | (31 | ) | 13 | — | (10 | ) | ||||||||||||
Net cash provided (used) by financing activities | (621 | ) | (198 | ) | 338 | 211 | (270 | ) | |||||||||||
Net increase (decrease) in cash and cash equivalents | (159 | ) | 18 | 45 | — | (96 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 938 | 81 | 278 | — | 1,297 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 779 | $ | 99 | $ | 323 | $ | — | $ | 1,201 |
17
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Cash Flows
For the 13 Weeks Ended April 30, 2016
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net income (loss) | $ | 116 | $ | (121 | ) | $ | 246 | $ | (126 | ) | $ | 115 | |||||||
Impairments and other charges | — | 3 | 10 | — | 13 | ||||||||||||||
Equity in earnings of subsidiaries | (116 | ) | (10 | ) | — | 126 | — | ||||||||||||
Dividends received from subsidiaries | 182 | — | — | (182 | ) | — | |||||||||||||
Depreciation and amortization | — | 102 | 158 | — | 260 | ||||||||||||||
(Increase) decrease in working capital | (34 | ) | 55 | (451 | ) | — | (430 | ) | |||||||||||
Other, net | 19 | 16 | 15 | — | 50 | ||||||||||||||
Net cash provided (used) by operating activities | 167 | 45 | (22 | ) | (182 | ) | 8 | ||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Purchase of property and equipment and capitalized software, net | — | (54 | ) | (158 | ) | — | (212 | ) | |||||||||||
Other, net | — | (2 | ) | 3 | — | 1 | |||||||||||||
Net cash used by investing activities | — | (56 | ) | (155 | ) | — | (211 | ) | |||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Debt issued, net of debt repaid | — | (3 | ) | — | — | (3 | ) | ||||||||||||
Dividends paid | (112 | ) | — | (182 | ) | 182 | (112 | ) | |||||||||||
Common stock acquired, net of issuance of common stock | (104 | ) | — | — | — | (104 | ) | ||||||||||||
Proceeds from noncontrolling interest | — | — | 4 | — | 4 | ||||||||||||||
Intercompany activity, net | (415 | ) | 52 | 363 | — | — | |||||||||||||
Other, net | 10 | (17 | ) | 50 | — | 43 | |||||||||||||
Net cash provided (used) by financing activities | (621 | ) | 32 | 235 | 182 | (172 | ) | ||||||||||||
Net increase (decrease) in cash and cash equivalents | (454 | ) | 21 | 58 | — | (375 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 741 | 91 | 277 | — | 1,109 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 287 | $ | 112 | $ | 335 | $ | — | $ | 734 |
18
MACY'S, INC.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
For purposes of the following discussion, all references to "first quarter of 2017" and "first quarter of 2016" are to the Company's 13-week fiscal periods ended April 29, 2017 and April 30, 2016, respectively.
The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes included elsewhere in this report, as well as the financial and other information included in the 2016 10-K. The following discussion contains forward-looking statements that reflect the Company's plans, estimates and beliefs. The Company's actual results could materially differ from those discussed in these forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this report (particularly in "Forward-Looking Statements") and in the 2016 10-K (particularly in "Risk Factors" and in "Forward-Looking Statements"). This discussion includes non-GAAP financial measures. For information about these measures, see the disclosure under the caption "Important Information Regarding Non-GAAP Financial Measures" on pages 23 to 24.
Overview
The Company is an omnichannel retail organization operating stores, websites and mobile applications under three brands (Macy's, Bloomingdale's and bluemercury) that sell a wide range of merchandise, including apparel and accessories (men's, women's and children's), cosmetics, home furnishings and other consumer goods. The Company operates approximately 840 stores in 45 states, the District of Columbia, Guam and Puerto Rico. As of April 29, 2017, the Company's operations were conducted through Macy's, Bloomingdale's, Bloomingdale's The Outlet, Macy's Backstage, bluemercury and Macy's China Limited. In addition, Bloomingdale's in Dubai, United Arab Emirates and Al Zahra, Kuwait are operated under a license agreement with Al Tayer Insignia, a company of Al Tayer Group, LLC.
The Company has begun the implementation of a strategy to transform its omnichannel business and focus on key growth areas, embrace customer centricity, and optimize value in its real estate portfolio. Inspired by the North Star which guided the Company's founder, R.H. Macy, to an optimistic future during his sailing days, there are five points to this strategy.
1. | From Familiar to Favorite includes everything the Company does to further its brand awareness and identity to its core customers. Actions include understanding and anticipating customers’ needs, strengthening the Company's fashion authority and executing initiatives around its loyalty and pricing strategies. |
2. | It Must Be Macy’s encompasses delivering the products and experiences customers love and are exclusive to the Company. This includes styles and home fashion for every day and special occasions, from the Company's leading private brands, as well as exclusive national brands or assortments. It celebrates the Company's iconic events and includes strategies to appeal to more value-oriented customers. |
3. | Every Experience Matters, in-store and online. The Company's competitive advantage is the ability to combine the human touch in its physical stores with cutting-edge technology in its mobile applications and websites. Key to this point is the enhancement of a customer's experience as they explore our stores, mobile applications and websites, find their favorite styles, sizes and colors, and receive their purchase through the shopping channels they prefer. |
4. | Funding our Future represents the decisions and actions the Company takes to identify and realize resources to fuel growth. This involves a focus on cost reduction and reinvestment as well as creating value from the Company's real estate portfolio. |
5. | What’s New, What’s Next explores and develops those innovations to turn consumer and technology trends to the Company's advantage and drive growth. This includes exploring previously unmet customer needs and making smart investment decisions based on customer insights and analytics. |
The Company has taken a number of key steps over the past couple of years to position itself to successfully implement the North Star strategy. Specifically, in January 2017, the Company announced a series of actions to streamline its store portfolio, intensify cost efficiency efforts and execute its real estate strategy. Further, in August 2016, the Company announced its intention to close approximately 100 Macy’s stores, 66 of which were closed by the end of the first quarter of 2017 and 2 additional stores will close by mid-2017. In addition, the Company has reorganized the field structure that supports the remaining stores and conducted a significant restructuring of the Company's central operations to focus resources on strategic priorities and reduce expense.
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MACY'S, INC.
The Company’s real estate strategy is designed to create value through both monetization and redevelopment of certain assets:
• | In January 2016, the Company completed a $270 million real estate transaction to recreate Macy's Brooklyn store. The Company continues to own and operate the first four floors and lower level of its existing nine-story retail store, which is currently being reconfigured and remodeled. The remaining portion of the store and its nearby parking facility were sold to Tishman Speyer in a single sales transaction. As the sales agreement required the Company to conduct certain redevelopment activities at Macy's Brooklyn store, the Company is recognizing the gain on the transaction, approximately $250 million, under the percentage of completion method of accounting over the redevelopment period. Accordingly, $126 million has been recognized to-date and the remaining gain is anticipated to be recognized over the next two years. |
• | In fiscal 2016, the Company had property and equipment sales, primarily related to real estate, totaling $673 million in cash proceeds and recognized real estate gains of $209 million. These proceeds include the cash received from the sale of the Company's 248,000 square-foot Union Square Men’s building in San Francisco for approximately $250 million in January 2017. The Company will use part of the proceeds to consolidate the Men’s store into its main Union Square store. The Company will lease the Men’s store property for two to three years as it completes the reconfiguration of the main store. The Company is expected to recognize a gain of approximately $235 million in January 2018. |
• | In January 2017, the Company finalized the formation of a strategic alliance with Brookfield Asset Management, a leading global alternative asset manager, to create increased value in its real estate portfolio. Under the alliance, Brookfield has an exclusive right for up to 24 months to create a “pre-development plan” for each of approximately 50 Macy’s real estate assets, with an option for Macy’s to continue to identify and add assets into the alliance. The breadth of opportunity within the portfolio ranges from the additional development on a portion of an asset (such as a Company-controlled land parcel adjacent to a store) to the complete redevelopment of an existing store. Once a "pre-development plan" is created, the Company has the option to accept the pre-development plan and then either contribute the asset into a joint venture for the development plan to commence or sell the asset to Brookfield. If the Company chooses to contribute the asset into a joint venture, the Company may elect to participate as a funding or non-funding partner. After development, the joint venture may sell the asset and distribute proceeds accordingly. |
• | In February 2017, the Company sold its downtown Minneapolis store and parking facility for $59 million of proceeds and recognized a gain of approximately $47 million in the first quarter of 2017. |
• | In April 2017, the Company launched a marketing effort for the upper floors of its flagship State Street Macy's store in downtown Chicago. Development and increased utilization of the upper floors are expected to drive more foot traffic to the store. |
• | In May 2017, the Company signed a contract to sell an additional two floors of the downtown Seattle Macy's store; four floors were sold in a similar transaction in 2015. This transaction is expected to close in the Fall of 2017. |
In the first quarter, the Company opened new Macy’s stores in Murray, UT and Los Angeles, CA as well as one Bloomingdale’s store in Kuwait under a license agreement with Al Tayer Group. The Company expects to open new Macy's and Bloomingdale's stores in Al Maryah Central in Abu Dhabi, UAE, in fiscal 2018 under a license agreement with Al Tayer Group and two additional Bloomingdale's stores in San Jose, CA and Norwalk, CT in fiscal 2019.
Both Macy's off-price business, Macy's Backstage, and its clearance strategy, Last Act, have been successful in providing unique value opportunities to both existing and new Macy's customers. The Company is currently focused on opening new Macy's Backstage stores within existing Macy's store locations. In the first quarter, the Company opened 11 new Macy’s Backstage stores within existing Macy’s stores, bringing the total locations in operation to 33 (7 freestanding and 26 inside Macy's stores) as of April 29, 2017. The Company expects to open 19 additional Macy’s Backstage locations inside Macy’s stores in the remainder of fiscal 2017.
The Company is focused on accelerating the growth of its luxury beauty products and spa retailer, bluemercury, by opening additional freestanding bluemercury stores in urban and suburban markets, enhancing its online capabilities and adding bluemercury products and boutiques to Macy's stores. 10 new freestanding bluemercury locations were opened in the first quarter of 2017 and 20 additional locations are expected to open later in the fiscal year. As of April 29, 2017, the Company is operating 131 bluemercury locations (111 freestanding and 20 inside Macy's stores).
The Company's operations are impacted by competitive pressures from department stores, off-price stores, specialty stores, mass merchandisers, online retailers and all other retail channels. The Company's operations are also impacted by general consumer spending levels, including the impact of general economic conditions, consumer disposable income levels,
20
MACY'S, INC.
consumer confidence levels, the availability, cost and level of consumer debt, the costs of basic necessities and other goods and the effects of weather or natural disasters and other factors over which the Company has little or no control.
In recent years, consumer spending levels have been affected to varying degrees by a number of factors, including modest economic growth, uncertainty regarding governmental spending and tax policies, unemployment levels, tightened consumer credit, an improving housing market and a fluctuating stock market. In addition, consumer spending levels of international customers are impacted by the strength of the U.S. dollar relative to foreign currencies. These factors have affected, to varying degrees, the amount of funds that consumers are willing and able to spend for discretionary purchases, including purchases of some of the merchandise offered by the Company.
All economic conditions ultimately affect the Company's overall operations. However, the effects of economic conditions can be experienced differently and at different times, in the various geographic regions in which the Company operates, in relation to the different types of merchandise that the Company offers for sale, or in relation to each of the Company's branded operations.
The Company affirms its previously provided guidance for full-year fiscal 2017. The Company expects comparable sales on an owned basis to decline between 2.2 percent and 3.3 percent, with comparable sales on an owned plus licensed basis to decline between 2.0 percent and 3.0 percent. Total sales are expected to be down between 3.2 percent and 4.3 percent in fiscal 2017. Total sales for fiscal 2017 reflect a 53rd week, whereas comparable sales are on a 52-week basis. Adjusted diluted earnings per share of between $3.37 and $3.62 are expected in fiscal 2017, excluding the impact of the anticipated settlement charges related to the company’s defined benefit plans and premiums and fees associated with debt repurchases. Excluding the impact of the anticipated fourth quarter gain on the sale of the Union Square Men’s building in San Francisco, the anticipated settlement charges related to the company’s defined benefit plans and premiums and fees associated with debt repurchases, adjusted diluted earnings per share of $2.90 to $3.15 are expected in fiscal 2017.
Results of Operations
Comparison of the First Quarter of 2017 and the First Quarter of 2016
First Quarter of 2017 | First Quarter of 2016 | ||||||||||||||||
Amount | % to Sales | Amount | % to Sales | ||||||||||||||
(dollars in millions, except per share figures) | |||||||||||||||||
Net sales | $ | 5,338 | $ | 5,771 | |||||||||||||
Decrease in sales | (7.5 | ) | % | (7.4 | ) | % | |||||||||||
Decrease in comparable sales | (5.2 | ) | % | (6.1 | ) | % | |||||||||||
Cost of sales | (3,306 | ) | (61.9 | ) | % | (3,516 | ) | (60.9 | ) | % | |||||||
Gross margin | 2,032 | 38.1 | % | 2,255 | 39.1 | % | |||||||||||
Selling, general and administrative expenses | (1,812 | ) | (34.0 | ) | % | (1,966 | ) | (34.1 | ) | % | |||||||
Settlement charges | — | — | % | (13 | ) | (0.2 | ) | % | |||||||||
Operating income | 220 | 4.1 | % | 276 | 4.8 | % | |||||||||||
Interest expense - net | (84 | ) | (98 | ) | |||||||||||||
Premiums on early retirement of debt | (3 | ) | — | ||||||||||||||
Income before income taxes | 133 | 178 | |||||||||||||||
Federal, state and local income tax expense | (63 | ) | (63 | ) | |||||||||||||
Net income | 70 | 115 | |||||||||||||||
Net loss attributable to noncontrolling interest | 1 | 1 | |||||||||||||||
Net income attributable to Macy's, Inc. shareholders | $ | 71 | 1.3 | % | $ | 116 | 2.0 | % | |||||||||
Diluted earnings per share attributable to Macy's, Inc. shareholders | $ | .23 | $ | .37 | |||||||||||||
Diluted earnings per share attributable to Macy's, Inc. shareholders, excluding the impact of settlement charges and premium on early retirement of debt | $ | .24 | $ | .40 |
21
MACY'S, INC.
Net Sales
Net sales for the first quarter of 2017 decreased $433 million or 7.5% compared to the first quarter of 2016 due to fiscal year-end 2016 store closures and the decline in comparable sales. The decrease in comparable sales on an owned basis for the first quarter of 2017 was 5.2% compared to the first quarter of 2016. The decrease in comparable sales on an owned plus licensed basis for the first quarter of 2017 was 4.6% compared to the first quarter of 2016. Sales during the quarter were strongest in women's apparel, particularly active and dresses, fine jewelry, fragrances, women's shoes, furniture and mattresses. Sales were less strong in handbags, fashion jewelry and fashion watches, housewares and tabletop. The Company’s digital business continued its strong growth with double digit gains at both macys.com and bloomingdales.com. Geographically, the Company’s strongest business was the Southwest region.
Cost of Sales
Cost of sales for the first quarter of 2017 decreased $210 million and the cost of sales rate as a percent to net sales increased to 61.9% compared to 60.9% for the first quarter of 2016. The increase in the cost of sales rate as a percent to net sales was due to increased promotional activity in the beauty business, price competition in housewares and strong growth in lower margin tech watches. The Company expects these trends to continue and is working to offset the gross margin pressure by increasing margin through faster inventory turnover, growth in the private brand and Last Act businesses. The application of the last-in, first-out (LIFO) retail inventory method did not result in the recognition of any LIFO charges or credits affecting cost of sales in either period.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses for the first quarter of 2017 decreased $154 million or 7.8% from the first quarter of 2016. The SG&A rate as a percent to net sales of 34.0% was 10 basis points lower in the first quarter of 2017, as compared to the first quarter of 2016. SG&A expenses in the first quarter of 2017 reflect higher asset sale gains, reduced expenses from the year-end 2016 stores closures and the impact of restructuring activities, partially offset by investments in digital growth and initiatives at bluemercury. The first quarter of 2017 included asset sale gains of $68 million, including $47 million related to the downtown Minneapolis property and $9 million related to the Macy's Brooklyn transaction. This compares to $14 million of asset sale gains recognized in the first quarter of 2016, inclusive of approximately $4 million related to the Macy's Brooklyn transaction. Income from credit operations was $180 million in the first quarter of 2017, a decrease of $2 million compared to $182 million recognized in the first quarter of 2016. Income from credit operations excludes costs related to new account originations and fraudulent transactions incurred on the Company’s private label credit cards.
Settlement Charges
The first quarter of 2016 included $13 million of non-cash settlement charges relating to the Company's defined benefit plans. These charges relate to the pro-rata recognition of net actuarial losses and are the result of an increase in lump sum distributions associated with store closings, a voluntary separation program and organizational restructuring, and periodic distribution activity. No such settlement charges were recognized in the first quarter of 2017.
Net Interest Expense
Net interest expense for the first quarter of 2017 decreased $14 million from the first quarter of 2016 due to a reduction in the Company's debt from $7.6 billion as of the end of the first quarter of 2016 to $6.7 billion as of the end of the first quarter of 2017. This approximate $900 million reduction is due to the maturity and early payment of certain of the Company's borrowings.
Premiums on Early Retirement of Debt
The Company repurchased approximately $146 million face value of senior notes and debentures in the first quarter of 2017. The debt repurchases were made in the open market for a total cost of approximately $149 million, including expenses related to the transactions. As a result of the debt repurchases, the Company booked $3 million in premium and fees in the first quarter of 2017.
Effective Tax Rate
The Company's effective tax rate of 47.4% for the first quarter of 2017 and 35.4% for the first quarter of 2016 differ from the federal income tax statutory rate of 35%, and on a comparative basis, principally because of the effect of state and local income taxes, including the settlement of various tax issues and tax examinations as well as the recognition of approximately $11 million of net tax deficiencies associated with share-based payment awards due to the adoption of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. Historically, the Company had recognized such amounts as an offset to accumulated excess tax benefits previously recognized in additional paid-in capital.
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Net Income Attributable to Macy's, Inc. Shareholders
Net income attributable to Macy's, Inc. shareholders for the first quarter of 2017 decreased $45 million or 38.8% compared to the first quarter of 2016, reflecting lower net sales and gross margin, partially offset by lower SG&A and interest expenses.
Diluted Earnings Per Share Attributable to Macy's, Inc. Shareholders
Diluted earnings per share for the first quarter of 2017 decreased $.14 or 37.8% compared to the first quarter of 2016, reflecting lower net income. Excluding the impact of settlement charges and the premiums on early retirement of debt, diluted earnings per share for the first quarter of 2017 decreased $.16 or 40.0% compared to the first quarter of 2016.
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 changes in comparable sales on an owned plus licensed basis, which includes 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. Management believes that excluding certain items that may vary substantially in frequency and magnitude from diluted earnings per share attributable to Macy's, Inc. shareholders provides a useful supplemental measure that assists in evaluating the Company's ability to generate earnings and leverage sales 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, where 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 because the timing and amount of excluded items (e.g., retirement plan settlement charges and premiums on the early retirement of debt) 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 and 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.
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Change in Comparable Sales
The following is a tabular reconciliation of the 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), which the Company believes to be the most directly comparable GAAP financial measure.
First Quarter of 2017 | First Quarter of 2016 | |||||
Decrease in comparable sales on an owned basis (note 1) | (5.2 | )% | (6.1 | )% | ||
Impact of growth in comparable sales of departments licensed to third parties (note 2) | 0.6 | % | 0.5 | % | ||
Decrease in comparable sales on an owned plus licensed basis | (4.6 | )% | (5.6 | )% |
Notes:
(1) | 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 undergoing remodeling, expansion or relocation remain in the comparable sales calculation unless the store is closed for a significant period of time. Definitions and calculations of comparable sales differ among companies in the retail industry. |
(2) | 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 the 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 Company believes that the amounts of commissions earned on sales of departments licensed to third parties are not material to its results of operations for the periods presented. |
Diluted Earnings Per Share Attributable to Macy's, Inc. Shareholders, Excluding Certain Items
The following is a tabular reconciliation of the non-GAAP financial measure diluted earnings per share attributable to Macy's, Inc. shareholders, excluding certain items, to GAAP diluted earnings per share attributable to Macy's, Inc., shareholders, which the Company believes to be the most directly comparable GAAP measure.
First Quarter of 2017 | First Quarter of 2016 | |||||||
Diluted earnings per share attributable to Macy's, Inc. shareholders | $ | .23 | $ | .37 | ||||
Add back the pre-tax impact of settlement charges | — | .04 | ||||||
Add back the pre-tax impact of premiums on the early retirement of debt | .02 | — | ||||||
Deduct the income tax impact of settlement charges and premiums on the early retirement of debt | (.01 | ) | (.01 | ) | ||||
Diluted earnings per share attributable to Macy's, Inc. shareholders, excluding the impact of settlement charges and premiums on the early retirement of debt | $ | .24 | $ | .40 |
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Liquidity and Capital Resources
The Company's principal sources of liquidity are cash from operations, cash on hand and the credit facility described below.
Operating Activities
Net cash provided by operating activities in the first quarter of 2017 was $234 million, compared to $8 million provided in the first quarter of 2016, primarily due to the timing of estimated income tax payments as compared to the previous year. Certain of the Company's estimated tax payments occurred in May 2017 whereas similar tax payments had been made in the first quarter of 2016.
Investing Activities
Net cash used by investing activities was $60 million in the first quarter of 2017, compared to net cash used by investing activities of $211 million in the first quarter of 2016. Investing activities for the first quarter of 2017 include purchases of property and equipment totaling $117 million and capitalized software of $60 million, compared to purchases of property and equipment totaling $153 million and capitalized software of $75 million for the first quarter of 2016. Additionally, the Company received cash of $96 million for the disposition of property and equipment in the first quarter of 2017, primarily related to real estate transactions, as compared to $16 million received in the first quarter of 2016.
Financing Activities
Net cash used by the Company for financing activities was $270 million for the first quarter of 2017, including the payment of $115 million of cash dividends and debt repurchase payments of $149 million.
Net cash used by the Company for financing activities was $172 million for the first quarter of 2016, including $130 million for the acquisition of the Company's common stock, primarily under its share repurchase program, the payment of $112 million of cash dividends, and the repayment of $3 million of debt, partially offset by an increase in outstanding checks of $43 million and $26 million from the issuance of common stock, primarily related to the exercise of stock options.
The Company is party to a $1,500 million unsecured commercial paper program. The Company may issue and sell commercial paper in an aggregate amount outstanding at any particular time not to exceed its then-current combined borrowing availability under the bank credit agreement with certain financial institutions. As of April 29, 2017 the Company did not have any borrowings outstanding under its commercial paper program.
As of April 29, 2017 the Company was required to maintain a specified interest coverage ratio for the latest four quarters of no less than 3.25 and a specified leverage ratio as of and for the latest four quarters of no more than 3.75 under the credit agreement. The Company's interest coverage ratio for the first quarter of 2017 was 7.43 and its leverage ratio at April 29, 2017 was 2.40, in each case as calculated in accordance with the credit agreement.
On May 11, 2017 the Company announced that the Board of Directors declared a quarterly dividend of 37.75 cents per share on its common stock, payable July 3, 2017 to the Company's shareholders of record at the close of business on June 15, 2017.
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Outlook
Management believes that, with respect to the Company's current operations, cash on hand and funds from operations, together with its credit facility and other capital resources, will be sufficient to cover the Company's reasonably foreseeable working capital, capital expenditure and debt service requirements and other cash requirements in both the near term and over the longer term. The Company's ability to generate funds from operations may be affected by numerous factors, including general economic conditions and levels of consumer confidence and demand; however, the Company expects to be able to manage its working capital levels and capital expenditure amounts so as to maintain sufficient levels of liquidity. To the extent that the Company's cash balances from time to time exceed amounts that are needed to fund its immediate liquidity requirements, the Company will consider alternative uses of some or all of such excess cash. Such alternative uses may include, among others, the redemption or repurchase of debt, equity or other securities through open market purchases, privately negotiated transactions or otherwise, and the funding of pension related obligations. Depending upon its actual and anticipated sources and uses of liquidity, conditions in the capital markets and other factors, the Company will from time to time consider the issuance of debt or other securities, or other possible capital markets transactions, for the purpose of raising capital which could be used to refinance current indebtedness or for other corporate purposes, including the redemption or repurchase of debt, equity or other securities through open market purchases, privately negotiated transactions or otherwise, and the funding of pension related obligations.
The Company intends from time to time to consider additional acquisitions of, and investments in, retail businesses and other complementary assets and companies. Acquisition transactions, if any, are expected to be financed from one or more of the following sources: cash on hand, cash from operations, borrowings under existing or new credit facilities and the issuance of long-term debt or other securities, including common stock.
New Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, which establishes principles to report useful information to financial statements users about the nature, timing and uncertainty of revenue from contracts with customers. ASU No. 2014-09 along with related amendments ASU Nos. 2016-20, 2016-12, 2016-10, 2016-08, and 2015-14 comprise ASC Topic 606, Revenue from Contracts with Customers, and provide guidance that is applicable to all contracts with customers regardless of industry-specific or transaction-specific fact patterns. The new standard and its related updates are effective for the Company beginning on February 4, 2018. On the effective date, the Company will apply the new guidance retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application. The Company is currently evaluating the methods of adoption and has not yet decided on the method to be applied when the new revenue guidance is effective.
Combined with the guidance in ASU No. 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), the Company currently estimates the material impacts to its consolidated financial statements to include changes in the presentation of estimates for future sales returns and related recoverable assets, presentation of earnings from credit operations, timing of certain real estate gains (particularly those with leaseback components) and the presentation of certain consignment and license arrangements.
The Company does not expect the new guidance to materially impact the revenue recognition associated with gift card breakage as well as the accounting for its warranty arrangements, loyalty programs and other customer incentive arrangements. The Company is continuing to evaluate the impact of the new standards and the final determinations of the impact of the new guidance may differ from these initial estimates.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize substantially all leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right of use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.
The new standard is effective for the Company on February 3, 2019, with early adoption permitted. The new standard is to be adopted utilizing a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements, with certain practical expedients available. The Company has not yet decided whether it will early adopt the new standard but the Company currently plans to elect all of the standard's available practical expedients on adoption.
The Company expects that the new lease standard will have a material impact on the Company's consolidated financial statements. While the Company is continuing to assess the effects of adoption, the Company currently believes the most
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significant changes relate to the recognition of new ROU assets and lease liabilities on the consolidated balance sheets for real property and personal property operating leases as well as changes to the timing of recognition of certain real estate asset sale gains in the consolidated statements of income due to application of the new sale-leaseback guidance and ASU No. 2017-05 as discussed above. The Company expects that substantially all of its operating lease commitments will be subject to the new guidance and will be recognized as operating lease liabilities and ROU assets upon adoption. A significant change in leasing activity between the date of this report and adoption is not expected.
In March 2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715), which requires employers to disaggregate the service cost component from other components of net periodic benefit costs and to disclose the amounts of net periodic benefit costs that are included in each income statement line item. The standard requires employers to report the service cost component in the same line item as other compensation costs and to report the other components of net periodic benefit costs (which include interest costs, expected return on plan assets, amortization of prior service cost or credits and actuarial gains and losses) separately and outside a subtotal of operating income. The income statement guidance requires application on a retrospective basis. The new standard is effective for the Company beginning in the first quarter of 2018, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial position, results of operations, and related disclosures. The Company plans to adopt this standard on February 4, 2018.
The Company does not anticipate that the adoption of any other recent accounting pronouncements will have a material impact on the Company's consolidated financial position, results of operations or cash flows.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
There have been no material changes to the Company’s market risk as described in the Company's 2016 10-K. For a discussion of the Company’s exposure to market risk, refer to the Company’s market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of the 2016 10-K.
Item 4. | Controls and Procedures. |
The Company's Chief Executive Officer and Chief Financial Officer have carried out, as of April 29, 2017, with the participation of the Company's management, an evaluation of the effectiveness of the Company's disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of April 29, 2017 the Company's disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in reports the Company files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission (the "SEC") rules and forms, and that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in the Company's internal control over financial reporting that occurred during the Company's most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. | Legal Proceedings. |
The Company and its subsidiaries are involved in various proceedings that are incidental to the normal course of their businesses. As of the date of this report, the Company does not expect that any of such proceedings will have a material adverse effect on the Company’s financial position or results of operations.
Item 1A. | Risk Factors. |
There have been no material changes to the Risk Factors described in Part I, "Item 1A. Risk Factors" in the Company's 2016 10-K.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
The following table provides information regarding the Company's purchases of Common Stock during the first quarter of 2017.
Total Number of Shares Purchased | Average Price Paid per Share ($) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Maximum Dollar Value of Shares that may yet be Purchased Under the Plans or Programs (1)($) | ||||||||
(thousands) | (thousands) | (millions) | |||||||||
January 29, 2017 – February 25, 2017 | 38 | 31.86 | — | 1,716 | |||||||
February 26, 2017 – April 1, 2017 | — | — | — | 1,716 | |||||||
April 2, 2017 – April 29, 2017 | — | — | — | 1,716 | |||||||
38 | 31.86 | — |
___________________
(1) | Commencing in January 2000, the Company's Board of Directors has from time to time approved authorizations to purchase, in the aggregate, up to $18 billion of Common Stock as of April 29, 2017. All authorizations are cumulative and do not have an expiration date. As of April 29, 2017, $1,716 million of authorization remained unused. The Company may continue, discontinue or resume purchases of Common Stock under these or possible future authorizations in the open market, in privately negotiated transactions or otherwise at any time and from time to time without prior notice. |
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Item 5. | Other Information. |
Forward-Looking Statements
This report and other reports, statements and information previously or subsequently filed by the Company with the SEC contain or may contain forward-looking statements. Such statements are based upon the beliefs and assumptions of, and on information available to, the management of the Company at the time such statements are made. The following are or may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995: (i) statements preceded by, followed by or that include the words "may," "will," "could," "should," "believe," "expect," "future," "potential," "anticipate," "intend," "plan," "think," "estimate" or "continue" or the negative or other variations thereof, and (ii) statements regarding matters that are not historical facts. Such forward-looking statements are subject to various risks and uncertainties, including risks and uncertainties relating to:
• | the possible invalidity of the underlying beliefs and assumptions; |
• | competitive pressures from department and specialty stores, general merchandise stores, manufacturers' outlets, off-price and discount stores, and all other retail channels, including the Internet, catalogs and television; |
• | the Company's ability to remain competitive and relevant as consumers' shopping behaviors migrate to other shopping channels; |
• | general consumer-spending levels, including the impact of general economic conditions, consumer disposable income levels, consumer confidence levels, the availability, cost and level of consumer debt, the costs of basic necessities and other goods and the effects of the weather or natural disasters; |
• | conditions to, or changes in the timing of, proposed transactions, including planned store closings, and changes in expected synergies, cost savings and non-recurring charges; |
• | the success of the Company's operational decisions (e.g., product curation, marketing programs) and strategic initiatives; |
• | the cost of employee benefits as well as attracting and retaining quality employees; |
• | transactions involving our real estate portfolio; |
• | the seasonal nature of the Company's business; |
• | possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions; |
• | possible actions taken or omitted to be taken by third parties, including customers, suppliers, business partners, competitors and legislative, regulatory, judicial and other governmental authorities and officials; |
• | changes in relationships with vendors and other product and service providers; |
• | currency, interest and exchange rates and other capital market, economic and geo-political conditions; |
• | unstable political conditions, civil unrest, terrorist activities and armed conflicts; |
• | the possible inability of the Company's manufacturers or transporters to deliver products in a timely manner or meet the Company's quality standards; |
• | the Company's reliance on foreign sources of production, including risks related to the disruption of imports by labor disputes, regional health pandemics, and regional political and economic conditions; |
• | duties, taxes, other charges and quotas on imports; and |
• | possible systems failures and/or security breaches, including, any security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or company information, or the failure to comply with various laws applicable to the Company in the event of such a breach. |
In addition to any risks and uncertainties specifically identified in the text surrounding such forward-looking statements, the statements in the immediately preceding sentence and the statements under captions such as "Risk Factors" in reports, statements and information filed by the Company with the SEC from time to time constitute cautionary statements identifying important factors that could cause actual amounts, results, events and circumstances to differ materially from those expressed in or implied by such forward-looking statements.
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Item 6. | Exhibits. |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) | |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) | |
32.1 | Certification by Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act | |
32.2 | Certification by Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act | |
101 | The following financial statements from Macy's, Inc.'s Quarterly Report on Form 10-Q for the quarter ended April 29, 2017, filed on June 2, 2017, formatted in XBRL: (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements. |
___________________
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SIGNATURES
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, thereunto duly authorized.
MACY’S, INC. | ||
By: | /s/ ELISA D. GARCIA | |
Elisa D. Garcia Chief Legal Officer and Secretary | ||
By: | /s/ FELICIA WILLIAMS | |
Felicia Williams Executive Vice President, Controller and Enterprise Risk (Principal Accounting Officer) |
Date: June 2, 2017
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