Macy's, Inc. - Quarter Report: 2024 August (Form 10-Q)

Shareholders' Equity Total Liabilities and Shareholders’ Equity$ $ $

The accompanying notes are an integral part of these Consolidated Financial Statements.

MACY’S, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

(millions)

Common
Stock

Additional
Paid-In
Capital

Accumulated
Equity

Treasury
Stock

Accumulated
Other
Comprehensive
Income (Loss)

Total
Shareholders'
Equity

Balance at February 3, 2024

()

Net income

Common stock dividends

($ per share)

()

Stock-based compensation expense

Stock issued under stock plans

()

Cumulative-effect adjustment (a)

Balance at May 4, 2024

()

Net income

Common stock dividends

($ per share)

()

Stock-based compensation expense

Stock issued under stock plans

()

Balance at August 3, 2024

()

(a)

The accompanying notes are an integral part of these Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - (Continued)

(Unaudited)

(millions)

Common
Stock

Additional
Paid-In
Capital

Accumulated
Equity

Treasury
Stock

Accumulated
Other
Comprehensive
Income (Loss)

Total
Shareholders'
Equity

Balance at January 28, 2023

()

Net income

Other comprehensive income

Common stock dividends

($ per share)

()

Stock repurchases

()

Stock-based compensation expense

Stock issued under stock plans

()

Balance at April 29, 2023

()

Net loss

()

Other comprehensive income

Common stock dividends

($ per share)

()

Stock-based compensation expense

Stock issued under stock plans

()

Balance at July 29, 2023

()

Debt repaid()()Dividends paid()()Decrease in outstanding checks()()Acquisition of treasury stock ()Net cash used by financing activities()()Net decrease in cash, cash equivalents and restricted cash()()Cash, cash equivalents and restricted cash beginning of period Cash, cash equivalents and restricted cash end of period$ $ Supplemental cash flow information: Interest paid$ $ Interest received Income taxes paid, net of refunds received Restricted cash, end of period

The accompanying notes are an integral part of these Consolidated Financial Statements.

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MACY’S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

states, the District of Columbia, Puerto Rico and Guam. As of August 3, 2024, the Company's operations and operating segments were conducted through Macy's (both full line and small format), Macy's Backstage, Bloomingdale's, Bloomingdale's The Outlet, Bloomie's, and Bluemercury.

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 February 3, 2024 (the "2023 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 2023 10-K.

Merchandise Inventories

On February 4, 2024, the Company changed its inventory valuation method. Previously, inventories were principally valued at lower of cost or market using the last-in, first-out ("LIFO") retail inventory method ("RIM"). Commencing in fiscal 2024, inventories are valued at the lower of cost or market using the LIFO cost method and as such are not directly comparable to the prior year. The LIFO cost method is preferable as compared to LIFO RIM because it improves the cost accuracy and transparency of inventory at the unit level and better allows the organization to evaluate selling margin realized on each sale. Additionally, it is consistent with the practices of many other retailers, improving comparability. Reported results for periods prior to fiscal 2024 have not been restated due to impracticability as the Company’s systems did not capture historical period-specific information necessary to value the inventory under the cost method. The impact of the change in accounting method had an immaterial effect on the Consolidated Financial Statements as of February 4, 2024.

Under the LIFO cost method, the item-cost method is used to determine inventory cost before the application of any LIFO adjustment, as necessary. This method involves assigning costs to each item individually based on the actual purchase costs of that item. The Company continuously monitors whether the carrying cost of inventory exceeds its market value. Excess inventories may be disposed of through the normal course of business. The Company writes down the carrying value of inventories that are not expected to be sold at or above cost based on historical results.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

See Note 5, "Retirement Plans," for further information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

$()

Shares to be issued under

deferred compensation and other plans

$ $() Basic earnings (loss) per share$ $()Effect of dilutive securities:

Stock options and restricted

stock units

$ $() Diluted earnings (loss) per share$ $()26 Weeks EndedAugust 3, 2024July 29, 2023Net IncomeSharesNet IncomeShares(millions, except per share data)

Net income and average

number of shares outstanding

$ $ Shares to be issued under deferred compensation and other plans $ $ Basic earnings per share$ $ Effect of dilutive securities:

Stock options and restricted

stock units

$ $ Diluted earnings per share$ $

In addition to the stock options and restricted stock units reflected in the foregoing table, stock options to purchase million shares of common stock and restricted stock units relating to million shares of common stock were outstanding at August 3, 2024, but were not included in the computation of diluted earnings per share for the 13 and 26 weeks ended August 3, 2024 because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met. Stock options to purchase million shares of common stock and restricted stock units relating to million shares of common stock were outstanding as of July 29, 2023 but were not included in the computation of diluted earnings per share for the 26 weeks ended July 29, 2023 because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.

million shares of common stock and restricted stock units relating to million shares of common stock were excluded from the calculation of diluted loss per share and, therefore, there was no difference in the weighted average number of common shares for basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive.

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MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

% of total revenue for each of the 13 and 26 weeks ended August 3, 2024 and July 29, 2023. $ $ $ Women's Apparel Men's and Kids' Home/Other (a) Total Net Sales $ $ Credit card revenues, net$ $ $ $ Macy's Media Network revenue, net (b) Other Revenue Total Revenue$ $ $ $

(a)Other primarily includes restaurant sales, allowance for merchandise returns adjustments and breakage income from unredeemed gift cards.

Macy's accounted for % of the Company's net sales for each of the 13 and 26 weeks ended August 3, 2024 and July 29, 2023. In addition, digital sales accounted for % and % of the Company's net sales for the 13 weeks ended August 3, 2024 and July 29, 2023, respectively, and % of the Company's net sales for both the 26 weeks ended August 3, 2024 and July 29, 2023.

million, $ million and $ million as of August 3, 2024, February 3, 2024 and July 29, 2023, respectively. Included in prepaid expenses and other current assets is an asset totaling $ million, $ million and $ million as of August 3, 2024, February 3, 2024 and July 29, 2023, respectively, for the recoverable cost of merchandise estimated to be returned by customers.

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MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

million, $ million and $ million as of August 3, 2024, February 3, 2024 and July 29, 2023, respectively.

Credit Card Revenues

In 2005, in connection with the sale of most of the Company's credit card accounts and related receivable balances to Citibank, the Company and Citibank entered into a long-term marketing and servicing alliance pursuant to the terms of a Credit Card Program Agreement ("Credit Card Program"). Subsequent to this initial arrangement and associated amendments, on December 13, 2021, the Company entered into the sixth amendment to the amended and restated Credit Card Program with Citibank (the "Program Agreement"). The changes to the Credit Card Program's financial structure are not materially different from its previous terms. As part of the Program Agreement, the Company receives payments for providing a combination of interrelated services and intellectual property to Citibank in support of the underlying Credit Card Program. Revenue based on the spending activity of the underlying accounts is recognized as the respective card purchases occur and the Company's profit share is recognized based on the performance of the underlying portfolio. Revenue associated with the establishment of new credit accounts and assisting in the receipt of payments for existing accounts is recognized as such activities occur. Credit card revenues include finance charges, late fees and other revenue generated by the Company’s Credit Card Program, net of fraud losses and expenses associated with establishing new accounts, credit card funding costs and bad debt reserves and are a component of other revenue on the consolidated statements of income.

. The Program Agreement provides for, among other things, (i) the ownership by Citibank of the accounts purchased by Citibank, (ii) the ownership by Citibank of new accounts opened by the Company’s customers, (iii) the provision of credit by Citibank to the holders of the credit cards associated with the foregoing accounts, (iv) the servicing of the foregoing accounts, and (v) the allocation between Citibank and the Company of the economic benefits and burdens associated with the foregoing and other aspects of the alliance. Pursuant to the Program Agreement, the Company continues to provide certain servicing functions related to the accounts and related receivables owned by Citibank and receives compensation from Citibank for these services. The amounts earned under the Program Agreement related to the servicing functions are deemed adequate compensation and, accordingly, no servicing asset or liability has been recorded on the Consolidated Balance Sheets.

million and $ million of standby letters of credit outstanding under the ABL Credit Facility, respectively, which reduced the available borrowing capacity to $ million and $ million, respectively. The Company had outstanding borrowings under the ABL Credit Facility as of August 3, 2024 and July 29, 2023.

repurchase shares of its common stock. During the 26 weeks ended July 29, 2023, the Company repurchased approximately million shares of its common stock pursuant to its existing stock purchase authorization for a total of approximately $ million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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.

$ $ $ Pension PlanInterest cost$ $ Expected return on assets()()()()Recognition of net actuarial loss $()$()$()$()Supplementary Retirement PlanInterest cost$ $ $ $ Recognition of net actuarial loss $ $ $ $ Total Retirement Expense$ $ $ $ Postretirement Obligations Interest cost$ $ $ $ Recognition of net actuarial gain()()()()Amortization of prior service credit()()$()$()$()$()$()$()

In connection with the Company's defined benefit plans, for the 13 and 26 weeks ended July 29, 2023, the Company incurred a non-cash settlement charge of $ million. This charge relates to the pro-rata recognition of net actuarial losses associated with the Company's Pension Plan and is the result of the transfer of pension obligations for certain retirees and beneficiaries under the Pension Plan through the purchase of a group annuity contract with an insurance company.

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MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

$ $ $ February 3, 2024 July 29, 2023

Other financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, receivables, certain short-term investments and other assets, 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.

$ $ February 3, 2024 July 29, 2023

Nonfinancial Assets

The Company reviews the carrying amount of goodwill and intangible assets with indefinite lives for impairment annually and whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable. For the Company's annual impairment assessment as of the end of fiscal May 2024, the Company elected to perform a qualitative impairment test on its goodwill and intangible assets with indefinite lives and concluded that it is more likely than not that the fair values exceeded the carrying values and therefore goodwill and intangible assets with indefinite lives were not impaired.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

million, $ million and $ million, respectively.

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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 "second quarter of 2024" and "second quarter of 2023" are to the Company's 13-week fiscal periods ended August 3, 2024 and July 29, 2023, respectively. References to the "first half of 2024" or "2024" and the "first half of 2023" or "2023" are to the Company's 26-week fiscal periods ended August 3, 2024 and July 29, 2023, 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 2023 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 "Risk Factors" and in "Forward-Looking Statements") and in the 2023 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".

Quarterly Overview

The Company continues to view fiscal 2024 as a transition and investment year as it implements its new strategy, A Bold New Chapter, which is designed to return the Company to enterprise growth, unlock shareholder value, improve the omni-channel experience and better serve its customers. During the second quarter of 2024, the Company continued to make progress on its three-year Bold New Chapter strategy, as follows:

•.Strengthen the Macy's nameplate

◦Rationalize store base: At the end of fiscal 2023, the Company announced it had identified approximately 150 underproductive Macy's locations for closure through fiscal 2026 (collectively, the "non-go-forward" locations), which will allow for monetization of these non-go-forward locations and prioritization of investments in the approximately 350 remaining Macy's locations (collectively, the "go-forward" locations) where the Company believes it has the most opportunity to improve square footage productivity. For the non-go-forward Macy's locations and distribution centers, the Company is thoughtfully and strategically approaching monetization to execute accretive deals and is encouraged by the pace and quality of deal activity to date. As a result, the Company now expects to close approximately 55 locations in fiscal 2024 versus its prior expectations of roughly 50.

◦Launch of First 50 Stores: The First 50 locations are a key component of the Macy's Bold New Chapter growth strategy as they are an early indicator for go-forward Macy's nameplate growth and ultimately the Macy's, Inc. go-forward business' ability to achieve comparable sales growth. They serve as pilots to test ideas with new product, visual merchandising and staffing initiatives. Initiatives at these locations have gained traction and include:

▪Focused staffing in key departments such as shoes, handbags, ready-to-wear as well as fitting room and checkout,

▪Enhanced merchandise offerings to emphasize freshness, relevance and inspiration with a focus on variety rather than redundancy by editing existing assortments and adding new brands,

▪Modernizing our visual presentations, and

▪Offering unique store-level activations and community events.

The First 50 achieved its second consecutive quarter of comparable sales growth. Net Promoter Scores of the First 50 locations increased approximately 600 basis points from the second quarter of 2023 and were over 200 basis points above the other Macy's go-forward locations. The Company plans to implement women's shoes and handbag staffing tests in roughly 100 additional go-forward Macy's locations this fall.

◦Revitalize assortment: The Company is focused on offering new product across categories. In the second quarter of 2024, Macy's experienced ongoing sales strength in fragrance and improvement in women’s ready-to-wear apparel compared to the second quarter of 2023. Macy's private brand reimagination is progressing as planned with a positive response from customers in ready-to-wear, including elevated fashion and quality in the Company's heritage labels. The Company has completed the majority of its planned brand exits. Additionally, the Company introduced new market and private brands that more closely align to customer demand.

◦Rollout of additional Macy's small format stores: The Company opened five Macy's small format locations during the second quarter of 2024, bringing the total small format location count to 18. The Company continues to plan to bring the total number of Macy's small format locations to an expected 24 by the end of fiscal 2024.

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MACY'S, INC.

◦Grow digital: Digital continues to serve as both a gateway to the Macy's brand and a source of commerce and omni engagement. The Company is making progress on optimizing the customer journey, with a focus on search engine optimization, site enhancements, more transparent pricing and a better mobile experience. Macy's digital visits increased 0.7% while the conversion rate decreased 30 basis points compared to the second quarter of 2023.

•.Accelerate luxury growth

◦The Company continues its plans to expand its luxury store footprint by approximately 20% through fiscal 2026.

▪Bloomingdale's: The Company expects to open approximately 15 small format (Bloomie's and Bloomingdale's the Outlet) locations through fiscal 2026. Comparable sales at the small format locations outperformed the broader Bloomingdale's fleet. Advanced contemporary market brands were well-received and serve as growth engines for the brand. Net Promoter Scores improved over 250 basis points compared to the second quarter of 2023 and remain a strength for the Bloomingdale's nameplate.

▪Bluemercury: Bluemercury opened one new location and completed one remodel in the second quarter of 2024; its 14th consecutive quarter of comparable sales growth driven by continued strength in skincare and the expansion of key brand partners both in skincare and fragrances. The new and remodeled stores elevate Bluemercury's service model, spa integration and product mix and have outperformed the total Bluemercury fleet in the second quarter of 2024.

•.Simplify and modernize end-to-end operations

◦The Company is actively advancing on solutions to reduce organizational complexity and generate cost savings to fund growth investments. During the second quarter of 2024, the Company made improvements to its fulfillment network productivity and continued to simplify its technology ecosystem. These investments have improved the customer experience through faster online delivery and higher product in-stocks, while contributing to bottom-line performance and cash flow generation.

Comparable sales highlights for the second quarter of 2024 versus the second quarter of 2023 related to components of the Bold New Chapter strategy are as follows:

•Macy's, Inc. comparable sales declined 4.0% on an owned basis and declined 3.3% on an owned-plus-licensed-plus-marketplace basis.

◦Macy's, Inc. go-forward business comparable sales, inclusive of go-forward locations and digital across nameplates, declined 3.8% on an owned basis and declined 3.0% on an owned-plus-licensed-plus-marketplace basis.

•Company's nameplate highlights include:

◦Macy's comparable sales declined 4.5% on an owned basis and declined 3.6% on an owned-plus-licensed-plus-marketplace basis.

▪Go-forward business comparable sales, inclusive of Macy’s go-forward locations and digital, declined 4.3% on an owned basis and declined 3.3% on an owned-plus-licensed-plus-marketplace basis. Go-forward locations comparable sales declined 2.4% on an owned basis and declined 2.3% on an owned-plus-licensed basis.

•First 50 locations comparable sales, included within go-forward locations comparable sales, increased 0.8% on an owned basis and increased 1.0% on an owned-plus-licensed basis.

•Non-First 50 go-forward locations comparable sales, included within go-forward locations comparable sales, declined 3.8% on an owned basis and declined 3.7% on an owned-plus-licensed basis.

▪Macy's non-go-forward locations comparable sales declined 6.5% on both an owned and owned-plus-licensed basis.

◦Bloomingdale's comparable sales declined 1.1% on an owned basis and declined 1.4% on an owned-plus-licensed-plus-marketplace basis1.

◦Bluemercury comparable sales increased 2.0% on an owned basis.

1 Bloomingdale's excludes one non-go-forward location.

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MACY'S, INC.

Results of Operations

Comparison of the Second Quarter of 2024 and the Second Quarter of 2023


	Second Quarter of 2024							Second Quarter of 2023
	Amount			% to Net Sales		% to Total Revenue		Amount			% to Net Sales		% to Total Revenue
	(dollars in millions, except per share figures)
Net sales	$	4,937						$	5,130
Other revenue	159			3.2	%			150			2.9	%
Total revenue	5,096							5,280
Cost of sales	(2,938)			(59.5)	%			(3,176)			(61.9)	%
Selling, general and administrative expenses	(1,973)					(38.7)	%	(1,980)					(37.5)	%
Gains on sale of real estate	36					0.7	%	4					0.1	%
Impairment, restructuring and other benefits (costs)	1					—	%	(4)					(0.1)	%
Operating income	222					4.4	%	124					2.3	%

Diluted earnings (loss) per share	$	0.53						$	(0.08)

Supplemental Financial Measures
Gross margin2	$	1,999		40.5	%			$	1,954		38.1	%

Decrease in comparable sales	(4.0)		%					(8.2)		%

Supplemental Non-GAAP Financial Measures
Decrease in comparable sales on an owned-plus-licensed-plus-marketplace basis	(3.3)		%					(7.3)		%
Adjusted diluted earnings per share	$	0.53						$	0.26
EBITDA	$	439						$	221
Adjusted EBITDA	$	438						$	347

2 Gross margin is not directly comparable to the prior year given the change in inventory valuation method from LIFO RIM to LIFO cost on February 4, 2024. Gross margin is defined as net sales less cost of sales.

See pages 25 to 28 for reconciliations of the supplemental non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.


	Second Quarter of 2024			Second Quarter of 2023
Net sales	$	4,937		$	5,130
Decrease in comparable sales	(4.0)		%	(8.2)		%
Decrease in comparable sales on an owned-plus-licensed-plus-marketplace basis	(3.3)		%	(7.3)		%

Net sales for the second quarter of 2024 decreased $193 million, or 3.8%, compared to the second quarter of 2023. During the quarter, net sales were impacted by ongoing macroeconomic conditions, including inflationary pressures and an increasingly complex news cycle. Macy's experienced strong performance in the First 50 locations, which benefited from enhanced merchandising through elevated product rollouts across top markets and new brands. Performance continued to be strong in fragrances and improved in ready-to-wear. The Company experienced weaknesses in men's apparel, handbags and home.

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	Second Quarter of 2024				Second Quarter of 2023
	$		% to Net Sales		$		% to Net Sales
Credit card revenues, net	$	125	2.5	%	$	120	2.3	%
Macy's Media Network, net	34		0.7	%	30		0.6	%
Other revenue	$	159	3.2	%	$	150	2.9	%

The increase in other revenues included a $5 million increase in credit card revenues. Credit card revenues in the second quarter of 2023 were negatively impacted by a change in net credit loss trends. Macy's Media Network grew $4 million, or 13% from the second quarter of 2023, driven by higher advertiser and campaign counts.


	Second Quarter of 2024			Second Quarter of 2023
Cost of sales	$	(2,938)		(3,176)
As a percent to net sales	59.5		%	61.9		%
Gross margin	$	1,999		$	1,954
As a percent to net sales	40.5		%	38.1		%

Gross margin rate and merchandise margin rate increased 240 basis points and 210 basis points, respectively, in the second quarter of 2024 compared to the second quarter of 2023. The increase in both gross margin and merchandise margin rates primarily reflected lower year-over-year discounting and favorable shortage due to the Company's asset protection work, and partially offset by the Company's change in inventory valuation method. Delivery expense as a percent of net sales improved 30 basis points from the second quarter of 2023 driven by lower shipped sales volumes and improved delivery expense due to cost savings and process reengineering initiatives.


	Second Quarter of 2024			Second Quarter of 2023
SG&A expenses	$	(1,973)		$	(1,980)
As a percent to total revenue	38.7		%	37.5		%

SG&A expenses decreased $7 million, or 0.4%, in the second quarter of 2024 compared to the second quarter of 2023 due to the Company's appropriate cost controls while it protected customer-facing investments, particularly in First 50 locations. The increase in SG&A expenses as a percent to total revenue in the second quarter of 2024 was due to a decline in total revenue, mainly net sales, compared to the second quarter of 2023.


	Second Quarter of 2024		Second Quarter of 2023
Gains on sale of real estate	$	36	$	4

Asset sale gains in the second quarter of 2024 mainly related to the sale of one Macy's store.


	Second Quarter of 2024		Second Quarter of 2023
Settlement charges	$	—	$	(122)

Settlement accounting was not required in the second quarter of 2024. During the second quarter of 2023, the Company recognized a non-cash settlement charge of $122 million associated with the transfer of fully funded pension obligations for certain retirees and beneficiaries through the purchase of a group annuity contract with an insurance company.


	Second Quarter of 2024		Second Quarter of 2023
Net interest expense	$	(31)	$	(36)

The decrease in net interest expense in the second quarter of 2024 compared to the second quarter of 2023 was primarily driven by an increase in interest income on investments.

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	Second Quarter of 2024		Second Quarter of 2023
Effective tax rate	23.1	%	26.7	%
Federal income statutory rate	21	%	21	%

The income tax expense of $45 million, or 23.1% of pretax income, for the second quarter of 2024 and the income tax benefit of $8 million, or 26.7% of pretax loss, for second quarter of 2023, reflect a different effective tax rate as compared to the Company’s federal income tax statutory rate of 21%. The income tax effective rates for the second quarter of 2024 and the second quarter of 2023 were impacted primarily by the effect of state and local taxes.

Comparison of the 26 Weeks Ended August 3, 2024 and July 29, 2023


	26 Weeks Ended August 3, 2024							26 Weeks Ended July 29, 2023
	Amount			% to Net Sales		% to Total Revenue		Amount			% to Net Sales		% to Total Revenue
	(dollars in millions, except per share figures)
Net sales	$	9,783						$	10,112
Other revenue	313			3.2	%			341			3.4	%
Total revenue	10,096							10,453
Cost of sales	(5,884)			(60.1)	%			(6,164)			(61.0)	%
Selling, general and administrative expenses	(3,884)					(38.5)	%	(3,930)					(37.6)	%
Gains on sale of real estate	37					0.4	%	15					0.1	%
Impairment, restructuring and other costs	(19)					(0.2)	%	(6)					(0.1)	%
Operating income	$	346				3.4	%	$	368				3.5	%

Diluted earnings per share	$	0.75						$	0.48

Supplemental Financial Measures
Gross margin2	$	3,899		39.9	%			$	3,948		39.0	%

Decrease in comparable sales	(2.6)		%					(8.1)		%

Supplemental Non-GAAP Financial Measures
Decrease in comparable sales on an owned-plus-licensed-plus-marketplace basis	(1.8)		%					(7.2)		%
Adjusted diluted earnings per share	$	0.80						$	0.82
EBITDA	$	783						$	687
Adjusted EBITDA	$	802						$	815

See pages 25 to 28 for reconciliations of the supplemental non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.


	2024			2023
Net sales	$	9,783		$	10,112
Decrease in comparable sales	(2.6)		%	(8.1)		%
Decrease in comparable sales on an owned-plus-licensed-plus-marketplace basis	(1.8)		%	(7.2)		%

Net sales for 2024 decreased $329 million, or 3.3%, compared to 2023. Net sales were impacted by ongoing macroeconomic conditions, including inflationary pressures and an increasingly complex news cycle. Macy's experienced strong performance in the First 50 locations, which benefited from various initiatives including, but not limited to, enhanced merchandising through elevated product rollouts across top markets and new brands and staffing.

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	2024				2023
	$		% to Net Sales		$		% to Net Sales
Credit card revenues, net	$	242	2.5	%	$	282	2.8	%
Macy's Media Network, net	71		0.7	%	59		0.6	%
Other revenue	$	313	3.2	%	$	341	3.4	%

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MACY'S, INC.


	13 Weeks Ended July 29, 2023 vs. 13 Weeks Ended July 30, 2022		26 Weeks Ended July 29, 2023 vs. 26 Weeks Ended July 30, 2022
	Macy's, Inc.
Decrease in comparable sales on an owned basis (Note 1)	(8.2	%)	(8.1	%)
Impact of departments licensed to third parties and marketplace sales (Note 2)	0.9	%	0.9	%
Decrease in comparable sales on an owned-plus-licensed-plus-marketplace basis	(7.3	%)	(7.2	%)

Notes:

(1)Represents the period-to-period percentage change in net sales from stores in operation for one full fiscal year for the 13 and 26 weeks ended August 3, 2024 and July 29, 2023. Such calculation includes all digital sales and excludes commissions from departments licensed to third parties and marketplace. Stores impacted by a natural disaster or undergoing significant expansion or shrinkage remain in the comparable sales calculation unless the store, or material portion of the store, is closed for a significant period of time. Definitions and calculations of comparable sales may 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, including marketplace sales, in the calculation of comparable sales. Macy’s and Bloomingdale’s license third parties to operate certain departments in their stores and online, including Macy’s and Bloomingdale’s digital Marketplace, and receive commissions from these third parties based on a percentage of their net sales, while Bluemercury does not participate in licensed or marketplace businesses. In its financial statements prepared in conformity with GAAP, the Company includes these commissions (rather than sales of the departments licensed to third parties and marketplace) in its net sales. The Company does not, however, include any amounts in respect of licensed department or marketplace sales (or any commissions earned on such sales) in its comparable sales in accordance with GAAP (i.e., on an owned basis). The amounts of commissions earned on sales of departments licensed to third parties and from the digital marketplace are not material to its net sales for the periods presented.

EBITDA and Adjusted EBITDA

The following is a tabular reconciliation of the non-GAAP financial measure EBITDA and Adjusted EBITDA to GAAP net income (loss), which the Company believes to be the most directly comparable GAAP measure.


	13 Weeks Ended August 3, 2024		13 Weeks Ended July 29, 2023		26 Weeks Ended August 3, 2024		26 Weeks Ended July 29, 2023
	(millions)



Net income (loss)	$	150	$	(22)	$	212	$	133
Interest expense - net	31		36		62		73

Federal, state and local income tax expense (benefit)	45		(8)		80		48
Depreciation and amortization	213		215		429		433
EBITDA	$	439	$	221	$	783	$	687
Impairment, restructuring and other costs (benefits)	(1)		4		19		6
Settlement charges	—		122		—		122
Adjusted EBITDA	$	438	$	347	$	802	$	815

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MACY'S, INC.

Adjusted Net Income and Adjusted Diluted Earnings Per Share

The following is a tabular reconciliation of the non-GAAP financial measures adjusted net income to GAAP net income (loss) and adjusted diluted earnings per share to GAAP diluted earnings (loss) per share, which the Company believes to be the most directly comparable GAAP measures.


	13 Weeks Ended August 3, 2024					13 Weeks Ended July 29, 2023
	Net Income			Diluted Earnings Per Share		Net Income (Loss)		Diluted Earnings (Loss) Per Share
	(millions, except per share figures)
As reported	$	150		$	0.53	$	(22)	$	(0.08)
Impairment, restructuring and other costs (benefits)	(1)			—		4		0.01
Settlement charges	—			—		122		0.44

Income tax impact of certain items noted above	—			—		(33)		(0.11)
As adjusted to exclude certain items above	$	149		$	0.53	$	71	$	0.26

	26 Weeks Ended August 3, 2024					26 Weeks Ended July 29, 2023
	Net Income			Diluted Earnings Per Share		Net Income		Diluted Earnings Per Share
	(millions, except per share figures)
As reported	$	212		$	0.75	$	133	$	0.48
Impairment, restructuring and other costs	19			0.07		6		0.01
Settlement charges	—			—		122		0.44

10.1			Macy's, Inc. 2024 Equity and Incentive Compensation Plan (incorporated by reference to Exhibit 99.1 to the Company's Registration Statement on Form S-8 (Registration No. 333-279923) filed June 3, 2024)

22			List of Subsidiary Guarantors (incorporated by reference to Exhibit 22 to the Company’s Annual Report on Form 10-K (File No. 1-13536) for the fiscal year ended January 28, 2023)

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 August 3, 2024, filed on September 4, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Changes in Shareholders' Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements.

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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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/ TRACY M. PRESTON
		Tracy M. Preston Chief Legal Officer and Corporate Secretary

	By:	/s/ PAUL GRISCOM
		Paul Griscom Senior Vice President and Controller

Date: September 4, 2024

Macy's, Inc. - Quarter Report: 2024 August (Form 10-Q)

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