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Macy’s, Inc. Reports Fourth Consecutive Year of Double-Digit Growth in Earnings Per Share

Furniture Industry News Update - Furniture World Magazine
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Article Summary: In fiscal 2012, the company opened a total of seven stores and closed eight stores.


Macy’s, Inc.’s reported that sales and earnings grew significantly in the fourth quarter and full year 2012, ended Feb. 2, 2013. The company exceeded the guidance it provided coming into 2012, and today is providing new guidance for continued growth and progress in 2013.

“2012 was another great year in our company’s evolving story of growth. The numbers reflect our success in pursuing the right strategies, and executing them with conviction in every part of the business with a talented team we consider to be the best in retailing,” said Terry J. Lundgren, chairman, president and chief executive officer of Macy’s, Inc. “We again added more than $1 billion in top-line sales growth in 2012. Comp sales rose by 3.7 percent for the year, on top of increases of 5.3 percent in 2011 and 4.6 percent in 2010. Earnings per share grew by double-digits for the fourth consecutive year. Operating cash flow continued to be strong, and we used excess cash to repurchase shares and double the dividend.

“The best news of all is that we continue to see significant upside opportunity ahead in those strategies that have worked so well since we reorganized the company in 2009. Going into 2013, our team is moving ahead with new plans and actions to sharpen our approach to localized merchandise assortments and marketing, which we continue to believe is Macy’s sustainable competitive advantage. We are accelerating progress in omnichannel strategies at Macy’s and Bloomingdale’s to bring together our efforts in stores, online and mobile in a manner that satisfies emerging shopping patterns and capitalizes on the strength of our inventory regardless of where the customer demand occurs. And we are engaging shoppers in a manner that engenders loyalty and builds our business with each individual customer,” he said.

“Central to our continued success at both Macy’s and Bloomingdale’s is our expertise in offering our customers fresh and exclusive fashion merchandise, and to deliver outstanding value. You can and will see this in every family of business, and particularly in our new strategies which will begin rolling out in 2013 for Millennial customers, now America’s largest generation,” Lundgren said.

Earnings were $1.83 per diluted share for the 14-week fourth quarter of 2012. Diluted earnings per share were $2.05 in the fourth quarter of 2012, excluding pre-tax expenses of $133 million ($85 million after tax or 21 cents per share) associated with the early retirement of approximately $700 million of outstanding debt, and approximately $5 million in pre-tax expenses ($3 million after tax or 1 cent per share) related primarily to the store closings announced on Jan. 3.

In the 13-week fourth quarter of 2011, earnings were $1.74 per diluted share. Diluted earnings per share were $1.70 in the fourth quarter of 2011, excluding pre-tax gains of $54 million ($34 million after tax or 8 cents per share) from the sale of store leases related to the 2006 divestiture of Lord & Taylor, and approximately $29 million in pre-tax expenses ($18 million after tax or 4 cents per share) related primarily to store closings.

For the 53 weeks of fiscal 2012, Macy’s, Inc. earned $3.24 per diluted share. Earnings per diluted share were $3.46 for fiscal 2012, excluding pre-tax expenses of $137 million ($87 million after tax or 21 cents per share) associated with the early retirement of outstanding debt, and $5 million in pre-tax expenses ($3 million after tax or 1 cent per share) related primarily to store closings. The $3.46 per share compares with management’s initial guidance provided at the beginning of the year for earnings per diluted share, excluding such items, to be in the range of $3.25 to $3.30 per diluted share in fiscal 2012.

For the 52 weeks of fiscal 2011, Macy’s, Inc. earned $2.92 per diluted share. Earnings per diluted share were $2.88 for fiscal 2011, excluding pre-tax gains of approximately $54 million ($34 million after tax or 8 cents per share) from the sale of store leases related to the 2006 divestiture of Lord & Taylor, and approximately $29 million in pre-tax expenses ($18 million after tax or 4 cents per share) related primarily to store closings.

Sales

Sales in the 14-week fourth quarter of 2012 totaled $9.350 billion, an increase of 7.2 percent, compared with sales of $8.724 billion in the 13-week fourth quarter last year. On a same-store basis – which included comparable 13-week periods this year and last – Macy’s, Inc.’s fourth quarter sales were up 3.9 percent.

The company’s total sales for the 53 weeks of fiscal 2012 totaled $27.686 billion, up 4.9 percent from total sales of $26.405 billion in the 52 weeks of fiscal 2011. On a same-store basis – which included comparable 52-week periods this year and last – Macy’s, Inc.’s fiscal 2012 sales were up 3.7 percent. This is better than initial guidance, provided at the beginning of the year, for sales to be up by approximately 3.5 percent in 2012.

Online sales (macys.com and bloomingdales.com combined) were up 47.7 percent in the fourth quarter and 41.0 percent for fiscal 2012 compared to the same periods in 2011. Online sales positively affected the company’s same-store sales by 3.3 percentage points in the fourth quarter and 2.2 percentage points in fiscal 2012 as a whole. Online sales are included in the same-store sales calculation for Macy's, Inc.

In fiscal 2012, the company opened a total of seven stores and closed eight stores. Two Macy’s stores were opened in Salt Lake City, UT, and Greendale, WI. Five Bloomingdale’s Outlet stores opened in Livermore, CA; Merrimack, NH; Garden City, NY; and Grand Prairie and Dallas, TX. As previously announced, Macy’s stores were closed in Pasadena, CA; Belmont, MA; Honolulu, HI; St. Paul, MN; and Houston, TX. The company closed a Macy’s furniture clearance center in Houston, TX, and a Macy’s men’s and home store in Santa Ana, CA, was closed and consolidated into the main store in the same shopping center. Also closed was a Bloomingdale’s Home Store in Las Vegas, NV.

Operating Income

Macy’s, Inc.’s operating income totaled $1.391 billion for the 14-week quarter ended Feb. 2, 2013, compared with operating income of $1.284 billion for the 13-week fourth quarter of fiscal 2011. Macy’s, Inc.’s fourth quarter 2012 operating income included expenses of $5 million primarily associated with store closings. Excluding these costs, operating income for the fourth quarter of 2012 was $1.396 billion or 14.9 percent of sales. Fourth quarter 2011 operating income included gains of $54 million from the sale of store leases and costs of $29 million associated primarily with store closings. Excluding these gains and costs, operating income for the fourth quarter of 2011 was $1.259 billion or 14.4 percent of sales.

For the 53 weeks of fiscal 2012, Macy’s, Inc.’s operating income totaled $2.661 billion, compared with operating income of $2.411 billion for the 52 weeks of fiscal 2011. Macy’s, Inc.’s fiscal 2012 operating income included expenses of $5 million primarily from asset impairment and store closing costs. Excluding these costs, operating income for fiscal 2012 was $2.666 billion or 9.6 percent of sales. Macy’s, Inc.’s fiscal 2011 operating income included gains of $54 million from the sale of store leases and costs of $29 million in asset impairment and other store closing costs. Excluding these gains and costs, operating income for fiscal 2011 was $2.386 billion or 9.0 percent of sales.

Cash Flow

Net cash provided by operating activities was $2.261 billion in fiscal 2012, compared with $2.093 billion in fiscal 2011. Net cash used by investing activities in fiscal 2012 was $863 million, compared with $617 million in the previous year. Thus, net cash provided before financing activities was $1.398 billion in fiscal 2011, compared with $1.476 billion in fiscal 2012.

In fiscal 2012, Macy’s, Inc. repaid $1.803 billion in debt and issued $1 billion in new debt. In fiscal 2011, the company repaid $454 million in debt and issued $800 million in new debt.

In fiscal 2012, the company repurchased approximately 35.6 million shares of its common stock for approximately $1.350 billion. At Feb. 2, 2013, the company had remaining authorization to repurchase up to approximately $1.502 billion of its common stock.

Looking Ahead

The company is assuming same-store sales growth of approximately 3.5 percent in fiscal 2013. Guidance for earnings per diluted share in fiscal 2013 is $3.90 to $3.95. Capital expenditures for the year are expected to be approximately $925 million.

In fiscal 2013, the company has announced plans for new Macy’s stores in Victorville, CA, and Gurnee, IL, as well as a Macy’s Men’s Store in Las Vegas, NV. A new Macy’s will open in Bay Shore, NY, to replace a previous location. Bloomingdale’s will open a new store in Glendale, CA, and a new Bloomingdale’s Outlet store in Rosemont, IL.


About Macy's Inc.: Macy’s, Inc. (NYSE:M), with corporate offices in Cincinnati and New York, is one of the nation’s premier retailers, with fiscal 2012 sales of $27.7 billion. The company operates about 840 stores in 45 states, the District of Columbia, Guam and Puerto Rico under the names of Macy’s and Bloomingdale’s, as well as the macys.com and bloomingdales.com websites. The company operates 12 Bloomingdale’s Outlet stores. Bloomingdale’s in Dubai is operated by Al Tayer Group LLC under a license agreement.

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