Macy’s Reports Third Quarter 2022 Results

NEW YORK–(BUSINESS WIRE)–Macy’s, Inc. (NYSE: M) today reported financial results for the third quarter of 2022 and updated its annual guidance.

“Our Polaris strategy is working. In the third quarter, we achieved solid top line results and a strong beat to our bottom line guidance. Macy’s brand position as a style and fashion source resonated with our customers, while luxury continued to outperform at Bloomingdale’s and Bluemercury,” said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc. “Retail is detail, and our talented and agile team are executing well to compete. We know the consumer is under increasing pressure and has choices on where to spend. As a leading gifting destination with fresh inventory across the value spectrum, we are ready to meet our customers’ needs this holiday season.”

“We are operating from a position of strong financial health – with appropriate levels of inventory, a strong balance sheet with ample liquidity, investment grade credit metrics and fixed interest rate debt in a rising interest rate environment. We have the tools, data-driven processes and talented teams to manage through this uncertain time and are committed to long-term, profitable growth,” added Adrian Mitchell, chief financial officer of Macy’s, Inc.

Third Quarter Highlights

Comparisons are to third quarter 2021 unless noted otherwise. Comparisons to 2019 are provided, where appropriate, to benchmark performance given the impact of the pandemic.

  • Diluted earnings per share of $0.39 and Adjusted diluted earnings per share of $0.52.
    • This compares to diluted earnings per share of $0.76 and Adjusted diluted earnings per share of $1.23 in the third quarter of 2021.
    • This compares to diluted earnings per share of $0.01 and Adjusted diluted earnings per share of $0.07 in the third quarter of 2019.
  • Net sales of $5.2 billion, down 3.9% versus the third quarter of 2021; up 1.1% versus the third quarter of 2019.
    • Digital sales decreased 9% versus the third quarter of 2021; up 35% versus the third quarter of 2019.
    • Brick-and-mortar sales decreased 1% versus the third quarter of 2021; down 9% versus the third quarter of 2019.
  • Comparable sales down 3.1% on an owned basis and down 2.7% on an owned-plus-licensed basis; up 5.6% and 6.0%, respectively, versus the third quarter of 2019.
  • Highlights of the company’s nameplates include:
    • Macy’s comparable sales were down 4.4% on an owned basis and down 4.0%, on an owned-plus-licensed basis.
      • 43.6 million active customers shopped the Macy’s brand, on a trailing twelve-month basis, a 2% increase compared to the prior year.
      • Star Rewards program members made up approximately 70% of the total Macy’s brand owned-plus-licensed sales on a trailing twelve-month basis, up approximately 5 percentage points versus the prior year.
      • The company continued to see strength in occasion-based categories, including career and tailored sportswear, fragrances, shoes, dresses and luggage.
    • Bloomingdale’s comparable sales on an owned basis were up 5.3% and on an owned-plus-licensed basis were up 4.1%.
      • 4.1 million active customers shopped the Bloomingdale’s brand, on a trailing twelve-month basis, a 9% increase over the prior year.
      • Results were driven by strength across women’s, men’s and kid’s contemporary and dressy apparel, women’s shoes as well as luggage.
    • Bluemercury comparable sales were up 14.0% on an owned and owned-plus-licensed basis.
      • Approximately 650,000 active customers shopped the Bluemercury brand, on a trailing twelve-month basis, a 15% increase over the prior year.
  • Inventory turnover, on a trailing twelve-month basis, was relatively flat to 2021 and improved 15% over 2019.
    • Inventory was up 4% year-over-year and down 12% versus 2019, reflecting disciplined inventory management in an environment of continued supply chain volatility and industry-wide elevated inventory levels, as well as lean inventory levels experienced in 2021. The company strategically brought in seasonal merchandise earlier to strengthen its competitive position for Holiday and has the added capacity to chase in-season trends.
  • Gross margin for the quarter was 38.7%, down from 41.0% in the third quarter of 2021.
    • Merchandise margin decline was driven by a year-over-year increase in promotional and permanent markdowns within the Macy’s brand, as the company sold through slower moving categories including casual apparel, soft home, and warmer weather seasonal goods.
    • Delivery expense as a percent of net sales was relatively consistent with the prior year. Higher fuel costs more than offset the impact of a 2-percentage point decline in digital penetration and reductions in cost-per-package.
  • Selling, general and administrative (“SG&A”) expense of $2.1 billion, a $84 million increase.
    • SG&A expense as a percent of sales was 39.3%, 300 basis points higher compared to the third quarter of 2021 and an improvement of 330 basis points compared to the third quarter of 2019.
    • The prior year quarter benefited from a significant number of open positions due to the tight labor market. The positions have since largely been filled.
    • The company is adjusting colleague compensation to remain competitive and attract the best talent, while simultaneously remaining disciplined in its SG&A productivity efforts.
  • Net credit card revenue of $206 million, down $7 million.
    • Represented 3.9% of sales, in line with the prior year period.
    • Performance driven by lower-than-expected bad debt levels, larger balances within the portfolio as well as higher-than-expected spend on co-brand credit cards.

Financial Highlights

All amounts in millions except percentages and per share figures

Third Quarter

2022

2021

Net sales

$5,230

$5,440

Comparable Sales

Owned

(3.1%)

Owned plus licensed

(2.7%)

Net Income

$108

$239

Earnings before interest, taxes, depreciation and amortization (EBITDA)

$392

$757

Diluted earnings per share (EPS)

$0.39

$0.76

Adjusted Net income

$143

$386

Adjusted EBITDA

$439

$765

Adjusted Diluted EPS

$0.52

$1.23

2022 Guidance

The company is reaffirming its annual 2022 sales guidance and raising its earnings guidance to account for improved expectations for credit card revenue and interest expense, lower benefit plan income, and updated shares outstanding estimates. The full update to guidance can be found in the presentation posted to macysinc.com/investors.

Guidance as of
November 17, 2022

Guidance as of
August 23, 2022

Net sales

unchanged

$24,340 million to $24,580 million

Adjusted EBITDA as a percent of sales

unchanged

Approximately 10.5%

Adjusted diluted earnings per share*

$4.07 – $4.27

$4.00 – $4.20

* Adjusted diluted EPS does not consider the impact of any potential future share repurchases associated with the company’s current share repurchase authorization.

About Macy’s, Inc.

At Macy’s, Inc. (NYSE: M), we are a trusted source for quality brands at great values from off-price to luxury. Across our iconic nameplates, including Macy’s, Bloomingdale’s and Bluemercury, we help our customers express their unique style and celebrate special moments, big and small. Headquartered in New York City, we operate one of retail’s largest e-commerce businesses integrated with a nationwide footprint to deliver the most convenient and seamless shopping experience. Our purpose is to create a brighter future with bold representation – so we can realize the full potential of every one of us. For more information, visit macysinc.com.