Macy’s, Inc. Reports Third Quarter 2023 Results

Delivered better-than-expected performance on both top and bottom lines

Gross margin rate of 40.3%, up 160 basis points year-over-year

Merchandise inventories down 6% year-over-year, down 17% to 2019

Diluted EPS of $0.15 and Adjusted Diluted EPS of $0.21

Macy’s, Inc. (NYSE: M) today reported financial results for the third quarter of 2023 and updated its annual guidance.

“I’d like to thank our teams for executing well during the quarter. We delivered better-than-expected top and bottom line third quarter results and are entering the holiday period in a healthy inventory position. Our portfolio of nameplates are leading gift-giving destinations across the value spectrum offering exclusive products. We have refined our gift assortment, simplified our promotions and improved our shopping experience,” said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc. "Looking forward we have strong continuity with Tony Spring transitioning to CEO in February and I am confident he and our leadership team will guide Macy’s, Inc. to sustainable long-term profitable sales growth in the future.”

Third Quarter Highlights

Comparisons are to the third quarter of 2022 unless noted otherwise. Comparisons to 2019 are provided, where appropriate, to benchmark performance. Please refer to note 2 within the financial tables regarding reclassifications of certain prior year metrics.

• Diluted earnings per share of $0.15 and Adjusted diluted earnings per share of $0.21.
  • This compares to diluted earnings per share of $0.39 and Adjusted diluted earnings per share of $0.52 in the third quarter of 2022.
• Net sales of $5 billion, down 7% versus the third quarter of 2022.
  • Brick-and-mortar sales decreased 7% versus the third quarter of 2022.
  • Digital sales decreased 7% versus the third quarter of 2022.
• Comparable sales down 7.0% on an owned basis and down 6.3% on an owned-plus-licensed basis.
• Highlights of the company's nameplates include:
  • Macy’s comparable sales were down 7.6% on an owned basis and down 6.7% on an owned-plus-licensed basis.
    • Approximately 41.3 million active customers shopped the Macy’s brand, on a trailing twelve-month basis.
    • Star Rewards program members made up approximately 72% of Macy's brand comparable owned-plus-licensed sales on a trailing twelve-month basis.
    • The Macy’s nameplate saw strength in beauty, particularly fragrances and prestige cosmetics, women’s career sportswear, men’s tailored and off-price with Backstage, while women’s casual sportswear, big ticket and handbags were challenged.
  • Bloomingdale’s comparable sales on an owned basis were down 3.2% and on an owned-plus-licensed basis were down 4.4%.
    • Approximately 4.0 million active customers shopped the Bloomingdale’s brand, on a trailing twelve-month basis.
    • The Bloomingdale’s nameplate saw strength across beauty, women’s contemporary apparel, shoes and the Bloomingdale’s outlet locations, while men’s, home and designer handbags were soft.
  • Bluemercury comparable sales were up 2.5% on an owned basis.
    • Approximately 683,000 active customers shopped the Bluemercury brand, on a trailing twelve-month basis.
    • The Bluemercury nameplate saw strength in skincare and color cosmetic categories.
• Other revenue of $178 million, a $59 million decrease.
  • Represented 3.7% of net sales, down from 4.5% in the prior year period.
  • Performance driven largely by net credit card revenue which declined year-over-year due to the expected impact of higher delinquency rates and bad debt levels within the portfolio.
• Inventory turnover, on a trailing twelve-month basis, was up 1% to 2022 and up 16% to 2019.
  • Merchandise inventories were down 6% year-over-year and down 17% to 2019, reflecting ongoing disciplined inventory management.
• Gross margin rate for the quarter was 40.3%, up from 38.7% in the third quarter of 2022.
  • Merchandise margin improved 110 basis points, due to lower permanent markdowns within the Macy’s brand, as well as improved freight expense, partially offset by planned changes in Macy’s category mix.
  • As disclosed in the second quarter, merchandise margin also reflects the shift in timing of the company’s shortage recognition informed by a June physical inventory count in certain categories.
  • Delivery expense as a percent of net sales improved 50 basis points from the prior year reflecting improvements in merchandise allocation resulting in reductions in packages per order and distance traveled.
• Selling, general and administrative (“SG&A”) expense of $2.0 billion, a $48 million decrease.
  • SG&A expense as a percent of total revenue was 40.5%, 230 basis points higher compared to the third quarter of 2022, reflecting the decline in sales year-over-year.
  • SG&A expense dollars benefited from the company’s commitment to ongoing expense discipline. SG&A expense dollars were also favorable due to a roughly $10 million timing shift of certain previously estimated expenses from the third quarter to the fourth quarter.

Financial Highlights

2023 Guidance

The company updated its annual sales and earnings outlook to reflect third quarter results. The outlook also reflects the risks associated with an uncertain macro-economic climate and the related pressures on consumers and provides flexibility to respond to intra-quarter demand trends.

The full updated outlook for 2023, presented on a 53-week basis unless otherwise noted, can be found in the presentation posted to macysinc.com/investors.

The company does not provide reconciliations of the forward-looking non-GAAP measures of comparable owned plus licensed sales change and adjusted diluted earnings per share to the most directly comparable forward-looking GAAP measures because the timing and amount of excluded items are unreasonably difficult to fully and accurately estimate. For the same reasons, the company is unable to address the probable significance of the unavailable information, which could be material to future results. See Important Information Regarding Financial Measures.

Conference Call and Webcasts

A webcast of Macy's, Inc.’s call with analysts and investors to report its third quarter of 2023 sales and earnings will be held today (November 16, 2023) at 8:00 a.m. ET. Macy’s, Inc.’s webcast, along with the associated presentation, is accessible to the media and general public via the company's website at www.macysinc.com. Analysts and investors may call 1-877-407-0832. A replay of the conference call will be available on the company’s website or by calling 1-877-660-6853, using passcode 13741401, about three hours after the conclusion of the call. Additional information on Macy’s, Inc., including past news releases, is available at www.macysinc.com/newsroom.

Important Information Regarding Financial Measures

Please see the final pages of this news release for important information regarding the calculation of the company’s non-GAAP financial measures.

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.

Forward-Looking Statements

All statements in this press release that are not statements of historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of Macy’s management and are subject to significant risks and uncertainties. Actual results could differ materially from those expressed in or implied by the forward-looking statements contained in this release because of a variety of factors, including Macy’s ability to successfully execute against its five growth vectors, including the ability to realize the anticipated benefits associated with the strategy, conditions to, or changes in the timing of proposed real estate and other transactions, prevailing interest rates and non-recurring charges, the effect of potential changes to trade policies, store closings, competitive pressures from specialty stores, general merchandise stores, off-price and discount stores, manufacturers’ outlets, the Internet and catalogs and general consumer spending levels, including the impact of the availability and level of consumer debt, possible systems failures and/or security breaches, the potential for the incurrence of charges in connection with the impairment of tangible and intangible assets, including goodwill, declines in credit card revenues, Macy’s reliance on foreign sources of production, including risks related to the disruption of imports by labor disputes, regional or global health pandemics, and regional political and economic conditions, the effect of weather, inflation, inventory shortage, labor shortages, the amount and timing of future dividends and share repurchases, our ability to execute on our strategies and achieve expectations related to environmental, social, and governance matters, and other factors identified in documents filed by the company with the Securities and Exchange Commission, including under the captions “Forward-Looking Statements” and “Risk Factors” in the company’s Annual Report on Form 10-K for the year ended January 28, 2023. Macy’s disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

MACY’S, INC.

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 supplemental changes in comparable sales on an owned-plus-licensed basis, which includes adjusting for the impact of comparable sales of departments licensed to third parties, assists in evaluating the company's ability to generate sales growth, whether through owned businesses or departments licensed to third parties, and in evaluating the impact of changes in the manner in which certain departments are operated. Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure which the company believes provides meaningful information about its operational efficiency by excluding the impact of changes in tax law and structure, debt levels and capital investment. In addition, management believes that excluding certain items from EBITDA, net income and diluted earnings per share that are not associated with the company’s core operations and that may vary substantially in frequency and magnitude from period-to-period provides useful supplemental measures that assist in evaluating the company's ability to generate earnings and to more readily compare these metrics between past and future periods.

The company does not provide reconciliations of the forward-looking non-GAAP measures of comparable owned plus licensed sales change and adjusted diluted earnings per share to the most directly comparable forward-looking GAAP measures because the timing and amount of excluded items are unreasonably difficult to fully and accurately estimate. For the same reasons, the company is unable to address the probable significance of the unavailable information, which could be material to future results.

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 or 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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