Macy's Files Q2 2024 10-Q

Ticker: M · Form: 10-Q · Filed: Sep 4, 2024 · CIK: 794367

Sentiment: neutral

Topics: 10-Q, retail, financials

TL;DR

Macy's Q2 10-Q is in: financials and operations detailed for investors.

AI Summary

Macy's, Inc. filed its 10-Q for the period ending August 3, 2024. The filing details financial performance and operational updates for the second quarter of fiscal year 2024. Key financial data and disclosures relevant to investors and stakeholders are presented.

Why It Matters

This filing provides crucial insights into Macy's financial health and strategic direction, impacting investor decisions and market perception.

Risk Assessment

Risk Level: medium — As a large public company in the retail sector, Macy's faces inherent market, economic, and competitive risks that are detailed in its SEC filings.

Key Numbers

Key Players & Entities

FAQ

What is the reporting period for this 10-Q filing?

The reporting period for this 10-Q filing is the quarter ended August 3, 2024.

When was this 10-Q filed with the SEC?

This 10-Q was filed on September 4, 2024.

What is Macy's, Inc.'s Central Index Key (CIK)?

Macy's, Inc.'s Central Index Key (CIK) is 0000794367.

What is the primary business address listed for Macy's, Inc.?

The primary business address listed is 151 WEST 34TH STREET, NEW YORK, NY 10001.

What fiscal year end does Macy's, Inc. report?

Macy's, Inc. reports a fiscal year end of February 3rd (0203).

Filing Stats: 4,849 words · 19 min read · ~16 pages · Grade level 14.6 · Accepted 2024-09-04 06:51:12

Key Financial Figures

Filing Documents

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION Item 1. Financial Statement s (un audited) 3 Consolidated Statements of Operations 3 Consolidated Statements of Comprehensive Income 4 Consolidated Balance Sheets 5 Consolidated Statements of Changes in Shareholders' Equity 6 Consolidated Statements of Cash Flows 8

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 9 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 28 Item 4. Control s and Procedures 28

– OTHER INFORMATION

PART II – OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 30 Item 1A.

Risk Factors

Risk Factors 30 Item 5. Other Information 30 Item 6. Exhibits 32

SIGNATURES

SIGNATURES 33 2 Table of Contents

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements MACY'S, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (millions, except per share figures) 13 Weeks Ended 26 Weeks Ended August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023 Net sales $ 4,937 $ 5,130 $ 9,783 $ 10,112 Other revenue 159 150 313 341 Total revenue 5,096 5,280 10,096 10,453 Cost of sales ( 2,938 ) ( 3,176 ) ( 5,884 ) ( 6,164 ) Selling, general and administrative expenses ( 1,973 ) ( 1,980 ) ( 3,884 ) ( 3,930 ) Gains on sale of real estate 36 4 37 15 Impairment, restructuring and other benefits (costs) 1 ( 4 ) ( 19 ) ( 6 ) Operating income 222 124 346 368 Benefit plan income, net 4 4 8 8 Settlement charges — ( 122 ) — ( 122 ) Interest expense, net ( 31 ) ( 36 ) ( 62 ) ( 73 ) Income (loss) before income taxes 195 ( 30 ) 292 181 Federal, state and local income tax (expense) benefit ( 45 ) 8 ( 80 ) ( 48 ) Net income (loss) $ 150 $ ( 22 ) $ 212 $ 133 Basic earnings (loss) per share $ 0.54 $ ( 0.08 ) $ 0.77 $ 0.49 Diluted earnings (loss) per share $ 0.53 $ ( 0.08 ) $ 0.75 $ 0.48 The accompanying notes are an integral part of these Consolidated Financial Statements. 3 Table of Contents MACY'S, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (millions) 13 Weeks Ended 26 Weeks Ended August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023 Net income (loss) $ 150 $ ( 22 ) $ 212 $ 133 Other comprehensive income (loss): Actuarial gain on post employment and postretirement benefit plans, before tax — ( 1 ) — ( 1 ) Reclassifications to net income: Amortization of net actuarial loss and prior service credit on post employment and postretirement benefit plans included in net income, before tax — 1 1 3 Settlement charges, before tax — 122 — 122 Tax effect related to items of other comprehensive income — ( 31 ) ( 1 ) ( 32 ) Total other comprehensive income, net of tax effect — 91 — 92 Comprehensive income $ 150 $ 69 $ 212 $ 225 The accompanying notes are an int

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Organization and Summary of Significant Accounting Policies Nature of Operations Macy's, Inc., together with its subsidiaries (the "Company"), is an omni-channel retail organization operating stores, websites and mobile applications under three nameplates (Macy's, Bloomingdale's and Bluemercury) that sell a wide range of merchandise, including apparel and accessories (men's, women's and kids'), cosmetics, home furnishings and other consumer goods. The Company has stores in 43 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. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("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 and 26 weeks ended August 3, 2024 and

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 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 and 26 weeks ended August 3, 2024 and July 29, 2023 relate to post employment and postretirement plan items. Settlement charges incurred are included as a separate component of income before income taxes in the Consolidated Statements of Income. Amortization reclassifications out of accumulated other comprehensive income (loss) are included in the computation of net periodic benefit cost (income) and are included in benefit plan income, net on the Consolidated Statements of Income. See Note 5, "Retirement Plans," for further information. Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this update enhance segment reporting by expanding the breadth and frequency of segment disclosures required by public entities. Most notable, registrants will be required to disclose: (1) significant segment expenses regularly provided to the Chief Operating Decisions Maker ("CODM") and included within the reported measure(s) of a segment's profit or loss, (2) the amount and composition of other segment items, (3) how the CODM uses the reported measure(s) of a segment's profit or loss to assess segment performance and decide how to allocate resources, (4) on an interim basis, all segment profit or loss and asset disclosures currently required annually by Topic 280, as well as those introduced by the ASU, and (5) the CODM's title and position. ASU 2023-07 is effective for the Company beginning in the fiscal year ending February 1, 2025. The Company i

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 2. Earnings (Loss) Per Share The following table sets forth the computation of basic and diluted earnings (loss) per share: 13 Weeks Ended August 3, 2024 July 29, 2023 Net Income Shares Net Loss Shares (millions, except per share data) Net income (loss) and average number of shares outstanding $ 150 276.7 $ ( 22 ) 272.8 Shares to be issued under deferred compensation and other plans 1.0 1.0 $ 150 277.7 $ ( 22 ) 273.8 Basic earnings (loss) per share $ 0.54 $ ( 0.08 ) Effect of dilutive securities: Stock options and restricted stock units 3.9 — $ 150 281.6 $ ( 22 ) 273.8 Diluted earnings (loss) per share $ 0.53 $ ( 0.08 ) 26 Weeks Ended August 3, 2024 July 29, 2023 Net Income Shares Net Income Shares (millions, except per share data) Net income and average number of shares outstanding $ 212 276.0 $ 133 272.5 Shares to be issued under deferred compensation and other plans 0.9 1.0 $ 212 276.9 $ 133 273.5 Basic earnings per share $ 0.77 $ 0.49 Effect of dilutive securities: Stock options and restricted stock units 4.4 4.3 $ 212 281.3 $ 133 277.8 Diluted earnings per share $ 0.75 $ 0.48 In addition to the stock options and restricted stock units reflected in the foregoing table, stock options to purchase 8.0 million shares of common stock and restricted stock units relating to 0.3 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 9.9 million shares of common stock and restricted stock units relating to 1.7 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 t

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 3. Revenue Net sales, which mainly consist of retail sales but also include merchandise returns, gift cards and loyalty programs, represented 97 % of total revenue for each of the 13 and 26 weeks ended August 3, 2024 and July 29, 2023. Other revenue generating activities consist of credit card revenues as well as Macy's Media Network revenue. 13 Weeks Ended 26 Weeks Ended Revenues August 3, 2024 July 29, 2023 August 3, 2024 July 29, 2023 (millions) Women's Accessories, Shoes, Cosmetics and Fragrances $ 1,990 $ 2,050 $ 4,060 $ 4,075 Women's Apparel 1,120 1,110 2,265 2,260 Men's and Kids' 1,056 1,110 2,037 2,128 Home/Other (a) 771 860 1,421 1,649 Total Net Sales 4,937 5,130 $ 9,783 $ 10,112 Credit card revenues, net $ 125 $ 120 $ 242 $ 282 Macy's Media Network revenue, net (b) 34 30 71 59 Other Revenue 159 150 313 341 Total Revenue $ 5,096 $ 5,280 $ 10,096 $ 10,453 (a) Other primarily includes restaurant sales, allowance for merchandise returns adjustments and breakage income from unredeemed gift cards. (b) Macy's Media Network is an in-house media platform supporting both Macy's and Bloomingdale's customers through a broad variety of advertising formats running both on owned and operated platforms as well as offsite. Macy's accounted for 85 % 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 29 % and 30 % of the Company's net sales for the 13 weeks ended August 3, 2024 and July 29, 2023, respectively, and 31 % of the Company's net sales for both the 26 weeks ended August 3, 2024 and July 29, 2023. Retail Sales Retail sales include merchandise sales, inclusive of delivery income, licensed department income, Marketplace income, sales of private brand goods directly to third party retailers and sales of excess inventory to third parties. Sales of merchandise are recorded at point of sale for

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Gift Cards and Customer Loyalty Programs The Company only offers no-fee, non-expiring gift cards to its customers. At the time gift cards are sold or issued, no revenue is recognized; rather, the Company records an accrued liability to customers. The liability is relieved, and revenue is recognized, equal to the amount redeemed at the time gift cards are redeemed for merchandise. The Company records revenue from unredeemed gift cards (breakage) in net sales on a pro-rata basis over the time period gift cards are actually redeemed. At least three years of historical data, updated annually, is used to determine actual redemption patterns. The Company maintains customer loyalty programs in which customers earn points based on their purchases. Under the Macy's Star Rewards loyalty program, points are earned based on customers' spending on Macy's private label and co-branded credit cards as well as non-proprietary cards and other forms of tender. Bloomingdale's Loyallist and Bluemercury BlueRewards programs provide tender neutral points-based programs to their customers. The Company recognizes the estimated net amount of the rewards that will be earned and redeemed as a reduction to net sales at the time of the initial transaction and as tender when the points are subsequently redeemed by a customer. The liability for unredeemed gift cards and customer loyalty programs is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was $ 334 million, $ 384 million and $ 340 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

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