Macy's Files 10-Q for Q3 2024

Ticker: M · Form: 10-Q · Filed: Dec 12, 2024 · CIK: 794367

Sentiment: neutral

Topics: 10-Q, retail, financials

TL;DR

Macy's 10-Q is in: financials look steady, but watch retail trends.

AI Summary

Macy's, Inc. filed its 10-Q for the period ending November 2, 2024. The filing details the company's financial performance and position. Key financial data points such as accounts payable and common stock are presented, reflecting the company's ongoing operations and financial structure.

Why It Matters

This filing provides investors and analysts with a detailed look at Macy's financial health and operational status as of early November 2024, crucial for understanding its market position.

Risk Assessment

Risk Level: medium — Retail sector is subject to economic fluctuations and changing consumer spending habits, which can impact Macy's performance.

Key Numbers

Key Players & Entities

FAQ

What was Macy's primary business activity during the reporting period?

Macy's primary business activity is operating as a retailer, specifically in department stores, as indicated by its SIC code 5311.

What is the fiscal year end for Macy's?

Macy's fiscal year ends on February 1st (0201).

When was Macy's incorporated?

Macy's was incorporated in Delaware (DE).

What is the filing date of this 10-Q report?

This 10-Q report was filed on December 12, 2024.

What is the reporting period covered by this 10-Q?

This 10-Q report covers the period ending on November 2, 2024.

Filing Stats: 4,845 words · 19 min read · ~16 pages · Grade level 14.5 · Accepted 2024-12-12 16:41:09

Filing Documents

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION Item 1.

Financial Statements (unaudited)

Financial Statements (unaudited) 3 Consolidated Statements of Income 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 22 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 35 Item 4.

Controls and Procedures

Controls and Procedures 35

– OTHER INFORMATION

PART II – OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 37 Item 1A.

Risk Factors

Risk Factors 37 Item 5. Other Information 37 Item 6. Exhibits 39

SIGNATURES

SIGNATURES 40 2 Table of Contents

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements MACY'S, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (millions, except per share figures) 13 Weeks Ended 39 Weeks Ended November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023 Net sales $ 4,742 $ 4,860 $ 14,525 $ 14,972 Other revenue 161 178 474 519 Total revenue 4,903 5,038 14,999 15,491 Cost of sales ( 2,864 ) ( 2,905 ) ( 8,749 ) ( 9,070 ) Selling, general and administrative expenses ( 2,064 ) ( 2,040 ) ( 5,948 ) ( 5,970 ) Gains on sale of real estate 66 5 103 20 Impairment, restructuring and other benefits (costs) 23 ( 15 ) 5 ( 21 ) Operating income 64 83 410 450 Benefit plan income, net 4 2 12 10 Settlement charges — ( 7 ) — ( 129 ) Interest expense, net ( 32 ) ( 35 ) ( 94 ) ( 108 ) Losses on early retirement of debt ( 1 ) — ( 1 ) — Income before income taxes 35 43 327 223 Federal, state and local income tax expense ( 7 ) ( 2 ) ( 87 ) ( 50 ) Net income $ 28 $ 41 $ 240 $ 173 Basic earnings per share $ 0.10 $ 0.15 $ 0.86 $ 0.63 Diluted earnings per share $ 0.10 $ 0.15 $ 0.85 $ 0.62 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 39 Weeks Ended November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023 Net income $ 28 $ 41 $ 240 $ 173 Other comprehensive income: Actuarial gain on post employment and postretirement benefit plans, before tax — ( 52 ) — ( 53 ) 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 — 4 Settlement charges, before tax — 7 — 129 Tax effect related to items of other comprehensive income — 11 — ( 21 ) Total other comprehensive income, net of tax effect — ( 33 ) — 59 Comprehensive income $ 28 $ 8 $ 240 $ 232 The accompanying notes are an integral part o

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 November 2, 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 39 weeks ended November 2, 2024

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 39 weeks ended November 2, 2024 and October 28, 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 Comp

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 2. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share: 13 Weeks Ended November 2, 2024 October 28, 2023 Net Income Shares Net Income Shares (millions, except per share data) Net income and average number of shares outstanding $ 28 277.4 $ 41 273.7 Shares to be issued under deferred compensation and other plans 1.0 1.0 $ 28 278.4 $ 41 274.7 Basic earnings per share $ 0.10 $ 0.15 Effect of dilutive securities: Stock options and restricted stock units 3.1 2.9 $ 28 281.5 $ 41 277.6 Diluted earnings per share $ 0.10 $ 0.15 39 Weeks Ended November 2, 2024 October 28, 2023 Net Income Shares Net Income Shares (millions, except per share data) Net income and average number of shares outstanding $ 240 276.5 $ 173 272.9 Shares to be issued under deferred compensation and other plans 0.9 1.0 $ 240 277.4 $ 173 273.9 Basic earnings per share $ 0.86 $ 0.63 Effect of dilutive securities: Stock options and restricted stock units 3.9 3.8 $ 240 281.3 $ 173 277.7 Diluted earnings per share $ 0.85 $ 0.62 In addition to the stock options and restricted stock units reflected in the foregoing table, stock options to purchase 7.9 million and 9.9 million shares of common stock and restricted stock units relating to 0.2 million and 1.4 million shares of common stock were outstanding at November 2, 2024 and October 28, 2023, respectively, but were not included in the computation of diluted earnings per share because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met. 11 Table of Contents MACY'S, INC.

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 % and 96 % of total revenue for the 13 weeks ended November 2, 2024 and October 28, 2023, respectively, and 97 % of total revenue for both of the 39 weeks ended November 2, 2024 and October 28, 2023. Other revenue generating activities consist of credit card revenues as well as Macy's Media Network revenue. 13 Weeks Ended 39 Weeks Ended Revenues November 2, 2024 October 28, 2023 November 2, 2024 October 28, 2023 (millions) Women's Accessories, Shoes, Cosmetics and Fragrances $ 1,971 $ 1,992 $ 6,031 $ 6,067 Women's Apparel 1,077 1,088 3,342 3,348 Men's and Kids' 1,034 1,049 3,071 3,177 Home/Other (a) 660 731 2,081 2,380 Total Net Sales 4,742 4,860 $ 14,525 $ 14,972 Credit card revenues, net $ 120 $ 142 $ 362 $ 424 Macy's Media Network revenue, net (b) 41 36 112 95 Other Revenue 161 178 474 519 Total Revenue $ 4,903 $ 5,038 $ 14,999 $ 15,491 (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 84 % of the Company's net sales for the 13 and 39 weeks ended November 2, 2024 and 85 % of the Company's net sales for the 13 and 39 weeks ended October 28, 2023. In addition, digital sales accounted for 30 % of the Company's net sales for each of the 13 and 39 weeks ended November 2, 2024 and 31 % of the Company's net sales for each of the 13 and 39 weeks ended October 28, 2023. Retail Sales Retail sales include merchandise sales, inclusive of delivery income, licensed department income, Marketplace income, sales of private

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 $ 331 million, $ 384 million and $ 336 million as of November 2, 2024, February 3, 2024 and October 28, 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 Pr

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 4. Financing Activities The following table shows the detail of debt repayments: 39 Weeks Ended November 2, 2024 October 28, 2023 (millions) Revolving credit agreement $ 90 $ 151 6.79 % Senior debentures due 2027 10 — 6.7 % Senior exchanged debentures due 2028 19 — 6.7 % Senior debentures due 2028 1 — 7.0 % Senior debentures due 2028 10 — 5.875 % Senior debentures due 2029 174 — 6.9 % Senior debentures due 2029 7 — $ 311 $ 151 On Se

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