Macys Inc
For the period ended Aug 3, 2024. Filed Sep 4, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Aug 3, 2024 · Filed Sep 4, 2024
M$23.08-4.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-05-04; filed 2024-05-30.
0001628280-24-025853
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-08-03; filed 2024-09-04.
0001628280-24-039219
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 88 previous paragraphs and 100 current paragraphs.
39 unchanged; 32 reworded; 23 added; 16 removed; 1 previous and 6 current paragraphs rearranged.
Tables are not compared: 15 previous and 28 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
▪Focused staffing in key departments such as shoes, handbags, ready-to-wear as well as fitting room and checkout,
Current report
▪Enhanced merchandise offerings to emphasize freshness, relevance and inspiration with a focus on variety rather than redundancy by editing existing assortments and adding new brands,
Current report
▪Modernizing our visual presentations, and
Current report
▪Offering unique store-level activations and community events.
Current report
The First 50 achieved its second consecutive quarter of comparable sales growth. Net Promoter Scores of the First 50 locations increased approximately 600 basis points from the second quarter of 2023 and were over 200 basis points above the other Macy's go-forward locations. The Company plans to implement women's shoes and handbag staffing tests in roughly 100 additional go-forward Macy's locations this fall.
Current report
◦Revitalize assortment: The Company is focused on offering new product across categories. In the second quarter of 2024, Macy's experienced ongoing sales strength in fragrance and improvement in women’s ready-to-wear apparel compared to the second quarter of 2023. Macy's private brand reimagination is progressing as planned with a positive response from customers in ready-to-wear, including elevated fashion and quality in the Company's heritage labels. The Company has completed the majority of its planned brand exits. Additionally, the Company introduced new market and private brands that more closely align to customer demand.
Current report
◦The Company continues its plans to expand its luxury store footprint by approximately 20% through fiscal 2026.
Current report
▪Bluemercury: Bluemercury opened one new location and completed one remodel in the second quarter of 2024; its 14th consecutive quarter of comparable sales growth driven by continued strength in skincare and the expansion of key brand partners both in skincare and fragrances. The new and remodeled stores elevate Bluemercury's service model, spa integration and product mix and have outperformed the total Bluemercury fleet in the second quarter of 2024.
Current report
◦The Company is actively advancing on solutions to reduce organizational complexity and generate cost savings to fund growth investments. During the second quarter of 2024, the Company made improvements to its fulfillment network productivity and continued to simplify its technology ecosystem. These investments have improved the customer experience through faster online delivery and higher product in-stocks, while contributing to bottom-line performance and cash flow generation.
Current report
Comparable sales highlights for the second quarter of 2024 versus the second quarter of 2023 related to components of the Bold New Chapter strategy are as follows:
Current report
◦Macy's comparable sales declined 4.5% on an owned basis and declined 3.6% on an owned-plus-licensed-plus-marketplace basis.
Current report
▪Go-forward business comparable sales, inclusive of Macy’s go-forward locations and digital, declined 4.3% on an owned basis and declined 3.3% on an owned-plus-licensed-plus-marketplace basis. Go-forward locations comparable sales declined 2.4% on an owned basis and declined 2.3% on an owned-plus-licensed basis.
Current report
◦Bloomingdale'scomparable sales declined 1.1% on an owned basis and declined 1.4% on an owned-plus-licensed-plus-marketplace basis 1.
Current report
◦Bluemercury comparable sales increased 2.0% on an owned basis.
Current report
The increase in other revenues included a $5 million increase in credit card revenues. Credit card revenues in the second quarter of 2023 were negatively impacted by a change in net credit loss trends. Macy's Media Network grew $4 million, or 13% from the second quarter of 2023, driven by higher advertiser and campaign counts.
Current report
Gross margin rate and merchandise margin rate increased 240 basis points and 210 basis points, respectively, in the second quarter of 2024 compared to the second quarter of 2023. The increase in both gross margin and merchandise margin rates primarily reflected lower year-over-year discounting and favorable shortage due to the Company's asset protection work, and partially offset by the Company's change in inventory valuation method. Delivery expense as a percent of net sales improved 30 basis points from the second quarter of 2023 driven by lower shipped sales volumes and improved delivery expense due to cost savings and process reengineering initiatives.
Current report
Asset sale gains in thesecond quarter of 2024 mainly related to the sale of one Macy's store.
Current report
Settlement accounting was not required in the second quarter of 2024. During the second quarter of 2023, the Company recognized a non-cash settlement charge of $122 million associated with the transfer of fully funded pension obligations for certain retirees and beneficiaries through the purchase of a group annuity contract with an insurance company.
Current report
Comparison of the 26 Weeks Ended August 3, 2024 and July 29, 2023
Current report
Gross margin rate and merchandise margin rate increased 90 basis points and 60 basis points, respectively, in 2024 compared to 2023. The increase in both gross margin and merchandise margin rates primarily reflected lower year-over-year discounting and favorable shortage due to the company's asset protection work. Delivery expense as a percent of net sales improved 30 basis points from the first half of 2023 driven by lower shipped sales volumes and improved delivery expense control due to cost savings and process reengineering initiatives.
Current report
Asset sale gains in the first half of 2024 mainly related to the sale of one Macy's store while asset sale gains in the first half of 2023 mainly related to the sale of a distribution center.
Current report
Settlement accounting was not required in the first half of 2024. During the first half of 2023, the Company recognized a non-cash settlement charge of $122 million associated with the transfer of fully funded pension obligations for certain retirees and beneficiaries through the purchase of a group annuity contract with an insurance company.
Current report
The decrease in net cash provided by operating activities was primarily driven by a lower cash inflow from the change in merchandise inventory in the first half of 2024 compared to the first half of 2023 mainly due to sales results and the Company's decision to invest into areas of strength for the second half of 2024.
Removed paragraphs (16)
Previous report
◦Revitalize assortment: The Company is focused on offering newness across categories. In the first quarter of 2024, Macy's introduced and expanded distribution in several market brands within apparel to address areas of opportunity where it has experienced softness in both women's and men's assortments. Beauty remained a standout category and key traffic driver, driven by fragrances. Macy's believes it has the opportunity to offset softness in the big ticket and home categories and is actively working on the market brand matrix with plans to begin a complete refresh of its home private brands in fiscal 2025. Macy's private brand apparel initiative is progressing as planned. The Company has completed the majority of its planned brand exits and reimagined and launched several new brands. In the first quarter of 2024, I.N.C. and Style & Co., which have led the initiative, continued to outperform the Macy's women's apparel segment and Macy's introduced its newest private brand, State of Day. The Company plans to refresh its kid's private brands in the summer of 2024 and introduce a new men's contemporary apparel brand later in the year.
Previous report
◦Accelerate Bluemercury growth: The first quarter of 2024 marked the 13th consecutive quarter of comparable sales growth for Bluemercury, driven by continued strength in skincare and the expansion of key brand partners. The Company's plans to open at least 30 new locations and remodel approximately 30 existing locations through fiscal 2026 is underway, with one new location and three remodels slated for the second quarter of 2024. These stores will look to incorporate learnings from recent remodels, including an elevated aesthetic, expanded assortment, and an enhanced selling model.
Previous report
◦The Company is actively advancing on solutions to consolidate capacity, increase automation and reduce costs across the network. While still in its early stages, during the first quarter of 2024, the Company benefited from the flow through of the consolidation of technology vendors and savings from offshoring efforts.
Previous report
Certain financial highlights for the first quarter of 2024 as compared to the first quarter of 2023 are as follows:
Previous report
◦Macy's comparable sales declined 1.6% on an owned basis and declined 0.4% on an owned-plus-licensed-plus-marketplace basis.
Previous report
◦Bloomingdale's comparable sales increased 0.8% on an owned basis and increased 0.3% on an owned-plus-licensed-plus-marketplace basis 1.
Previous report
◦Bluemercury comparable sales increased 4.3% on an owned basis.
Previous report
•Other revenues were $154 million, down $37 million.
Previous report
•Gross margin rate was 39.2%, down 80 basis points.
Previous report
•Selling, general and administrative ("SG&A") expense was $1,911 million, down $39 million. SG&A expense as a percent of total revenue was 38.2%, up 50 basis points.
Previous report
•Net income was $62 million, down $93 million.
Previous report
•Earnings before interest, taxes, depreciation and amortization ("EBITDA") was $345 million compared to EBITDA of $466 million. On an adjusted basis, EBITDA was $364 million compared to $468 million.
Previous report
•Diluted earnings per share was $0.22 compared to $0.56, and adjusted diluted earnings per share was$0.27 compared to$0.56.
Previous report
•Merchandise inventories were up 1.7%.
Previous report
Gross margin rate and merchandise margin rate decreased 80 basis points and 100 basis points, respectively, in the first quarter of 2024 compared to the first quarter of 2023. The decline primarily reflected additional discounting for slower-moving warm weather products. Delivery expense as a percent of net sales improved 20 basis points from the first quarter of 2023 reflecting ongoing efforts to improve supply chain efficiency. Inventory increased 1.7% year-over-year.
Previous report
The increase in net cash provided by operating activities was primarily driven by a decrease in payments of accounts payable and accrued liabilities, partially offset by lower net income.
Reworded paragraphs (32)
Previous wording
For purposes of the following discussion, all references to "first quarter of 2024" and "first quarter of 2023" are to the Company's 13-week fiscal periods ended May 4, 2024 and April 29, 2023, respectively.
Current wording
For purposes of the following discussion, all references to "second quarter of 2024" and "second quarter of 2023" are to the Company's 13-week fiscal periods ended August 3, 2024 and July 29, 2023, respectively. References to the "first half of 2024" or "2024" and the "first half of 2023" or "2023" are to the Company's 26-week fiscal periods ended August 3, 2024 and July 29, 2023, respectively.
Previous wording
The Company continues to view fiscal 2024 as a transition and investment year as it implements its new strategy, A Bold New Chapter, which is designed to return the Company to enterprise growth, unlock shareholder value, improve the omni-channel experience and better serve its customers. During the first quarter of 2024, the Company was encouraged by customer response to A Bold New Chapter through progress of its initiatives, as follows:
Current wording
The Company continues to view fiscal 2024 as a transition and investment year as it implements its new strategy, A Bold New Chapter, which is designed to return the Company to enterprise growth, unlock shareholder value, improve the omni-channel experience and better serve its customers. During the second quarter of 2024, the Company continued to make progress on its three-year Bold New Chapter strategy, as follows:
Previous wording
◦Rationalize store base: At the end of fiscal 2024, the Company announced it had identified approximately 150 underproductive Macy's locations for closure over the next three years (collectively, the "non-go-forward" locations), which will allow for monetization of assets at the non-go-forward locations and prioritization of investments in the approximately 350 remaining Macy's locations (collectively, the "go-forward" locations) where the Company believes it has the most opportunity to improve square footage productivity. For the non-go-forward Macy's locations and distribution centers, the Company is able to be thoughtful and strategic with its approach to monetization and is encouraged by the pace of deal activity.
Current wording
◦Rationalize store base: At the end of fiscal 2023, the Company announced it had identified approximately 150 underproductive Macy's locations for closure through fiscal 2026 (collectively, the "non-go-forward" locations), which will allow for monetization of these non-go-forward locations and prioritization of investments in the approximately 350 remaining Macy's locations (collectively, the "go-forward" locations) where the Company believes it has the most opportunity to improve square footage productivity. For the non-go-forward Macy's locations and distribution centers, the Company is thoughtfully and strategically approaching monetization to execute accretive deals and is encouraged by the pace and quality of deal activity to date. As a result, the Company now expects to close approximately 55 locations in fiscal 2024 versus its prior expectations of roughly 50.
Previous wording
◦Launch of First 50 Stores: The First 50 locations are a key component of the Macy's Bold New Chapter growth strategy as they are an early leading indicator for the go-forward Macy's locations and ultimately the entire Macy's, Inc. go-forward business' ability to return to growth. They serve as pilots to test ideas with new product, visual merchandising and staffing initiatives. Along with positive comparable sales growth, the First 50 locations Net Promoter Scores increased approximately 500 basis points from the prior year and were over 250 basis points above all other Macy's locations.
Current wording
◦Launch of First 50 Stores: The First 50 locations are a key component of the Macy's Bold New Chapter growth strategy as they are an early indicator for go-forward Macy's nameplate growth and ultimately the Macy's, Inc. go-forward business' ability to achieve comparable sales growth. They serve as pilots to test ideas with new product, visual merchandising and staffing initiatives. Initiatives at these locations have gained traction and include:
Previous wording
◦Rollout of additional Macy's small format stores: The Company opened one Macy's small format during the first quarter and plans to open 11 more this year, bringing the total number of Macy's small format locations to an expected 24 by the end of fiscal 2024.
Current wording
◦Rollout of additional Macy's small format stores: The Company opened five Macy's small format locations during the second quarter of 2024, bringing the total small format location count to 18. The Company continues to plan to bring the total number of Macy's small format locations to an expected 24 by the end of fiscal 2024.
Previous wording
◦Grow digital: Digital continues to serve as both a gateway to the Macy's brand and is a source of commerce and omni engagement. Under new leadership, the team is making progress on optimizing the customer journey, including addressing places of greatest friction, and enhancing the shopping experience across platforms. In the first quarter of 2024, Macy's launched a baby registry, including over 150 new brands across all baby categories. Macy's digital visits increased 2.3% while the conversion rate decreased 14 basis points compared to the first quarter of 2023.
Current wording
◦Grow digital: Digital continues to serve as both a gateway to the Macy's brand and a source of commerce and omni engagement. The Company is making progress on optimizing the customer journey, with a focus on search engine optimization, site enhancements, more transparent pricing and a better mobile experience. Macy's digital visits increased 0.7% while the conversion rate decreased 30 basis points compared to the second quarter of 2023.
Previous wording
◦Accelerate Bloomingdale's growth: The Company continues to expect to open approximately 15 small format (Bloomie's and Bloomingdale's the Outlet) locations through fiscal 2026, including three later in fiscal 2024. Comparable sales at the small format locations outperformed the broader Bloomingdale's fleet. Contemporary apparel, private brands and beauty continue to be well-received and serve as growth engines for the brand.
Current wording
▪Bloomingdale's: The Company expects to open approximately 15 small format (Bloomie's and Bloomingdale's the Outlet) locations through fiscal 2026. Comparable sales at the small format locations outperformed the broader Bloomingdale's fleet. Advanced contemporary market brands were well-received and serve as growth engines for the brand. Net Promoter Scores improved over 250 basis points compared to the second quarter of 2023 and remain a strength for the Bloomingdale's nameplate.
Previous wording
•Macy's, Inc. comparable sales declined 1.2% on an owned basis and declined 0.3% on an owned-plus-licensed-plus-marketplace basis.
Current wording
•Macy's, Inc. comparable sales declined 4.0% on an owned basis and declined 3.3% on an owned-plus-licensed-plus-marketplace basis.
Previous wording
◦Macy's, Inc. go-forward business comparable sales, inclusive of go-forward locations and digital, declined 0.9% on an owned basis and increased 0.1% on an owned-plus-licensed-plus-marketplace basis.
Current wording
◦Macy's, Inc. go-forward business comparable sales, inclusive of go-forward locations and digital across nameplates, declined 3.8% on an owned basis and declined 3.0% on an owned-plus-licensed-plus-marketplace basis.
Previous wording
▪First 50 locations comparable sales, included within go-forward locations comparable sales, increased 3.3% on an owned basis and increased 3.4% on an owned-plus-licensed basis.
Current wording
•First 50 locations comparable sales, included within go-forward locations comparable sales, increased 0.8% on an owned basis and increased 1.0% on an owned-plus-licensed basis.
Previous wording
▪Non-First 50 go-forward locations comparable sales, included within go-forward locations comparable sales, decreased 1.2% on an owned basis and decreased 1.3% on an owned-plus-licensed basis.
Current wording
•Non-First 50 go-forward locations comparable sales, included within go-forward locations comparable sales, declined 3.8% on an owned basis and declined 3.7% on an owned-plus-licensed basis.
Previous wording
▪Macy’s non-go-forward locations comparable sales decreased 4.5% on both an owned and owned-plus-licensed basis.
Current wording
▪Macy's non-go-forward locations comparable sales declined 6.5% on both an owned and owned-plus-licensed basis.
Previous wording
Comparison of the First Quarter of 2024 and the First Quarter of 2023
Current wording
Comparison of the Second Quarter of 2024 and the Second Quarter of 2023
Previous wording
(a)Gross margin is defined as net sales less cost of sales.
Current wording
2 Gross margin is not directly comparable to the prior year given the change in inventory valuation method from LIFO RIM to LIFO cost on February 4, 2024. Gross margin is defined as net sales less cost of sales.
Previous wording
See pages 21 to 23 for reconciliations of the supplemental non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.
Current wording
See pages 25 to 28 for reconciliations of the supplemental non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.
Previous wording
Net sales for the first quarter of 2024 decreased for Macy’s but grew for Bloomingdale's and Bluemercury. During the quarter, net sales were impacted by ongoing macroeconomic conditions as consumers benefited from strong wage and job growth, offset by continued inflationary pressures. Macy's experienced strong performance in the First 50 locations, which benefited from enhanced merchandising through elevated product rollouts across top markets and new brands. Beyond apparel, performance was strong in beauty, particularly fragrances. The big ticket, home and handbag categories continued to underperform.
Current wording
Net sales for the second quarter of 2024 decreased $193 million, or 3.8%, compared to the second quarter of 2023. During the quarter, net sales were impacted by ongoing macroeconomic conditions, including inflationary pressures and an increasingly complex news cycle. Macy's experienced strong performance in the First 50 locations, which benefited from enhanced merchandising through elevated product rollouts across top markets and new brands. Performance continued to be strong in fragrances and improved in ready-to-wear. The Company experienced weaknesses in men's apparel, handbags and home.
Previous wording
SG&A expenses decreased 2.0% in the first quarter of 2024 compared to the first quarter of 2023 due to continued cost discipline. The increase in SG&A expenses as a percent to total revenue in the first quarter of 2024 was due to a decline in total revenue compared to the first quarter of 2023.
Current wording
SG&A expenses decreased$7 million, or 0.4%, in the second quarter of 2024 compared to the second quarter of 2023 due to the Company's appropriate cost controls while it protected customer-facing investments, particularly in First 50 locations. The increase in SG&A expenses as a percent to total revenue in the second quarter of 2024 was due to a decline in total revenue, mainly net sales, compared to the second quarter of 2023.
Previous wording
The decrease in net interest expense in thefirst quarter of 2024 compared to the first quarter of 2023 was primarily driven by an increase in interest income on liquid investments.
Current wording
The decrease in net interest expense in the second quarter of 2024 compared to the second quarter of 2023 was primarily driven by an increase in interest income on investments.
Previous wording
The decrease in other revenues was primarily driven by a $45 million decrease in credit card revenues. This decrease was primarily driven by expected higher delinquency rates and net credit losses within the portfolio. Macy's Media Network grew $8 million, or 28% from the first quarter of 2023, due to increased vendor engagement.
Current wording
The decrease in other revenues was driven by a $40 million decrease in credit card revenues. This decrease was primarily driven by higher net credit losses as compared to 2023. Macy's Media Network grew $12 million, or 20%, compared to 2023, due to increased vendor engagement and higher advertiser and campaign counts.
Previous wording
Income tax expense decreased $20 million in thefirst quarter of 2024 compared to the first quarter of 2023 due to lower income before income taxes. The income tax expense of $36 million and $56 million, or 36.7% and 26.5% of pretax income, for the 13 weeks ended May 4, 2024 and April 29, 2023, respectively, reflect a different effective tax rate as compared to the Company’s federal income tax statutory rate of 21%. The income tax effective rates for the 13 weeks ended May 4, 2024 and April 29, 2023 were impacted primarily by the effect of state and local taxes and the vesting and cancellation of certain stock-based compensation awards.
Current wording
Income tax expense increased$32 million in 2024 compared to 2023 due to higher income before income taxes. Additionally, the effective tax rates in 2024 and 2023 were 27.4% and 26.5%, respectively, and reflect a different effective tax rate as compared to the Company’s Federal income tax statutory rate of 21% primarily due to the impact of state and local taxes and the vesting and cancellation of certain stock-based compensation awards.
Previous wording
The Company ended thefirst quarter of 2024 with a cash and cash equivalents balance of $876 million, an increase of $273 million from $603 million at the end of thefirst quarter of 2023. The Company is party to the ABL Credit Facility with certain financial institutions providing for a $3,000 million asset-based credit facility.
Current wording
The Company ended thesecond quarter of 2024 with a cash and cash equivalents balance of $646 million, an increase of $208 million from $438 million at the end of thesecond quarter of 2023. The Company is party to an ABL Credit Facility with certain financial institutions providing for a $3,000 million asset-based credit facility.
Previous wording
The Company's capital expenditures were $229 million in the first quarter of 2024 compared to $296 million in the first quarter of 2023. Capital expenditures in the current year are primarily focused on digital and technology investments as well as omni-channel capabilities.
Current wording
The Company's capital expenditures were $432 million in the first half of 2024 compared to $564 million in the first half of 2023. Capital expenditures in the current year are primarily focused on digital and technology investments as well as omni-channel capabilities.
Previous wording
The Company paid dividends totaling $48 million and $45 million in the first quarters of 2024 and 2023, respectively.
Current wording
The Company paid dividends totaling $96 million and $90 million in the first halfof 2024 and 2023, respectively.
Previous wording
On February 22, 2022, the Board of Directors authorized a new $2,000 million share repurchase program, which does not have an expiration date. During the first quarter of 2023, the Company repurchased approximately 1.4 million shares of its common stock at an average cost of $17.57 per share on the open market under its share repurchase program. The Company did not repurchase any shares of its common stock during the first quarter of 2024. As of May 4, 2024,$1,375 million remained available under the authorization. Repurchases may be made from time to time in the open market or through privately negotiated transactions in accordance with applicable securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, on terms determined by the Company. During the first quarter of 2023, the Company also withheld approximately $12 million of shares for tax purposes associated with the issuance of certain stock awards.
Current wording
On February 22, 2022, the Board of Directors authorized a new $2,000 million share repurchase program, which does not have an expiration date. During the first quarter of 2023, the Company repurchased approximately 1.4 million shares of its common stock at an average cost of $17.57 per share on the open market under its share repurchase program. The Company did not repurchase any shares of its common stock during the first half of 2024. As of August 3, 2024, $1,375 million remained available under the authorization. Repurchases may be made from time to time in the open market or through privately negotiated transactions in accordance with applicable securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, on terms determined by the Company. During the first half of 2023, the Company also withheld approximately $12 million of shares for tax purposes associated with the issuance of certain stock awards.
Previous wording
As of May 4, 2024 and April 29, 2023, the Company had$144 million and $138 million of standby letters of credit outstanding under its ABL Credit Facility, respectively, which reduced the available borrowing capacity to$2,856 million and $2,862 million, respectively. The Company hadno outstanding borrowings under the ABL Credit Facility as of May 4, 2024 and April 29, 2023.
Current wording
As of August 3, 2024 and July 29, 2023, the Company had $144 million and $138 million of standby letters of credit outstanding under its ABL Credit Facility, respectively, which reduced the available borrowing capacity to $2,856 million and $2,862 million, respectively. The Company hadno outstanding borrowings under the ABL Credit Facility as of both August 3, 2024 and July 29, 2023.
Previous wording
The following tables include combined financial information of the Obligor Group. Investments in subsidiaries of $9,331 million and $9,423 million as of May 4, 2024 and February 3, 2024, respectively, have been excluded from the Summarized Balance Sheets. Equity in earnings of non-Guarantor subsidiaries of $355 million for the 13 weeks ended May 4, 2024, have been excluded from the Summarized Statement of Operations. The combined financial information of the Obligor Group is presented on a combined basis with intercompany balances and transactions within the Obligor Group eliminated.
Current wording
The following tables include combined financial information of the Obligor Group. Investments in subsidiaries of $9,616 million and $9,423 million as of August 3, 2024 and February 3, 2024, respectively, have been excluded from the Summarized Balance Sheets. Equity in earnings of non-Guarantor subsidiaries of $439 million and $794 million for the 13 and 26 weeks ended August 3, 2024, respectively, have been excluded from the Summarized Statement of Operations. The combined financial information of the Obligor Group is presented on a combined basis with intercompany balances and transactions within the Obligor Group eliminated.
Previous wording
(a)Includes net amounts due to non-Guarantor subsidiaries of $4,301 million and $6,784 million as of May 4, 2024 and February 3, 2024, respectively.
Current wording
(a)Includes net amounts due to non-Guarantor subsidiaries of $3,992 million and $6,784 million as of August 3, 2024 and February 3, 2024, respectively.
Previous wording
(b)Includes $95 million of dividend income from non-Guarantor subsidiaries for the 13 weeks ended May 4, 2024, respectively.
Current wording
(b)Includes $154 million and $249 million of dividend income from non-Guarantor subsidiaries for the 13 and 26 weeks ended August 3, 2024, respectively.
Previous wording
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-plus-marketplace basis, which includes the impact of growth in comparable sales of departments licensed to third parties and marketplace sales, assists in evaluating the Company's ability to generate sales growth, whether through owned businesses, departments licensed to third parties or marketplace sales, on a comparable basis, 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 that are not associated with the Company's core operations and that may vary substantially in frequency and magnitude from period-to-period from net income, diluted earnings per share attributable to Macy's, Inc. shareholders and EBITDA provide useful supplemental measures that assist in evaluating the Company's ability to generate earnings and leverage sales, respectively, and to more readily compare these metrics between past and future periods. Management also believes that EBITDA and Adjusted EBITDA are frequently used by investors and securities analysts in their evaluations of companies, and that such supplemental measures facilitate comparisons between companies that have different capital and financing structures and/or tax rates. The Company uses certain non-GAAP financial measures as performance measures for components of executive compensation.
Current wording
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 and an owned-plus-licensed-plus-marketplace basis, which includes the impact of growth in comparable sales of departments licensed to third parties and marketplace sales, as applicable, assists in evaluating the Company's ability to generate sales growth, whether through owned businesses, departments licensed to third parties or marketplace sales, on a comparable basis, 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 that are not associated with the Company's core operations and that may vary substantially in frequency and magnitude from period-to-period from net income (loss), diluted earnings (loss) per share and EBITDA provide useful supplemental measures that assist in evaluating the Company's ability to generate earnings and leverage sales, respectively, and to more readily compare these metrics between past and future periods. Management also believes that EBITDA and Adjusted EBITDA are frequently used by investors and securities analysts in their evaluations of companies, and that such supplemental measures facilitate comparisons between companies that have different capital and financing structures and/or tax rates. The Company uses certain non-GAAP financial measures as performance measures for components of executive compensation.
Previous wording
(1)Represents the period-to-period percentage change in net sales from stores in operation for one full fiscal year for the 13 weeks ended May 4, 2024 and April 29, 2023. Such calculation includes all digital sales and excludes commissions from departments licensed to third parties and marketplace. Stores impacted by a natural disaster or undergoing significant expansion or shrinkage remain in the comparable sales calculation unless the store, or material portion of the store, is closed for a significant period of time. Definitions and calculations of comparable sales may differ among companies in the retail industry.
Current wording
(1)Represents the period-to-period percentage change in net sales from stores in operation for one full fiscal year for the 13 and 26 weeks ended August 3, 2024 and July 29, 2023. Such calculation includes all digital sales and excludes commissions from departments licensed to third parties and marketplace. Stores impacted by a natural disaster or undergoing significant expansion or shrinkage remain in the comparable sales calculation unless the store, or material portion of the store, is closed for a significant period of time. Definitions and calculations of comparable sales may differ among companies in the retail industry.
Previous wording
The following is a tabular reconciliation of the non-GAAP financial measure EBITDA and Adjusted EBITDA to GAAP net income, which the Company believes to be the most directly comparable GAAP measure.
Current wording
The following is a tabular reconciliation of the non-GAAP financial measure EBITDA and Adjusted EBITDA to GAAP net income (loss), which the Company believes to be the most directly comparable GAAP measure.
Previous wording
The following is a tabular reconciliation of the non-GAAP financial measures adjusted net income to GAAP net income and adjusted diluted earnings per share to GAAP diluted earnings per share, which the Company believes to be the most directly comparable GAAP measures.
Current wording
The following is a tabular reconciliation of the non-GAAP financial measures adjusted net income to GAAP net income (loss) and adjusted diluted earnings per share to GAAP diluted earnings (loss) per share, which the Company believes to be the most directly comparable GAAP measures.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
The income tax expense of $45 million, or 23.1% of pretax income, for thesecond quarter of 2024 and theincome tax benefit of $8 million, or 26.7% of pretax loss, for second quarter of 2023, reflect a different effective tax rate as compared to the Company’s federal income tax statutory rate of 21%. The income tax effective rates for thesecond quarter of 2024 and thesecond quarter of 2023 were impacted primarily by the effect of state and local taxes.
Current report — wording carried from elsewhere
2 Gross margin is not directly comparable to the prior year given the change in inventory valuation method from LIFO RIM to LIFO cost on February 4, 2024. Gross margin is defined as net sales less cost of sales.
Current report — wording carried from elsewhere
See pages 25 to 28 for reconciliations of the supplemental non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.
Current report — wording carried from elsewhere
Net sales for 2024 decreased $329 million, or 3.3%, compared to 2023. Net sales were impacted by ongoing macroeconomic conditions, including inflationary pressures and an increasingly complex news cycle. Macy's experienced strong performance in the First 50 locations, which benefited from various initiatives including, but not limited to, enhanced merchandising through elevated product rollouts across top markets and new brands and staffing.
Current report — wording carried from elsewhere
SG&A expenses decreased 1.2% in 2024 compared to 2023 due to the Company's appropriate cost controls while it protected customer-facing investments, particularly in First 50 locations. The increase in SG&A expenses as a percent to total revenue in 2024 was due to a decline in total revenue compared to 2023.
Current report — wording carried from elsewhere
The decrease in net interest expense in 2024 compared to 2023 wasprimarily driven by an increase in interest income on investments.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
▪Go-forward locations comparable sales increased 0.1% on both an owned and owned-plus-licensed basis.