Macy’s, Inc. lowered its guidance for full year sales growth, saying fiscal second quarter sales growth was not enough to offset disappointing first quarter results.
The department store operator reported total sales reached $6.27 billion in the second quarter ended Aug. 2, up 3.3 percent from total sales of $6.07 billion in the second quarter ended Aug. 3, 2013. Comparable sales together with comparable sales of departments licensed to third parties were up 4.0 percent in the second quarter of 2014 over 2013. Second quarter comparable sales were up 3.4 percent in 2014 compared with 2013.
“Our sales trend improved at both Macy’s and Bloomingdale’s in the second quarter, reflecting a rebound in shopping activity once weather patterns normalized. We also benefitted from a shift in a major Macy’s promotional event into the first two days of the quarter. Advancements in our M.O.M. strategies My Macy’s localization, Omnichannel integration and Magic Selling customer engagement continued to drive sales growth across the country. We also are very pleased by customer response to improvements at our Macy’s Herald Square flagship in New York, where we are mid-way through the third year of an unprecedented remodel project,” said Terry J. Lundgren, Macy’s, Inc. chairman and chief executive officer.
Earnings reached 80 cents per diluted share, up 11 percent from 72 cents in the second quarter of 2013 Macy’s, Inc.’s diluted earnings per share in the first half of 2014 were $1.40, an increase of 10 percent compared with earnings per diluted share of $1.27 in the first half of 2013.
For the year to date, Macy’s, Inc. sales totaled $12.546 billion, up 0.7 percent from total sales of $12.453 billion in the
first half of 2013. Comparable sales together with comparable sales of departments licensed to third parties were up 1.5 percent in the first half of 2014 over 2013. Year-to-date comparable sales were up 0.8 percent in 2014 compared with 2013.
“We are approaching the second half of 2014 with confident optimism in our business strategies, merchandise assortments and marketing plans, tempered with the reality that many customers still are not feeling comfortable about spending more in an uncertain economic environment,” Lundgren said. “Thus, we remain focused on outperforming our competitors through innovation in omnichannel, which has added new dimensions in how consumers can shop us and how our company can satisfy customer demand. This includes a robust Buy Online Pickup in Store process, which has been rolled out to all full-line Macy’s stores nationwide so that it is fully available this fall and into the holiday shopping season. Moreover, our Millennial strategies have sharpened our merchandising and marketing to customers in the age range of 13 to 30. This has created new positive energy as our customers begin back-to-school shopping.”
In August 2014, the company closed Macy’s stores in Bradenton, FL, and York, PA. In the second half of 2014, the company is opening three new Macy’s stores in Sarasota, FL, Las Vegas, NV, and The Bronx in New York City. A new Bloomingdale’s replacement store will open in Palo Alto, CA.
Operating Income
Macy’s, Inc.’s operating income totaled $571 million or 9.1 percent of sales for the quarter ended Aug. 2, 2014, compared with operating income of $534 million or 8.8 percent of sales for the same period last year.
For the first half of 2014, Macy’s, Inc.’s operating income totaled $1.014 billion or 8.1 percent of sales, compared with operating income of $969 million or 7.8 percent of sales for the same period last year.
Cash Flow
Net cash provided by operating activities was $646 million in the first half of 2014, compared with $664 million in the first six months of last year. Net cash used by investing activities in the first half of 2014 was $288 million, compared with $316 million a year ago. Net cash used by financing activities in the first six months of 2014 was $1.001 billion, compared with $760 million in the first half of 2013.
The company repurchased approximately 8.9 million shares of its common stock for a total of approximately $517 million in the second quarter of 2014. In the fiscal year to date, the company repurchased approximately 16.3 million shares of its common stock for approximately $949 million. At Aug. 2, 2014, the company had remaining authorization to repurchase up to approximately $2 billion of its common stock.
Looking Ahead
Expectations for the second half of 2014 remain on track, with guidance for comparable store growth of 2 percent to 3 percent. However, even with an improved sales trend in the second quarter, the company was unable to make up its sales shortfall from the first quarter. This calculates to expectations for a full-year 2014 comparable sales increase of 1.5 percent to 2 percent. Full-year 2014 comparable sales together with comparable sales of departments licensed to third parties now are expected to increase by 2 percent to 2.5 percent. Previous guidance was for full-year comparable sales to increase by 2.5 percent to 3 percent. The company continues to expect full-year 2014 earnings per diluted share in the range of $4.40 to $4.50, consistent with guidance previously provided.
