Macy’s Inc. reported results for the second quarter of 2021, raised guidance for fiscal 2021 and announced plans to return capital to shareholders.

“Second quarter results were strong across all three nameplates and surpassed our expectations. Our momentum in the first quarter accelerated in the second quarter as we successfully reengaged core customers and attracted new, younger customers with new brands and categories,” said Jeff Gennette, chairman and CEO, Macy’s, Inc. “Through the Macy’s, Inc. portfolio and our omnichannel approach, we provide a compelling, seamless integration between physical stores and digital shopping to most effectively meet the needs of our customers.”

“The Polaris strategy is working. We have meaningfully improved the fundamentals and overall health of our business, and we are well underway building a stronger Macy’s, Inc. for the future,” Gennette continued.

Enhancing Shareholder Value
Macy’s, Inc. ended the second quarter with approximately $2.1 billion in cash, allowing the company to execute on its two priorities of investing in profitable growth while de-levering its balance sheet. The company’s strong cash position will also allow it to return capital to shareholders as follows:

  • The company is reinstating its regular quarterly dividend at 15 cents per share on Macy’s, Inc.’s common stock, resulting in an annual return of cash to shareholders of nearly $200 million. The dividend is payable on October 1 to shareholders of record at the close of business on September 15;
  • The company’s board of directors has authorized a $500 million share repurchase program; and
  • As previously announced, the company voluntarily repaid $1.3 billion in Senior Secured Notes on August 17, 2021. With this action, Macy’s, Inc. now expects to exceed its target leverage ratio and achieve a ratio of no more than 2.5x by the end of fiscal 2021.

“While there is still uncertainty due to the ongoing pandemic, the increased traction of the Polaris strategy and our strong performance in the second quarter gives us the confidence to materially increase full-year guidance. We are also increasing our long-term Adjusted EBITDA margin target to remain in the low-double-digits beginning next year. We are now well-positioned to strengthen our business, enhance our long-term financial stability and return capital to our shareholders,” said Adrian Mitchell, CFO, Macy’s, Inc.

Second Quarter Highlights
In addition to prior-year comparisons, Macy’s, Inc. is providing comparisons to 2019 to benchmark its performance given the impact of the pandemic last year.

  • Diluted earnings per share of $1.08 and Adjusted diluted earnings per share of $1.29 exceeded expectations for the quarter. This compares to a diluted loss per share of $(1.39) and an Adjusted diluted loss per share of $(0.81) in the second quarter 2020. This compares to diluted earnings per share and Adjusted diluted earnings per share of $0.28 in the second quarter 2019.
  • Comparable sales up 61.2 percent on an owned basis and up 62.2 percent on an owned plus licensed basis versus 2020. Comparable sales up 5.8 percent on an owned basis and up 5.9 percent on an owned plus licensed basis versus 2019. Trend improvement of approximately 16 percentage points compared to the first quarter of 2021.
  • As macroeconomic trends shifted to more normal levels, the company saw strength across merchandise categories. Pandemic impacted categories, including denim, luggage, dresses, and other occasion-based apparel, came back strong. Categories that were solid throughout the pandemic, such as fragrance, fine jewelry and textiles, continued to perform well.
  • Digital sales declined 6 percent versus second quarter 2020, and grew 45 percent versus second quarter 2019. Digital penetration was 32 percent of net sales, a 22-percentage point decline from second quarter 2020, but a 10-percentage point improvement over second quarter 2019. The decline in digital sales compared to the prior year was driven by the shift of omnichannel customers to stores, which are now fully open.
  • The company brought approximately 5 million new customers into the Macy’s brand, a 30 percent increase compared to the second quarter 2019. Forty-one percent of new customers came through the digital channel in the second quarter 2021.
  • The company saw Platinum, Gold and Silver customers in its Star Rewards Loyalty program re-engage, with the average customer spend up 15 percent compared to second quarter 2019 and a 5-percentage point trend improvement from the first quarter 2021. The company’s Bronze segment, its youngest and most diverse loyalty tier continued to grow, adding approximately 2 million members.
  • Gross margin for the quarter was 40.6 percent, up from 23.6 percent in second-quarter 2020 and up 180 basis points from the second quarter 2019. Improvement as a result of merchandise margin was largely due to accelerated momentum in pricing, promotion and inventory initiatives driven by the Polaris strategy. Delivery expense as a percent of net sales decreased approximately 310 basis points from the second quarter of 2020 and increased 170 basis points from the second quarter 2019, due to the respective changes in penetration of digital sales.
  • Inventory was down 14.5 percent from the second quarter 2019. The decline was driven by market dynamics and the company’s execution of its Polaris strategy.
  • Selling, general and administrative (“SG&A”) expense of $1.9 billion, a $279 million improvement from second quarter 2019. SG&A as a percent of sales was 33.6 percent, an improvement of 570 basis points from second quarter 2019. The permanent Polaris SG&A expense savings, disciplined expense management, and improved productivity with a tight labor market, contributed to the second quarter SG&A performance.
  • Net credit card revenue of $197 million, up $21 million from second quarter 2019. Represented 3.5 percent of sales, 120 basis points lower than second quarter 2020 and 30 basis points better than second quarter 2019.

Revised Full-Year 2021 Guidance
The company is raising its full-year 2021 guidance.

  • Net sales are now expected in the range of $23.55B to $23.95B. Previous guidance called for $21.73B to $22.23B.
  • Adjusted diluted earnings per share are now expected in the range of $3.41 to $3.75. Previous guidance called for $1.71 to $2.12.
  • Adjusted EBITDA, as a percent of sales, is now expected in the range of 11 percent to 11.5 percent. Previous guidance called for 9 p.ercent to 9.5 percent