Macys, Inc. reported a net loss of 21 cents per diluted share for the first quarter of 2009, ended May 2, 2009. These results include restructuring charges of $138 million ($20 million after tax; 5 cents per share) related to division consolidations and localization initiatives announced in February 2009. Excluding these charges, the company lost 16 cents per diluted share in the first quarter of 2009. This is better than recent guidance for a loss of 19 cents to 21 cents per diluted share, excluding restructuring charges.
In the first quarter of 2008, Macys, Inc. lost 14 cents per diluted share. Excluding costs related to divisional consolidations announced in 2008 of $87 million ($55 million after tax; 13 cents per diluted share), and a reserve for a potential settlement of litigation of $23 million ($14 million after tax; 3 cents per diluted share), first quarter 2008 diluted earnings per share were 2 cents.
“We continue to successfully navigate this very difficult economic environment,” said Terry J. Lundgren, Macys, Inc. chairman, president and CEO. “Our first quarter sales were consistent with our initial expectations, while earnings and cash flow performance were better than expected.
“By the end of the first quarter, we completed the unification of our organizational structure, as well as the nationwide rollout of our My Macys localization initiative. We have entered the second quarter with our new organization in place and expect to benefit from approximately $400 million of annual expense savings beginning in 2010 (and $250 million in the partial year of 2009). Meanwhile, we expect to see an improvement in sales trend from My Macys beginning in the fourth quarter of 2009 and especially in spring 2010,” Lundgren said.
Sales
Sales in the first quarter totaled $5.19 billion, down 9.5% from total sales of $5.75 billion in the first 13 weeks of 2008. On a same-store basis, Macys, Inc.s first quarter sales were down 9.0%.
Online sales (macys.com and bloomingdales.com combined) were up 16.2% in the first quarter of 2009 and positively affected the companys first quarter 2009 same-store sales by 0.5 percentage points. Online sales are included in the same-store sales calculation for Macy's, Inc.
In the first quarter of 2009, the company opened one new Macys store in the Phoenix market.
Operating Income (Loss)
Macys, Inc.s operating loss totaled $114 million or 2.2% of sales for the quarter ended May 2, 2009, compared with operating income of $30 million or 0.5% of sales for the same period last year. First quarter 2009 operating loss included $138 million in restructuring charges. Excluding these costs, operating income for the first quarter of 2009 was $24 million or 0.5% of sales. Macys, Inc.s first quarter 2008 operating income included $87 million in division consolidation costs and a $23 million reserve for the potential litigation settlement. Excluding these costs, operating income for the first quarter of 2008 was $140 million or 2.4% of sales.
Cash Flow
Net cash used by operating activities was $35 million in the first quarter of 2009, compared with $21 million of net cash provided in the first quarter last year. Net cash used by investing activities in the first quarter of 2009 was $68 million, compared with $99 million a year ago. Net cash used by financing activities in the first quarter of 2009 was $908 million, including $837 million used to repay debt. Net cash used by financing activities was $139 million in the first quarter last year.
Looking Ahead
Given the continued uncertainty in the macro-economic environment, management believes it is prudent to maintain its previous annual guidance (initially provided on Feb. 2, 2009) for fiscal 2009 sales to be down between 6 percent and 8 percent, and for earnings of 40 cents to 55 cents per diluted share, excluding division consolidation costs. The company expects it will exceed this guidance if the economy improves in the second half of the year. The company expects to book approximately $230 million in division consolidation costs in the final three quarters of 2009.
MACYS, INC. | ||||||||||||||
Consolidated Statements of Operations (Unaudited) (Note 1) | ||||||||||||||
(All amounts in millions except percentages and per share figures) | ||||||||||||||
13 Weeks Ended | 13 Weeks Ended | |||||||||||||
May 2, 2009 | May 3, 2008 | |||||||||||||
% to | % to | |||||||||||||
$ | Net sales | $ | Net sales | |||||||||||
Net sales | $ | 5,199 | $ | 5,747 | ||||||||||
Cost of sales (Note 2) | 3,219 | 61.9 | % | 3,527 | 61.4 | % | ||||||||
Gross margin | 1,980 | 38.1 | % | 2,220 | 38.6 | % | ||||||||
Selling, general and administrative expenses (Note 3) | (1,956 | ) | (37.6 | %) | (2,103 | ) | (36.6 | %) | ||||||
Division consolidation costs (Note 4) | (138 | ) | (2.7 | %) | (87 | ) | (1.5 | %) | ||||||
Operating income (loss) | (114 | ) | (2.2 | %) | 30 | 0.5 | % | |||||||
Interest expense net | (141 | ) | (136 | ) | ||||||||||
Loss before income taxes | (255 | ) | (106 | ) | ||||||||||
Federal, state and local income tax benefit (Note 5) | 167 | 47 | ||||||||||||
Net loss | $ | (88 | ) | $ | (59 | ) | ||||||||
Basic loss per share | $ | (.21 | ) | $ | (.14 | ) | ||||||||
Diluted loss per share | $ | (.21 | ) | $ | (.14 | ) | ||||||||
Average common shares: | ||||||||||||||
Basic | 421.4 | 420.9 | ||||||||||||
Diluted | 421.4 | 420.9 | ||||||||||||
End of period common shares outstanding | 420.6 | 420.5 | ||||||||||||
Depreciation and amortization expense |