Press release:
CINCINNATI–(BUSINESS WIRE)– Macy’s, Inc. (NYSE:M – News) today reported significantly improved results for the fourth quarter and fiscal 2010. The company also provided initial guidance that anticipates further growth in sales and earnings in 2011, which reflects the continued benefits from consistent implementation of key strategies.
“Fiscal 2010 was a very successful year for Macy’s and Bloomingdale’s based on a combination of strong sales, steady margins and continued expense discipline. Our operating income rose 32 percent over the previous year, factoring out various items,” said Terry J. Lundgren, chairman, president and chief executive officer of Macy’s, Inc. “A successful holiday selling period in 2010 reinforced the effectiveness of our talented team, our unique organizational structure and the process that has transformed Macy’s, Inc. to a culture of growth.
“We believe that our company is now on a clear path that will lead to continued growth in sales, earnings and cash flow in the years ahead. We remain in the early phases of implementing several key strategies – localizing assortments through My Macy’s, embracing customer centricity and driving omnichannel integration,” Lundgren said. “We have a focused, energized and experienced organization that has seen the initial success of these initiatives and we now are pursuing new ideas for further improvement and sharpened execution. We have entered 2011 with momentum and confidence that we believe will continue to result in great things for our customers, our associates, our vendor partners and our shareholders.”
Earnings were $1.55 per diluted share for the 13-week fourth quarter of 2010, ended Jan. 29, 2011. Diluted earnings per share were $1.59 per share in the fourth quarter of 2010, excluding asset impairment charges and other costs and expenses related to store closings announced in January 2011 of $25 million ($16 million after tax or 4 cents per diluted share). This exceeds the company’s most recent guidance for fourth quarter earnings per diluted share of $1.44 to $1.49.
Included in fourth quarter and full year 2010 and 2009 tax expense are the effects of a change in methodology for recording the company’s deferred state income taxes from a blended rate basis to a separate entity basis. In the fourth quarter and full year 2010, the impact is a non-cash decrease in tax expense of $9 million, or 2 cents per diluted share. In the fourth quarter and full year 2009, the impact is a non-cash increase in tax expense of $21 million, or 5 cents per diluted share. The company’s previous reporting for fourth quarter 2009 has been adjusted to reflect this change.
In the fourth quarter of 2009, Macy’s, Inc. earned $1.05 per diluted share. Diluted earnings per share were $1.35 in the fourth quarter of 2009, excluding asset impairment charges, other costs and expenses related to store closings announced in January 2010, and expenses associated with division consolidation and localization initiatives announced in February 2009 of $186 million ($127 million after tax or 30 cents per diluted share).
For the full 52 weeks of fiscal 2010, Macy’s, Inc. reported diluted earnings per share of $1.98. Diluted earnings per share were $2.11 for fiscal 2010, excluding asset impairment charges and other costs and expenses related to store closings announced in January 2011 of $25 million ($16 million after tax or 4 cents per diluted share), and expenses associated with the early retirement of debt in the first and third quarters of 2010 of $66 million ($41 million after tax or 9 cents per diluted share).
For the full 52 weeks of fiscal 2009, Macy’s, Inc. earned 78 cents per diluted share. Earnings per diluted share were $1.36 for fiscal 2009, excluding $391 million ($247 million after tax or 58 cents per diluted share) in asset impairment charges, other costs and expenses related to store closings announced in January 2010, and expenses associated with divisional consolidation and localization initiatives announced in February 2009.
Sales
Sales in the fourth quarter of 2010 totaled $8.269 billion, an increase of 5.4 percent, compared with sales of $7.849 billion in the same period last year. On a same-store basis, Macy’s, Inc.’s fourth quarter sales were up 4.3 percent.
The company’s total sales for the 52 weeks of fiscal 2010 totaled $25.003 billion, up 6.4 percent from total sales of $23.489 billion in fiscal 2009. On a same-store basis, Macy’s, Inc.’s fiscal 2010 sales were up 4.6 percent. This is significantly better than initial guidance, provided at the beginning of the year, for sales to be up between 1 and 2 percent in 2010.
Online sales (macys.com and bloomingdales.com combined) were up 29.1 percent in the fourth quarter and 28.7 percent for fiscal 2010 compared with the same fiscal 2009 periods. Online sales positively affected the company’s same-store sales by 1.1 percentage points in the fourth quarter and 0.9 percentage points in fiscal 2010 as a whole. Online sales are included in the same-store sales calculation for Macy’s, Inc.
In fiscal 2010, the company opened two new Macy’s stores in Palmdale and Tracy, CA; a new Bloomingdale’s store in Santa Monica, CA; and four new Bloomingdale’s Outlet stores. Macy’s Home stores in Kansas City, KS, and Owensboro, KY, also were consolidated into nearby full-line stores during the year. A Macy’s store in Warwick, RI, was closed in 2010 due to flood damage and is expected to re-open when repairs are complete in the first quarter of 2011. In January 2011, the company announced the closing of three Macy’s stores in Union City, GA, Chestnut Hill, MA, and Austin, TX. In February 2010, Bloomingdale’s opened in Dubai under a license agreement with Al Tayer Insignia, a company of Al Tayer Group LLC.
Operating Income
Macy’s, Inc.’s operating income totaled $1.144 billion or 13.8 percent of sales for the quarter ended Jan. 29, 2011, compared with operating income of $874 million or 11.1 percent of sales for the same fiscal 2009 period. Macy’s, Inc.’s fourth quarter 2010 operating income included $25 million in asset impairment and other store closing costs. Excluding these costs, operating income for the fourth quarter of 2010 was $1.169 billion or 14.1 percent of sales. Fourth quarter 2009 operating income included $186 million of asset impairment charges, other costs and expenses related to store closings announced in January 2010, and expenses associated with division consolidation and localization initiatives announced in February 2009. Excluding these costs, operating income for the fourth quarter of 2009 was $1.060 billion or 13.5 percent of sales.
For fiscal 2010, Macy’s, Inc.’s operating income totaled $1.894 billion or 7.6 percent of sales, compared with operating income of $1.063 billion or 4.5 percent of sales for fiscal 2009. Macy’s, Inc.’s fiscal 2010 operating income included $25 million in asset impairment and other store closing costs. Excluding these costs, operating income for fiscal 2010 was $1.919 billion or 7.7 percent of sales. Fiscal 2009 operating income included $391 million of asset impairment charges, other costs and expenses related to store closings announced in January 2010, and expenses associated with division consolidation and localization initiatives announced in February 2009. Excluding these costs, operating income for fiscal 2009 was $1.454 billion or 6.2 percent of sales.
Cash Flow
Net cash provided by operating activities was $1.506 billion in fiscal 2010, compared with $1.750 billion in fiscal 2009. This includes $825 million in pension plan contributions in fiscal 2010, compared with $370 million in fiscal 2009. Net cash used by investing activities in fiscal 2010 was $465 million, compared with $377 million in the previous year. Thus, net cash provided before financing activities was $1.041 billion in fiscal 2010, compared with $1.373 billion in fiscal 2009.
In fiscal 2010, Macy’s, Inc. repaid $1.245 billion in debt, compared with $966 million repaid in fiscal 2009.
Looking Ahead
The company is assuming same-store sales growth of approximately 3 percent in fiscal 2011. Guidance for earnings per diluted share in fiscal 2011 is $2.25 to $2.30. Capital expenditures for the year are expected to be approximately $800 million.
Macy’s, Inc., with corporate offices in Cincinnati and New York, is one of the nation’s premier retailers, with fiscal 2010 sales of $25 billion. The company operates about 850 department stores in 45 states, the District of Columbia, Guam and Puerto Rico under the names of Macy’s and Bloomingdale’s, as well as the macys.com and bloomingdales.com websites. The company also operates four Bloomingdale’s outlet stores.
