Macy's Reports Same Store Sales Decline of 2.6%

Furniture World News

Macy's, Inc. reported a loss of 14 cents per diluted share from continuing operations for the first quarter of 2008, ended May 3, 2008. These results include two unusual items (described below) that negatively impacted first quarter 2008 earnings by 16 cents per diluted share. Excluding these items, the company would have earned 2 cents per diluted share from continuing operations in the first quarter of 2008. The first unusual item relates to the consolidation of three Macy's divisions announced in February 2008, which is expected to save approximately $100 million per year beginning in 2009 (approximately $60 million in savings for the partial year in 2008). In the first quarter of 2008, the company booked consolidation costs of $87 million ($55 million after tax or 13 cents per diluted share). First quarter 2008 results also include a reserve of $23 million ($14 million after tax or 3 cents per diluted share) for a potential settlement of litigation related to a wage and hour class-action lawsuit in California. A settlement is contingent on final agreement and court approval. In the first quarter of 2007, Macy's, Inc. earned 11 cents per diluted share from continuing operations. Excluding May Company merger integration costs of $36 million ($22 million after tax or 5 cents per diluted share), first quarter 2007 diluted earnings per share from continuing operations were 16 cents. "Given the very difficult economic environment, our company performed relatively well compared to the competition in the first quarter. Macy's, Inc.'s same-store sales for the quarter, while below last year, were significantly better than most of our largest competitors, continuing a trend from the fourth quarter of 2007. This indicates that customers are preferring Macy's and we appear to be capturing market share even in this period of weak consumer spending. Earnings per share are on track to deliver the annual guidance provided at the outset of the year," said Terry J. Lundgren, Macy's, Inc. chairman, president and chief executive officer. "We are running the business with discipline given the weakened level of consumer confidence, as demonstrated by inventory levels at the end of the quarter that were about 4 percent below a year ago. And as we begin implementation of new My Macy's localization initiatives across the country, we are optimistic that our plans for tailored assortments and an improved shopping experience in every location will further enhance our store-level execution." Sales Sales in the first quarter totaled $5.747 billion, a decrease of 2.9 percent compared to sales of $5.921 billion in the same period last year. On a same-store basis, Macy's, Inc.'s first quarter sales were down 2.6 percent. In the first quarter of 2008, the company opened a new Macy's store in Westminster, CO, and closed a Macy's store in Memphis, TN, and a Macy's furniture store in Richmond, VA. Operating Income Macy's, Inc.'s operating income totaled $30 million or 0.5 percent of sales for the quarter ended May 3, 2008, compared with operating income of $208 million or 3.5 percent of sales for the same period last year. Macy's, 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 percent of sales. First quarter 2007 operating income included $36 million in May Company integration costs. Excluding these costs, operating income for the first quarter of 2007 was $244 million or 4.1 percent of sales. The gross margin rate in the first quarter of 2008 declined by 120 basis points primarily because of a higher level of merchandise clearance which was expected in light of a slowing economy and the resulting sales trends. SG&A as a percent to sales was up by 90 basis points primarily because of weak sales as well as the reserve for a potential litigation settlement. Cash Flow Net cash provided by continuing operating activities was $21 million in the first quarter of 2008, compared with $370 million of cash used by continuing operating activities in the first quarter last year. Net cash used by continuing investing activities in the first quarter of 2008 was $99 million, compared with $31 million a year ago. Net cash used by continuing financing activities was $139 million in the first quarter of 2008, compared with $309 million in the first quarter last year. The company repurchased no shares of its common stock in the first quarter of 2008 and anticipates no share repurchases for the remainder of fiscal 2008. At May 3, 2008, the company had remaining authorization to repurchase up to approximately $850 million of its common stock. Looking Ahead Macy's, Inc. is reaffirming previously provided guidance for same-store sales in fiscal 2008 to be in the range of down 1.0 percent to up 1.5 percent, with earnings per share on a diluted basis of $1.85 to $2.15, excluding one-time division consolidation costs. The company expects to book approximately $60 million in division consolidation costs in the final three quarters of 2008. Macy's, Inc., with corporate offices in Cincinnati and New York, is one of the nation's premier retailers, with fiscal 2007 sales of $26.3 billion. The company operates more than 850 department stores in 45 states, the District of Columbia, Guam and Puerto Rico under the names of Macy's and Bloomingdale's. The company also operates macys.com, bloomingdales.com and Bloomingdale's By Mail. Prior to June 1, 2007, Macy's, Inc. was known as Federated Department Stores, Inc.