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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended July 31, 2021

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from          to

 

Commission file number: 1-13536

 

 

Macy's, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

13-3324058

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

151 West 34th Street, New York, New York 10001

(Address of Principal Executive Offices, including Zip Code)

(212) 494-1621

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $.01 par value per share

 

M

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

 

  

Accelerated Filer

 

 

 

 

 

Non-Accelerated Filer

 

  

Smaller Reporting Company

 

 

 

 

 

 

 

 

Emerging Growth Company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at August 28, 2021

Common Stock, $.01 par value per share

 

309,704,845 shares

 

 

 


 

 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MACY’S, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

(millions, except per share figures)

 

 

 

13 Weeks Ended

 

 

26 Weeks Ended

 

 

 

July 31, 2021

 

 

August 1, 2020

 

 

July 31, 2021

 

 

August 1, 2020

 

Net sales

 

$

5,647

 

 

$

3,559

 

 

$

10,353

 

 

$

6,576

 

Credit card revenues, net

 

 

197

 

 

 

168

 

 

 

356

 

 

 

299

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

(3,353

)

 

 

(2,718

)

 

 

(6,242

)

 

 

(5,219

)

Selling, general and administrative expenses

 

 

(1,898

)

 

 

(1,398

)

 

 

(3,646

)

 

 

(2,995

)

Gains on sale of real estate

 

 

6

 

 

 

 

 

 

12

 

 

 

16

 

Impairment, restructuring and other costs

 

 

(2

)

 

 

(242

)

 

 

(21

)

 

 

(3,426

)

Operating income (loss)

 

 

597

 

 

 

(631

)

 

 

812

 

 

 

(4,749

)

Benefit plan income, net

 

 

17

 

 

 

12

 

 

 

32

 

 

 

21

 

Settlement charges

 

 

(81

)

 

 

(38

)

 

 

(81

)

 

 

(38

)

Interest expense

 

 

(80

)

 

 

(70

)

 

 

(159

)

 

 

(120

)

Losses on early retirement of debt

 

 

(3

)

 

 

 

 

 

(14

)

 

 

 

Financing costs

 

 

 

 

 

(3

)

 

 

 

 

 

(3

)

Interest income

 

 

 

 

 

1

 

 

 

 

 

 

3

 

Income (loss) before income taxes

 

 

450

 

 

 

(729

)

 

 

590

 

 

 

(4,886

)

Federal, state and local income tax benefit (expense)

 

 

(105

)

 

 

298

 

 

 

(142

)

 

 

874

 

Net income (loss)

 

$

345

 

 

$

(431

)

 

$

448

 

 

$

(4,012

)

Basic earnings (loss) per share

 

$

1.11

 

 

$

(1.39

)

 

$

1.44

 

 

$

(12.91

)

Diluted earnings (loss) per share

 

$

1.08

 

 

$

(1.39

)

 

$

1.41

 

 

$

(12.91

)

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

2


 

MACY’S, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

(millions)

 

 

 

13 Weeks Ended

 

 

26 Weeks Ended

 

 

 

July 31, 2021

 

 

August 1, 2020

 

 

July 31, 2021

 

 

August 1, 2020

 

Net income (loss)

 

$

345

 

 

$

(431

)

 

$

448

 

 

$

(4,012

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial gain on post employment and postretirement benefit

   plans, before tax

 

 

63

 

 

 

19

 

 

 

63

 

 

 

19

 

Reclassifications to net income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of net actuarial loss and prior service credit on

   post employment and postretirement benefit plans included in

   net income (loss), before tax

 

 

9

 

 

 

11

 

 

 

19

 

 

 

23

 

Settlement charges, before tax

 

 

81

 

 

 

38

 

 

 

81

 

 

 

38

 

Tax effect related to items of other comprehensive income

 

 

(38

)

 

 

(17

)

 

 

(40

)

 

 

(20

)

Total other comprehensive income, net of tax effect

 

 

115

 

 

 

51

 

 

 

123

 

 

 

60

 

Comprehensive income (loss)

 

$

460

 

 

$

(380

)

 

$

571

 

 

$

(3,952

)

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

3


 

MACY’S, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(millions)

 

 

 

July 31, 2021

 

 

January 30, 2021

 

 

August 1, 2020

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,137

 

 

$

1,679

 

 

$

1,395

 

Receivables

 

 

221

 

 

 

276

 

 

 

184

 

Merchandise inventories

 

 

4,298

 

 

 

3,774

 

 

 

3,582

 

Prepaid expenses and other current assets

 

 

955

 

 

 

455

 

 

 

470

 

Total Current Assets

 

 

7,611

 

 

 

6,184

 

 

 

5,631

 

Property and Equipment - net of accumulated depreciation and

   amortization of $4,689, $4,400 and $4,642

 

 

5,713

 

 

 

5,940

 

 

 

6,279

 

Right of Use Assets

 

 

2,819

 

 

 

2,878

 

 

 

3,035

 

Goodwill

 

 

828

 

 

 

828

 

 

 

828

 

Other Intangible Assets – net

 

 

436

 

 

 

437

 

 

 

438

 

Other Assets

 

 

1,010

 

 

 

1,439

 

 

 

1,403

 

Total Assets

 

$

18,417

 

 

$

17,706

 

 

$

17,614

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Short-term debt

 

$

1,546

 

 

$

452

 

 

$

539

 

Merchandise accounts payable

 

 

2,476

 

 

 

1,978

 

 

 

1,409

 

Accounts payable and accrued liabilities

 

 

2,660

 

 

 

2,927

 

 

 

2,906

 

Income taxes

 

 

18

 

 

 

 

 

 

 

Total Current Liabilities

 

 

6,700

 

 

 

5,357

 

 

 

4,854

 

Long-Term Debt

 

 

3,295

 

 

 

4,407

 

 

 

4,851

 

Long-Term Lease Liabilities

 

 

3,096

 

 

 

3,185

 

 

 

3,269

 

Deferred Income Taxes

 

 

913

 

 

 

908

 

 

 

921

 

Other Liabilities

 

 

1,267

 

 

 

1,296

 

 

 

1,395

 

Shareholders' Equity

 

 

3,146

 

 

 

2,553

 

 

 

2,324

 

Total Liabilities and Shareholders’ Equity

 

$

18,417

 

 

$

17,706

 

 

$

17,614

 

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

4


 

MACY’S, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

 

(millions)

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Equity

 

 

Treasury

Stock

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Total

Shareholders'

Equity

 

Balance at January 30, 2021

$

3

 

 

$

571

 

 

$

3,928

 

 

$

(1,161

)

 

$

(788

)

 

$

2,553

 

Net income

 

 

 

 

 

 

 

 

 

103

 

 

 

 

 

 

 

 

 

 

 

103

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

8

 

Stock-based compensation expense

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

Stock issued under stock plans

 

 

 

 

 

(24

)

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

Balance at May 1, 2021

 

3

 

 

 

558

 

 

 

4,031

 

 

 

(1,137

)

 

 

(780

)

 

 

2,675

 

Net income

 

 

 

 

 

 

 

 

 

345

 

 

 

 

 

 

 

 

 

 

 

345

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

115

 

 

 

115

 

Stock-based compensation expense

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

Stock issued under stock plans

 

 

 

 

 

(71

)

 

 

 

 

 

 

71

 

 

 

 

 

 

 

 

Balance at July 31, 2021

$

3

 

 

$

498

 

 

$

4,376

 

 

$

(1,066

)

 

$

(665

)

 

$

3,146

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

5


 

 

MACY’S, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - (Continued)

(Unaudited)

 

(millions)

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Equity

 

 

Treasury

Stock

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Total

Shareholders'

Equity

 

Balance at February 1, 2020

$

3

 

 

$

621

 

 

$

7,989

 

 

$

(1,241

)

 

$

(995

)

 

$

6,377

 

Net loss

 

 

 

 

 

 

 

 

 

(3,581

)

 

 

 

 

 

 

 

 

 

 

(3,581

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

9

 

Common stock dividends

   ($0.3775 per share)

 

 

 

 

 

 

 

 

 

(117

)

 

 

 

 

 

 

 

 

 

 

(117

)

Stock-based compensation expense

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

Stock issued under stock plans

 

 

 

 

 

(62

)

 

 

 

 

 

 

61

 

 

 

 

 

 

 

(1

)

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

4

 

Balance at May 2, 2020

 

3

 

 

 

565

 

 

 

4,291

 

 

 

(1,180

)

 

 

(982

)

 

 

2,697

 

Net loss

 

 

 

 

 

 

 

 

 

(431

)

 

 

 

 

 

 

 

 

 

 

(431

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

51

 

 

 

51

 

Stock-based compensation expense

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

Stock issued under stock plans

 

 

 

 

 

(4

)

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

Balance at August 1, 2020

$

3

 

 

$

568

 

 

$

3,860

 

 

$

(1,176

)

 

$

(931

)

 

$

2,324

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

6


 

MACY’S, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

(millions)

 

 

 

26 Weeks Ended

 

 

 

July 31, 2021

 

 

August 1, 2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

448

 

 

$

(4,012

)

Adjustments to reconcile net income (loss) to net cash provided (used) by

   operating activities:

 

 

 

 

 

 

 

 

Impairment, restructuring and other costs

 

 

21

 

 

 

3,426

 

Settlement charges

 

 

81

 

 

 

38

 

Depreciation and amortization

 

 

444

 

 

 

472

 

Stock-based compensation expense

 

 

22

 

 

 

13

 

Gains on sale of real estate

 

 

(12

)

 

 

(16

)

Benefit plans

 

 

19

 

 

 

23

 

Amortization of financing costs and premium on acquired debt

 

 

14

 

 

 

4

 

Deferred income taxes

 

 

(36

)

 

 

(265

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Decrease in receivables

 

 

55

 

 

 

222

 

(Increase) decrease in merchandise inventories

 

 

(525

)

 

 

1,598

 

(Increase) decrease in prepaid expenses and other current assets

 

 

(41

)

 

 

31

 

Increase (decrease) in merchandise accounts payable

 

 

647

 

 

 

(188

)

Decrease in accounts payable and accrued liabilities

 

 

(78

)

 

 

(605

)

Increase (decrease) in current income taxes

 

 

12

 

 

 

(695

)

Change in other assets, liabilities, and other items not separately identified

 

 

(106

)

 

 

(53

)

Net cash provided (used) by operating activities

 

 

965

 

 

 

(7

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(142

)

 

 

(228

)

Capitalized software

 

 

(88

)

 

 

(61

)

Disposition of property and equipment

 

 

34

 

 

 

31

 

Other, net

 

 

52

 

 

 

(14

)

Net cash used by investing activities

 

 

(144

)

 

 

(272

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Debt issued

 

 

500

 

 

 

2,780

 

Debt issuance costs

 

 

(9

)

 

 

(98

)

Debt repurchase premium and expenses

 

 

(15

)

 

 

 

Debt repaid

 

 

(518

)

 

 

(1,504

)

Dividends paid

 

 

 

 

 

(117

)

Decrease in outstanding checks

 

 

(318

)

 

 

(111

)

Net cash provided (used) by financing activities

 

 

(360

)

 

 

950

 

Net increase in cash, cash equivalents and restricted cash

 

 

461

 

 

 

671

 

Cash, cash equivalents and restricted cash beginning of period

 

 

1,754

 

 

 

731

 

Cash, cash equivalents and restricted cash end of period

 

$

2,215

 

 

$

1,402

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

152

 

 

$

104

 

Interest received

 

 

 

 

 

4

 

Income taxes paid (net of refunds received)

 

 

166

 

 

 

86

 

 

Note: Restricted cash of $78 million and $7 million have been included with cash and cash equivalents for the 26 weeks ended July 31, 2021 and August 1, 2020, respectively.

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

7


MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1.

Organization and Summary of Significant Accounting Policies

Nature of Operations

Macy's, Inc., together with its subsidiaries (the "Company"), is an omnichannel retail organization operating stores, websites and mobile applications under three brands (Macy's, Bloomingdale's and bluemercury) that sell a wide range of merchandise, including apparel and accessories (men's, women's and kids'), cosmetics, home furnishings and other consumer goods. The Company has stores in 43 states, the District of Columbia, Puerto Rico and Guam. As of July 31, 2021, the Company's operations were conducted through Macy's, Market by Macy’s, Macy’s Backstage, Bloomingdale's, Bloomingdale's The Outlet, and bluemercury.  

Bloomingdale's in Dubai, United Arab Emirates and Al Zahra, Kuwait are operated under a license agreement with Al Tayer Insignia, a company of Al Tayer Group, LLC.

A description of the Company's significant accounting policies is included in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2021 (the "2020 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 2020 10-K.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are subject to inherent uncertainties, including the ultimate financial impact of the COVID-19 pandemic, which may result in actual amounts differing from reported amounts.

The Consolidated Financial Statements for the 13 and 26 weeks ended July 31, 2021 and August 1, 2020, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly, in all material respects, the consolidated financial position and results of operations of the Company.

Seasonality

Because of the seasonal nature of the retail business, the results of operations for the 13 and 26 weeks ended July 31, 2021 and August 1, 2020 (which do not include the Christmas season) are not necessarily indicative of such results for the full fiscal year.

Comprehensive Income (Loss)

Total comprehensive income (loss) represents the change in equity during a period from sources other than transactions with shareholders and, as such, includes net income (loss).  For the Company, the only other components of total comprehensive income (loss) for the 13 and 26 weeks ended July 31, 2021 and August 1, 2020 relate to post employment and postretirement plan items. Settlement charges incurred are included as a separate component of income (loss) before income taxes in the Consolidated Statements of Operations. Amortization reclassifications out of accumulated other comprehensive loss are included in the computation of net periodic benefit cost (income) and are included in benefit plan income, net on the Consolidated Statements of Operations.  See Note 6, "Benefit Plans," for further information.

COVID-19 Pandemic

As the COVID-19 pandemic continues through fiscal 2021, the Company continues to prioritize health and safety measures in its stores and facilities to protect the well-being of its customers and colleagues while also focusing on prudent cash management, maintaining strong liquidity and executing its strategic initiatives.  Although the Company has experienced strong recovery in operating results during fiscal 2021 as compared to fiscal 2020, the Company continues to monitor the impacts of COVID-19 on the macro economy as well as on the Company’s and its vendor partners’ operations. The full impact of the pandemic will continue to depend on future developments, including the continued spread and duration of the pandemic, the emergence of future variant strains of COVID-19, the availability and distribution of effective medical treatments or vaccines as well as any related federal, state or local governmental orders or restrictions. In addition, numerous uncertainties continue to surround the pandemic and its ultimate impact on the Company, including the timing and extent of any recovery in consumer traffic and spending, potential delays, interruptions and disruptions in the Company’s supply chain, maintenance of temporary government stimulus programs, labor shortages and intense competition for talent, all of which are highly uncertain and cannot be predicted.

 


MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

 

As further disclosed in the Company’s 2020 Form 10-K, on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law, which permitted, among other benefits, the carryback of certain net operating losses.  Based on the Company’s 2020 fiscal results, a $520 million income tax receivable associated with this net operating loss carryback benefit is included within prepaid expenses and other current assets on the Company’s Consolidated Balance Sheet.  This income tax receivable is estimated to be received in the first quarter of 2022.

2.

Impairment, Restructuring and Other Costs

 

 

 

13 Weeks Ended

 

 

26 Weeks Ended

 

 

 

July 31, 2021

 

 

August 1, 2020

 

 

July 31, 2021

 

 

August 1, 2020

 

 

 

(millions)

 

Impairments

 

$

2

 

 

$

15

 

 

$

20

 

 

$

3,164

 

Restructuring

 

 

 

 

 

169

 

 

 

(1

)

 

 

194

 

Other

 

 

 

 

 

58

 

 

 

2

 

 

 

68

 

Total

 

$

2

 

 

$

242

 

 

$

21

 

 

$

3,426

 

 

During the 13 and 26 weeks ended July 31, 2021, the Company incurred non-cash impairment charges totaling $2 million and $20 million, respectively, primarily related to capitalized software assets.

 

During the 13 and 26 weeks ended August 1, 2020, primarily as a result of the COVID-19 pandemic, the Company incurred non-cash impairment charges totaling $15 million and $3,164 million, respectively, the majority of which consisted of:

 

$3,080 million of goodwill impairments, with $2,982 million attributable to the Macy's reporting unit and $98 million attributable to the bluemercury reporting unit.

 

$80 million of impairments primarily related to long-lived tangible and right of use assets to adjust the carrying value of certain store locations to their estimated fair value.  

A summary of the restructuring and other cash activity for the 13 and 26 weeks ended July 31, 2021 and August 1, 2020 related to the Polaris strategy, which was announced in February 2020 and included within accounts payable and accrued liabilities, is as follows:

 

 

 

Severance and

other benefits

 

 

Professional

fees and other

related charges

 

 

Total

 

 

 

(millions)

 

Balance at February 1, 2020

 

$

115

 

 

$

9