Macy’s Reports Third Quarter 2024 Results

NEW YORK–(BUSINESS WIRE)–Macy’s, Inc. (NYSE: M) today reported financial results for the third quarter of 2024 that are consistent with its previously announced preliminary results, and also updated its annual guidance. These financial results and outlook reflect revisions to properly reflect previously misstated delivery expense, the related accrual and tax effects.

Third Quarter Highlights

• The company confirms no material impact or restatements to previously filed financial statements following completion of delivery expense related investigation.
• GAAP diluted earnings per share of $0.10; Adjusted diluted earnings per share of $0.04 exceeded the company’s prior guidance.
• Macy’s First 50 locations delivered third consecutive quarter of comparable sales growth, up 1.9%.
• Bloomingdale’s reported comparable sales growth of owned and owned-plus-licensed-plus-marketplace of 1.0% and 3.2%, respectively.
• Bluemercury reported comparable sales growth of 3.3%.
• Asset sale gains of $66 million, which was ahead of the company’s prior guidance.

“Our third quarter results reflect the positive momentum we are building through our Bold New Chapter strategy,” said Tony Spring, chairman and chief executive officer of Macy’s, Inc. “We are encouraged by the consistent sales growth in our Macy’s First 50 locations and the strong performance of Bloomingdale’s and Bluemercury. Quarter-to-date, comparable sales continue to trend ahead of third quarter levels across the portfolio. Looking ahead, we remain committed to achieving sustainable, profitable growth for Macy’s, Inc.”

Third Quarter Results (comparisons are to the third quarter of 2023)

Macy’s, Inc. net sales decreased 2.4% to $4.7 billion, with comparable sales down 2.4% on an owned basis and down 1.3% on an owned-plus-licensed-plus-marketplace basis. Sales growth at Macy’s First 50 locations, Bloomingdale’s, and Bluemercury was offset primarily by weakness in Macy’s non-First 50 locations as well as its digital channel and cold weather categories.

Macy’s, Inc. go-forward business¹ comparable sales were down 2.0% on an owned basis and down 0.9% on an owned-plus-licensed-plus-marketplace basis. By nameplate:

• Macy’s net sales were down 3.1%, with comparable sales down 3.0% on an owned basis and down 2.2% on an owned-plus-licensed-plus-marketplace basis. Fragrances, dresses and men’s and women’s active apparel were strong. Macy’s go-forward business¹ comparable sales were down 2.6% on an owned basis and down 1.8% on an owned-plus-licensed-plus-marketplace basis.
  • First 50 locations comparable sales were up 1.9% on both an owned basis and on an owned-plus-licensed basis as investments in staffing, merchandising, visual presentation and eventing continued to resonate with the customer.
• Bloomingdale’s net sales were up 1.4%, with comparable sales up 1.0% on an owned basis and up 3.2% on an owned-plus-licensed-plus-marketplace basis. Key drivers included strength in contemporary apparel, beauty and digital.
• Bluemercury net sales were up 3.2% and comparable sales were up 3.3% on an owned basis, representing the fifteenth consecutive quarter of comparable sales growth. Customers continued to respond well to the breadth of skincare offerings.

Other revenue of $161 million decreased $17 million, or 9.6%. Within Other revenue:

• Credit card revenues, net decreased $22 million, or 15.5%, to $120 million. Net credit losses contributed to the year-over-year decline and were in-line with the company’s expectations.
• Macy’s Media Network revenue, net rose $5 million, or 13.9%, to $41 million, reflecting higher advertiser and campaign counts.

Gross margin rate^{2, 3} of 39.6% decreased 60 basis points. Merchandise margin declined 70 basis points due to product mix and the conversion to cost accounting. The decline in merchandise margin was partially offset by efficiencies in the company’s fulfillment network and lower shipped sales volume.

Selling, general and administrative (“SG&A”) expense of $2.1 billion increased $24 million. SG&A expense growth reflected strategic customer-facing investments, partially offset by continued cost controls. As a percent of total revenue, SG&A expense increased 160 basis points to 42.1% due to lower total revenue.

Asset sale gains of $66 million were $61 million higher than the same period last year due to the monetization of non-go-forward assets, as part of the company’s Bold New Chapter strategy. Asset sale gains reflect the pull-forward of the monetization of certain non-go-forward assets into the third quarter from the fourth quarter.

GAAP diluted earnings per share (“EPS”) was $0.10 and Adjusted diluted EPS was $0.04, compared to GAAP diluted EPS of $0.15 and Adjusted diluted EPS of $0.21 in the third quarter of 2023.³

Balance Sheet and Liquidity

Merchandise inventories² increased 3.9% year-over-year. The conversion to cost accounting was estimated to account for approximately half of the increase from the prior year. The company believes its merchandise inventories reflect the appropriate level of newness.

The company ended the third quarter of 2024 with cash and cash equivalents of $315 million and $2.8 billion of available borrowing capacity under its asset-based credit facility reflecting current borrowings and letters of credit.

As of the end of third quarter of 2024, total debt of $2.9 billion included $86 million of short-term borrowings under the company’s asset-based credit facility and no material long-term debt maturities until 2027. The company voluntarily retired $220 million of debt during the quarter through a previously disclosed tender offer.

1: Inclusive of go-forward locations and digital. For Macy’s, Inc. this reflects go-forward locations and digital across all three nameplates.
2: Inventories and Gross Margin are not directly comparable to the prior year given the conversion to cost accounting at the beginning of fiscal 2024.
3. To properly reflect delivery expense, third quarter of 2024 gross margin includes a $13 million adjustment (of which $9 million relates to the first half of 2024), or approximately 30 bps, and third quarter of 2024 adjusted diluted EPS includes a $0.04 adjustment. Third quarter of 2023 gross margin has been revised by $3 million, or approximately 10 bps. There is no change to third quarter of 2023 diluted EPS or adjusted diluted EPS.

Other Corporate Developments

As previously disclosed, during the preparation of the company’s unaudited condensed consolidated financial statements for the fiscal quarter ended November 2, 2024, the company identified an issue related to delivery expenses in one of its accrual accounts. The company consequently initiated an independent investigation which has now been completed and, following its analysis, determined that there was no material impact to financial results for any historical annual or interim period.

As a result of the independent investigation and forensic analysis, the company identified that a single employee with responsibility for small package delivery expense accounting intentionally made erroneous accounting accrual entries to hide approximately $151 million of cumulative delivery expenses from the fourth quarter of 2021 through the third quarter of 2024. As previously communicated, the investigation determined that this matter had no impact on the company’s reported net cash flows, inventories or vendor payments.

The company is revising its historical consolidated financial statements that were impacted by the misstatements to properly reflect delivery expense, the related accrual and tax effects. The total misstatement to delivery expense for the first half of fiscal 2024 amounted to $9 million, which was adjusted in total during the third quarter of 2024. Additional details and revised financial information for fiscal years 2021, 2022, and 2023, and quarterly periods for fiscal year 2023 can be found in the company’s Form 8-K filed today with the Securities and Exchange Commission (“SEC”). The company expects to file its Form 10-Q for the fiscal quarter ended November 2, 2024 with the SEC tomorrow, December 12, 2024.

“We’ve concluded our investigation and are strengthening our existing controls and implementing additional changes designed to prevent this from happening again and demonstrate our strong commitment to corporate governance,” said Spring. “Our focus is on ensuring that ethical conduct and integrity are upheld across the entire organization.”

2024 Guidance

The company updated its annual outlook. The full updated outlook for 2024, presented on a 52-week basis, can be found in the presentation posted to macysinc.com/investors.

Gross margin as a percent of net sales, adjusted EBITDA, and adjusted diluted EPS guidance as of December 11, 2024 includes the impact from the aforementioned $13 million adjustment to delivery expense in the third quarter of 2024 as well as an updated estimated delivery expense impact of $66 million for the fourth quarter of 2024, for a full year estimated impact of $79 million. These impacts were not included in the company’s previously provided guidance. Additionally, for comparison purposes, the company has presented guidance as of August 21, 2024 both as provided and adjusted for the third and fourth quarter of 2024 delivery expense impacts.

Adjusted diluted EPS excludes any potential impact from the credit card late fee ruling, which was stayed on May 10, 2024. Additionally, the impact of any potential future share repurchases associated with the company’s current share repurchase authorization is also excluded.

The company does not provide reconciliations of the forward-looking non-GAAP measures of comparable owned-plus-licensed-plus-marketplace sales change, adjusted EBITDA, and adjusted diluted earnings per share to the most directly comparable forward-looking GAAP measures because the timing and amount of excluded items are unreasonably difficult to fully and accurately estimate. For the same reasons, the company is unable to address the probable significance of the unavailable information, which could be material to future results. See Important Information Regarding Financial Measures.

About Macy’s, Inc.

Macy’s, Inc. (NYSE: M) is a trusted source for quality brands through our iconic nameplates – Macy’s, Bloomingdale’s and Bluemercury. Headquartered in New York City, our comprehensive digital and nationwide footprint empowers us to deliver a seamless shopping experience for our customers. For more information, visit macysinc.com.