After Tough Q4, Macy’s Plans Comeback

Macy’s, for the fourth quarter, posted company net income of $544 million, or $1.73 per diluted share, versus $793 million, or $2.26 per diluted share, in the year-ago period. Comparable sales for company-owned and licensed stores combined slipped 4.3%, while comps for company-owned stores alone fell 4.8%.

Adjusted earnings per diluted share were $2.09 after excluding $177 million— $115 million after tax, or 36 cents per diluted share— of impairments, store closing and other costs, the company asserted.

Net sales were $8.87 billion versus $9.36 billion in the year-earlier quarter. Operating income was $936 million in the quarter versus $1.36 billion in the period a year prior.

For the full fiscal year, company net income was $1.07 billion, or $3.22 per diluted share, versus $1.53 billion, or $4.22 per diluted share, in fiscal 2014. Comparable store sales for company-owned and licensed stores combined slid 2.5%, while comps for company-owned stores alone decreased 3%.

Adjusted earnings per share in fiscal 2015 were $3.77 after excluding $288 million— $184 million after tax, or 55 cents per diluted share— of impairments, store closing and other costs.

In the fiscal year 2014, adjusted earnings per diluted share were $4.40 after excluding charges of $87 million— $54 million after tax, or 15 cents per diluted share— associated with merchandising and marketing restructuring, store and field adjustments, store closings and asset impairments, as well as $17 million— $10 million after tax, or three cents per diluted share— of expense related to the make-whole premium for the early retirement of debt.

Net sales were $27.08 billion versus $28.11 billion in the 2014 fiscal year. Operating income was $2.04 billion versus $2.8 billion in the fiscal year previous.

“While 2015 was challenging, our sales trend improved in January as the weather turned colder in northern climate zones,” said Terry Lundgren, Macy’s chairman and CEO. “Macy’s and Bloomingdale’s were well-stocked in coats, boots, sweaters, gloves, hats and other seasonal goods. As the year ended, our inventories were in good shape. We are encouraged by the way the business responded going into 2016, and we believe we are well positioned to stabilize sales levels this year as we lay the foundation for enhanced shareholder value and sustained, long-term profitable growth. Given our determination to rise above our disappointing 2015 performance, I have reminded my team that our setback last year is a setup for our comeback.”

As it moves forward, Lundgren said, “Macy’s remains rooted in the M.O.M. strategies that have resonated with customers seeking fashion, value, quality and convenience as customers shop us in stores and digitally. But we are redefining, updating and redirecting our efforts in each letter of M.O.M. to carry us forward: With My Macy’s evolving from localization to personalization, Omnichannel now focused on providing omni choices for customers, and engaging customers by making Magic Connections. After the previous six consecutive years of cumulative success, 2015 reminded us that retailing is a dynamic business that requires continuous reinvention as the customer evolves. Today, we are examining every aspect of our business so we can grow profitable sales and re-attain our goal over time of an EBITDA rate as a percent of sales of 14%.”

Lundgren added that investments made in 2015 will boost Macy’s long term: “We registered yet another year of double-digit growth in our online business, fueled by exceptional increases in mobile traffic and increased conversions, with exciting new offerings from macys.com and bloomingdales.com. We expanded our online capacity with a new state-of-the-art fulfillment center in Tulsa, OK. We announced licensed department arrangements with companies including LensCrafters, Men’s Wearhouse and Best Buy to add new categories to the Macy’s store assortment. We completed the acquisition of Bluemercury, which added capabilities to our signature beauty business. We developed and launched Macy’s Backstage, which will be piloted as an in-store concept this spring. And we began initial testing of online selling in China in a new joint venture with a Hong Kong-based partner.”

The company operates about 870 stores in 45 states across its retail banners.