Macy’s Secures Financing But Signals Q1 Loss

Macy’s has secured new financing to shore up its business, while revealing that its preliminary sales and earnings results for the first quarter included a loss and lower sales, although it said e-commerce and reopened stores are performing well.

The department store retailer said that it finished closing on $4.5 billion of new financing, including the company’s previously announced $1.3 billion of 8.375% senior secured notes, as well as a new $3.15 billion asset-based credit agreement. The company has amended and substantially reduced the credit commitments of its existing $1.5 billion unsecured credit agreement and intends to use the proceeds of the notes offering, along with cash on hand, to repay the outstanding borrowings under the existing $1.5 billion unsecured credit agreement.

As it closed the financing arrangements, Macy’s asserted that it expects to have sufficient liquidity to address the needs of the business, including funding operations and purchasing new inventory for upcoming merchandising seasons, resolving the company’s accrued payables obligations and repaying upcoming debt maturities in fiscal 2020 and fiscal 2021.

Macy’s financial statements for the quarter ended May 2 are not yet complete, the company pointed out. The preliminary results do not include the non-cash impact of goodwill and long-lived asset impairment charges, which are expected to have a material impact on the company’s reported results.

Preliminary net loss in the quarter was $652 million, or $2.10 per diluted share, versus net income of $136 million, or 44 cents per diluted share, in the year-prior quarter. Adjusted for one-time events, the loss was $630 million, or $2.03 per share, versus net income of $137 million, or 44 cents per diluted share, in the period a year earlier.

Net sales were $3.02 billion versus $5.5 billion in the year-before quarter. Operating loss was $969 million versus operating income of $203 million in the period a year previous.

The company will release its official first quarter earnings results on July 1.

“The COVID-19 pandemic significantly impacted our first quarter sales and earnings results, but I am proud of the way our team navigated this difficult period and maintained the business while our stores were closed,” said Jeff Gennette, Macy’s chairman and CEO. “Our strong digital business sales trend continued throughout May, and it is encouraging to see that as we reopen a store, the digital business in that geography continues to be strong. By June 1, we had approximately 450 stores reopened, with the majority opened in their full format. Our reopened stores are performing better than anticipated. Importantly, we are receiving positive feedback on the curbside pickup experience and our efforts to create a safe and welcoming shopping environment.”

He added that Macy’s is experiencing strong seasonal merchandise sales and anticipates that it will exit the second quarter in a clean inventory position.

“The holiday season will be crucial, and the team is working now to get the right merchandise and assortment in place,” he said.