Macy's Inc · NYSE:M
Macy's — Q4 2020 Earnings Presentation
34 slides from Macy's's earnings presentation, Feb 23, 2021
Slide 1: Fourth Quarter 2020 Earnings and Polaris Strategy Update
Fourth Quarter 2020 Earnings and Polaris Strategy Update 52909940 Jeff Gennette, Chairman & CEO Adrian Mitchell, CFO 23 February 2021 (revised 2.23.21) 0
Slide 2: Safe Harbor Statement
Safe Harbor Statement All statements in this presentation that are not statements of historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of Macy’s management and
Slide 3: Fourth Quarter and Full-year Results
Fourth Quarter and Full-year Results 2
Slide 4: Fourth Quarter and Full-year Snapshot
Fourth Quarter and Full-year Snapshot $ millions, except per share figures and percentages 4Q20 FY20 Net sales 6,780 17,346 Comp sales - owned (17.0)% (27.9)% Comp sales - owned + licensed (17.1)% (27.9)% Credit card revenues, net 258 751 Gross margin 2,282 5,060 Gross margin rate 33.7% 29.2% Sellin
Slide 5: Fourth Quarter and Full-year Highlights
Fourth Quarter and Full-year Highlights • Net income of $160 million, with diluted EPS of $0.50 in 4Q20 • 4Q20 adjusted net income of $253 million and adjusted diluted EPS of $0.80 • Exceeded expectations for the quarter • Net sales of $6.8 billion and $17.3 billion for 4Q20 and FY20, respectively •
Slide 6: Fourth Quarter and Full-year Earnings Highlights
Fourth Quarter and Full-year Earnings Highlights $ millions, except percentages 4Q20 FY20 Notes Credit Revenue 258 751 • Profit share income drove 4Q20 result due to lower delinquency and bad change to LY 19 20 debt levels resulting from a healthy credit customer Gross Margin 2,282 5,060 • 4Q20: Del
Slide 7: Digital Channel is contributing profitably to results
Digital Channel is contributing profitably to results Illustrative example FY19 Economics Illustration Digital Channel Store Channel Net sales $100 $100 • Delivery expense has largest impact on Digital Gross margin rate 30% 41% Channel gross margin Selling and labor costs • Digital Channel cost mode
Slide 8: Digital Channel: 4Q20 Highlights
Digital Channel: 4Q20 Highlights Performance Metrics 4Q20 (unless otherwise noted) Sales Up 21%, ~44% of net sales Average number of unique visitors* ~812 million, up ~11% to LY Conversion rate* 4.2%, up ~3% to LY Vendor direct % of digital sales* ~20% of Macy’s digital sales New vendor direct SKUs*
Slide 9: Macy's Core Portfolio
Stores are an important part of the market eco-system Focused on Best Locations Represent ~93% of sales and ~88% of stores moving forward Repositioning our store fleet within the highest quality malls primarily within A and B-malls Macy’s Core Portfolio GSA RATING % PORTFOLIO % SALES A&B 85% 87% FRE
Slide 10: Credit Card Revenue
Credit Card Revenue Credit Card Revenue, as a % of Sales 5.0% • Expect future credit card revenue to trend near 4.5% 4.3% pre-2020 levels at around 3% on an annual 4.0% basis 3.5% 3.1% 3.1% 3.0% 2.8% Performance Metrics 4Q20 2.5% New accounts ~608K, ~ -34% to LY 2.0% Proprietary card penetration 41.
Slide 11: Capital Allocation: Full-year Highlights
Capital Allocation: Full-year Highlights Finished the year without drawing from the asset-backed credit facility Free cash flow* of $296 million in 2020 Cash flow from operating activities of $649 million, down from $1.6 billion LY; variance driven primarily by lower earnings Capital expenditures of
Slide 12: 2021 Guidance
2021 Guidance 2021 Guidance $19.75 billion to $20.75 billion Net sales Increase between 14% and 20% compared to 2020 Digital channel Annual penetration of approximately 35% of net sales Credit card revenues, net Approximately 3% of net sales Gross margin rate Increase by high-single digit percentage
Slide 13: 2021 Guidance: Seasonal and Q121
2021 Guidance: Seasonal and Q121 From a seasonal standpoint, 2021 earnings are expected to be weighted more towards the back half of the year as sales continue to improve • ~75% of adjusted EBITDA, excluding asset sales gains, will be generated in the second half, with the majority of that coming in
Slide 14: Macy's, Inc. Store Count, as of January 30, 2021
Macy’s, Inc. Store Count , as of January 30, 2021 End of 3Q20 End of 4Q20 Change in Store Locations from 3Q20 Change in Store Locations Year to Date Boxes Store Locations Boxes Store Locations Macy's Flagships 16 11 16 11 Macy's Magnets 429 384 429 384 -1 Macy's Core 445 395 445 395 -1 Macy's Neighb
Slide 15: Polaris
* POLARIS
Slide 16: 2020 Polaris Accomplishments
2020 Polaris Accomplishments Customer Category Digital Omnichannel Margins and Relevance Mix Strength Ecosystem Cash Saw a 45% increase Flexed with current Accelerated focus on Focused on Achieved positive in active bronze customer demand digital to capitalize on optimizing the current EBITDA in Q3,
Slide 17: Key Pillars of Polaris
Key Pillars Win with Deliver fashion and style that meet core and new customer needs across all occasions, via existing and new retail platforms. of Polaris 1 fashion and style Transform our assortment architecture, fashion curation, inventory productivity, and vendor relationships to support. Build
Slide 18: Priority Strategy Tactics: Win with Fashion and Style
1. Win with Fashion and Style Key priorities to execute the strategy Win with Priority Strategy Tactics KPIs 1 fashion and style Establish Macy's as a source ▪ Create well-rounded assortments ▪ Increased full-price 2 Deliver clear value for customers to achieve their own unique style across private
Slide 19: Priority Strategy Tactics: Deliver Clear Value
2. Deliver Clear Value Key priorities to execute the strategy Win with Priority Strategy Tactics KPIs 1 fashion and style Optimized pricing A new pricing approach that ▪ Implement advanced analytics to ▪ Increased full-price sell- 2 Deliver clear value & promotions utilizes advanced analytics to dri
Slide 20: Priority Strategy Tactics: Excel in Digital Shopping
3. Excel in Digital Shopping Key priorities to execute the strategy Win with Priority Strategy Tactics KPIs 1 fashion and style Improve the fundamental ▪ Curate visual content ▪ Increased market 2 Deliver clear value Digital digital shopping experiences for our customers across our ▪ Offer new ways
Slide 21: Priority Strategy Tactics: Enhance Store Experience
4. Enhance Store Experience Key priorities to execute the strategy Win with Priority Strategy Tactics KPIs 1 fashion and style Create a connected omni- ▪ Establish and elevate customer ▪ Cost of transaction 2 Deliver clear value Tech-enabled ecosystem through store capabilities that accelerate exper
Slide 22: Priority Strategy Tactics: Modernize Supply Chain
5. Modernize Supply Chain Key priorities to execute the strategy Win with Priority Strategy Tactics KPIs 1 fashion and style Identify modifications and ▪ Build out store fulfillment model ▪ Improved fulfillment by 2 Deliver clear value Faster and more network optimization required to support forecas
Slide 23: Enablers: Technology Foundation, Data and Analytics, Operating Model
6. Enablers Win with fashion Excel in digital Enhance store Modernize supply Deliver clear value and style shopping experience chain Enterprise Data and Performance-driven Technology Foundation Analytics Operating Model Modernizing technology platforms to Embedding data and analytics into Defining a
Slide 24: Accelerate sustainable sales growth and profitability
Accelerate sustainable sales growth and profitability Generate solid free cash flow to achieve a healthier capital structure and enhance shareholder value 23
Slide 25: Healthy & Sustainable Future Growth Trajectory
Healthy & Sustainable Future Growth Trajectory We are targeting: Comparable owned + licensed Adjusted EBITDA margin: sales growth: Moving into the high single Low-single digits digits Execution on the Polaris strategy will Gross margin rate: Stabilizing in the mid-30s be a critical enabler of delive
Slide 26: Disciplined Capital Allocation Strategy
Disciplined Capital Allocation Strategy Allows for Return to Investment Grade Capital Structure VALUE-ENHANCING CAPITAL STRUCTURE CAPITAL RETURNED TO INVESTMENTS SHAREHOLDERS • Investing in the business to • Target < 3x • When appropriate, based on support growth initiatives debt-to-EBITDA leverage
Slide 27: Refocus Capital Investment to Drive Growth and Profitability
Refocus Capital Investment to Drive Growth and Profitability Historical versus Targeted Capital Expenditures 6% 6% Investing in new store • Going forward, test and scale localized off- properties mall formats to acquire U-40 and value- 18% driven customers 44% Enhance store experience in • Bring all
Slide 28: Appendix
Appendix 27
Slide 29: Reconciliation of GAAP to Non-GAAP Financial Measures
Reconciliation of GAAP to Non-GAAP Financial Measures The company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that certain non- GAAP financial measures provide users of the company's financial information with ad
Slide 30: Changes in Comparable Sales
Changes in Comparable Sales 13 weeks ended 52 weeks ended January 30, 2021 January 30, 2021 Decrease in comparable sales on an owned basis (Note 1) (17.0%) (27.9%) Impact of comparable sales of departments licensed to third parties (Note 2) (0.1%) 0.0% Decrease in comparable sales on an owned plus l
Slide 31: EBITDA Excluding Certain Items
Earnings (Loss) Before Interest, Taxes, Depreciation, and Amortization Excluding Certain Items 13 weeks 13 weeks 52 weeks 52 weeks ended ended ended ended January 30, February 1, January 30, February 1, In millions 2021 2020 2021 2020 Most comparable GAAP measure: Net income (loss) $160 $340 $(3,944
Slide 32: Net Income (Loss), Excluding Certain Items
Net Income (Loss), Excluding Certain Items 13 weeks ended 13 weeks ended In millions January 30, 2021 February 1, 2020 Most comparable GAAP measure: Net income (loss) $160 $340 Non-GAAP measure: Net income (loss) $160 $340 Impairment, restructuring, store closings and other costs 134 337 Settlement
Slide 33: Diluted Earnings (Loss) Per Share, Excluding Certain Items
Diluted Earnings (Loss) Per Share, Excluding Certain Items 13 weeks 13 weeks 52 weeks 52 weeks ended ended ended ended January 30, February 1, January 30, February 1, 2021 2020 2021 2020 Most comparable GAAP measure: Diluted earnings (loss) per share $0.50 $1.09 ($12.68) $1.81 Non-GAAP measure: Dilu
Slide 34: Free Cash Flow
Free Cash Flow 52 weeks ended 52 weeks ended In millions January 30, 2021 February 1, 2020 Net cash provided by operating activities $649 $1,608 Purchase of property and equipment (338) (902) Capitalized software (128) (255) Disposition of property and equipment 113 185 Free Cash Flow $296 $636 33