Macy's updates business performance & 2008 guidance
Macy's Inc provided additional information on the company's business performance and updated its 2008 sales and earnings guidance in light of the weakening economic environment and consumer confidence. The company noted that with the uncertain direction of the economy, predictions of future performance remain difficult.
• Macy's Inc has continued to out-perform most of its major competitors in same-store sales, even as sales have declined on a year-over-year basis. In the 2008 third quarter to date (August and September combined), same-store sales at Macy's Inc declined by 5.8 percent, which represents a weakening from earlier periods in the year. For the year to date (eight months of 2008 through September), same-store sales declined by 3.2 percent. If weaker sales trends continue, same-store sales in the fall season could be down by 3 to 6 percent. (Previous guidance was for fall season same-store sales to be flat to down 1 percent.)
• Based on the potential for lower sales, the company's guidance now is for earnings per share on a diluted basis of approximately $1.30 to $1.50 for fiscal 2008 as a whole, excluding one-time division consolidation costs and impairment charges. Previous guidance was for earnings of $1.70 to $1.85 per diluted share, excluding division consolidation costs and impairment charges.
• The company continues to be financially healthy and year-to-date cash flow is stronger than anticipated at the beginning of the year, despite lower sales. Through a combination of initiatives - including the previously announced suspension of Macy's Inc's share repurchase program, reduced capital spending and disciplined management of inventories and expenses - the company's need for cash has been reduced. The company had approximately $740 million in cash and cash equivalents at the end of September. The company expects to fulfill additional working capital needs through borrowings from its existing $2 billion bank credit agreement, led by Bank of America and J.P. Morgan, which is committed through August 2012. There are currently no borrowings under this credit agreement.
"We are continuing to manage our business well in this tough economic environment, while simultaneously offering customers exciting fashion product and great value. We expect this will result in sales performance that continues to outpace key competitors, as we have done throughout the year-to-date period," said Terry J. Lundgren, chairman, president and chief executive officer of Macy's Inc.
"We have a strong and experienced organization that is committed to maximizing performance through the upcoming holiday season, and to continue to implement the My Macy's localization initiative that we believe will position us well in 2009 and beyond."