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Macy's Shares Shine Brightly on Q2 Earnings, Raised FY Outlook, Partnership With Toys"R"Us

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Macy's shares traded 20% higher after the company reported Q2/21 financial results and significantly raised its FY/21 sales and earnings guidance, reinstated its regular quarterly dividend, and instituted a $500 million share repurchase program.

Omni-channel fashion retailer Macy's Inc. (M:NYSE), today reported financial results for its second quarter 2021 ending July 31, 2021. The company stated in the announcement that it is raising its FY/21 guidance and advised that it is committed to reducing debt and returning capital to shareholders thru dividends and share repurchases.

The company's Chairman and CEO Jeff Gennette remarked, "Second quarter results were strong across all three nameplates and surpassed our expectations. Our momentum in the first quarter accelerated in the second quarter as we successfully reengaged core customers and attracted new, younger customers with new brands and categories…Through the Macy's Inc. portfolio and our omnichannel approach, we provide a compelling, seamless integration between physical stores and digital shopping to most effectively meet the needs of our customers."

"The Polaris strategy is working. We have meaningfully improved the fundamentals and overall health of our business, and we are well underway building a stronger Macy's Inc. for the future," Gennette added.

The company noted that it ended Q2/21 with approximately $2.1 billion in cash on its balance sheet, which will allow it to focus on making profitable investments with strong growth potential.

The firm stated that it is also highly focused on returning capital to shareholders. Macy's advised that it will be reinstating its quarterly dividend of $0.15 per share. On an annual basis, the dividend represents a return of cash to shareholders of around $200 million. The firm said that the dividend will be payable to shareholders of record as of September 15, 2021, on October 1, 2021. In addition, Macy's listed that its Board of Directors has authorized a $500-million share repurchase program.

Macy's reported that in Q2/21 it posted diluted earnings of $1.08 per share and adjusted diluted earnings of $1.29 per share. The company stated that both amounts exceeded its expectations and compared favorably with results in both Q2/20 and Q2/19. For Q2/20 the company recorded a diluted loss per share of $1.39 and an adjusted diluted loss per share of $0.81. During the pre-pandemic Q2/19 quarter, the firm listed that it posted diluted earnings per share and adjusted diluted earnings per share of $0.28.

The company advised that comparable sales in Q2/21 rose 61.2% on an owned basis and 62.2% on an owned plus licensed basis, versus Q2/20. When measured against pre-COVID Q2/19 results, comparable sales were up 5.8% on an owned basis and up 5.9% on an owned plus licensed basis.

The firm noted that its business is returning to more normal seasonal levels as pandemic-impacted categories such as denim, dresses, other occasion-based apparel, and luggage showed strong improvement. Macy's stated that fragrance, fine jewelry, and textiles continued to perform well in the latest quarter.

Macy's advised that digital sales decreased by 6% in Q2/21, when compared with Q2/20, but remained 45% higher than in Q2/19. The company explained that the decline in digital sales occurred as more customers returned to in-store shopping.

Macy's CFO Adrian Mitchell stated, "The increased traction of the Polaris strategy and our strong performance in the second quarter gives us the confidence to materially increase full-year guidance. We are also increasing our long-term adjusted EBITDA margin target to remain in the low-double digits beginning next year."

The company advised that it is now raising its FY/21 guidance. The firm now estimates that FY/21 net sales will be in the range of $23.55 to $23.95 billion, up from its prior forecasts of $21.73 to $22.23 billion. The firm added that it expects FY/21 adjusted diluted earnings of $3.41 to $3.75 per share, up from previous estimates of $1.71 to $2.12 per share. Macy's added that for FY/21, adjusted EBITDA as a percent of sales is expected to improve to between 11% to 11.5%.

In a separate news release today, Macy's Inc. (M:NYSE) announced that it entered into "a partnership with WHP Global to bring together two of America's most beloved brands, Macy's and Toys"R"Us." The company highlighted that "Toys"R"Us kids of all ages can now shop an expansive assortment online from the most globally recognized leader in toys at and in more than 400 Macy's stores nationwide rolling out in 2022.

The report indicated that Toys"R"Us generates over $2 billion in sales worldwide each year from its e-commerce businesses in over 25 countries and approximately 900 branded global stores located outside the U.S.

Macy's Inc. is a mainstay omni-channel fashion retailer headquartered in New York, N.Y. In addition to the iconic Macy' department store, the company also owns Bloomingdale's and Bluemercury. The firm sells a wide range of branded and private-label merchandise, including apparel, accessories, cosmetics, home furnishings, and other consumer goods. The company has built a robust and seamless mobile and e-commerce business that is highly integrated with its stores, allowing its customers to "shop the way they live — anytime and through any channel."

Macy's began the day with a market cap of around $5.6 billion with approximately 311.9 million shares outstanding and a short interest of about 13.5%. Shares opened about 6.5% higher today at $19.24 (+$1.17, +6.47%) over yesterday's $18.07 closing price. The stock has traded today between $18.79 and $22.19 per share and closed at $21.61 (+$3.54, +19.59%).


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