Macy’s, Inc. Reports Fourth Quarter and Fiscal Year 2018 Earnings and Provides 2019 Guidance

• Annual comparable sales growth of 1.7% on an owned basis; 2.0% on
  an owned plus licensed basis
• Annual EPS of $3.56; annual adjusted EPS of $4.18
• Strategic initiatives gain traction and position company for
  continued comparable sales growth
• Company launches multi-year productivity program to fund
  reinvestment in the business; streamlines management structure

CINCINNATI–(BUSINESS WIRE)–Macy’s, Inc. (NYSE:M) today reported results for the fourth quarter and
fiscal 2018 and provided annual sales and earnings guidance for fiscal
2019.

*Net sales performance is provided on a 52-week basis in 2018 compared
to a 53-week basis in 2017. Comparable sales performance is provided on
a 52-week basis in both 2018 and 2017. Comparable sales adjusted for the
impact of the 53^rd week reflect a shift of the company’s 2017
calendar to align with 2018 on a like-for-like basis.
**As adjusted
reflects the exclusion of certain items from the respective financial
measures. Please see the final pages of this news release for important
information regarding the nature of such excluded amounts and
calculation of the company’s non-GAAP financial measures.

“2018 was an important year for Macy’s, Inc. as we changed the
trajectory of the company and delivered positive comparable sales for
the full year. I’m pleased with the impact of our strategic initiatives,
particularly as they gained traction in the back half of the year,” said
Jeff Gennette, Macy’s, Inc. chairman & chief executive officer. “Looking
at the fourth quarter of 2018, while we delivered positive comparable
sales against what was a strong holiday season in 2017, results were
lower than our expectations. We experienced another quarter of
double-digit growth in digital. We also saw continued improvement in our
brick and mortar trends with the Growth50 stores outperforming the
fleet.”

“We know that when we listen to our customers, we win. And when we
invest in our business, we grow. In 2019, we will continue with a
balanced investment approach, and we are confident that Macy’s, Inc. is
on the right path to deliver sustainable, profitable growth,” continued
Gennette.

“The North Star Strategy is working. Macy’s is heading into 2019 a
stronger business than we were a year ago – with healthier stores, a
growing e-commerce business and a mobile experience that is resonating
with our customers. We are executing a balanced investment strategy that
supports all three of these components, with investment directed towards
areas we know have the highest returns,” said Gennette. “We are also a
more agile and flexible organization. The steps we are announcing to
further streamline our management structure will allow us to move
faster, reduce costs and be more responsive to changing customer
expectations. Importantly, these changes build the foundation we need to
achieve meaningful enterprise productivity improvements. These actions
impact colleagues who have made strong contributions to the company over
the years, and I thank them for their service.”

Asset Sale Gains

Asset sale gains for the fourth quarter of 2018 totaled $278 million
pre-tax, or $204 million after-tax and $0.65 per diluted share
attributable to Macy’s, Inc. This compares to the fourth quarter of
2017, when asset sale gains totaled $368 million pre-tax, or $230
million after-tax and $0.75 per diluted share attributable to Macy’s,
Inc.

In the fourth quarter of 2018, Macy’s, Inc. completed the sale of the
former I. Magnin building in Union Square San Francisco for $250 million
of cash proceeds and a gain of $178 million. Following the transaction,
the Macy’s Union Square store will comprise approximately 700,000 gross
square feet. Macy’s Union Square is one of the company’s flagship
properties, and this transaction is part of a multi-year plan to invest
in further enhancing the customer experience in the store.

Asset sale gains for fiscal 2018 totaled $389 million pre-tax, or $287
million after-tax and $0.92 per diluted share attributable to Macy’s,
Inc. This compares to 2017 when asset sale gains totaled $544 million
pre-tax, or $338 million after-tax and $1.10 per diluted share
attributable to Macy’s, Inc.

2018 Strategic Initiatives Update

The company’s five key strategic initiatives of the North Star Strategy
performed well for the year. Highlights include:

• Loyalty: Improved benefits to Macy’s Star Rewards member
  loyalty program led to increased loyalty penetration with platinum
  members, with platinum spend up 10%. The company also launched a
  tender-neutral option, which added more than three million new members
  to the loyalty program.
• Backstage: Opened Backstage, Macy’s on-mall, off-price
  business, in more than 120 new locations within Macy’s stores. For all
  Backstage store within a store locations, the average lift was more
  than 5% in the total store.
• Store Pickup: Expanded “Buy Online Pickup in Store” (BOPS),
  launched “Buy Online Ship to Store” (BOSS) feature, and built “At Your
  Service” centers in all stores. The company maintained approximately
  25% associated sales on BOPS and BOSS orders.
• Vendor Direct: Expanded vendor direct program on macys.com,
  nearly doubling online SKUs.
• Growth50: Implemented growth investment model in 50 Macy’s
  stores, a mix of size and geography, with upgrades including
  facilities, fixtures, assortment and customer service. These stores
  outperformed the fleet for sales growth in fiscal 2018 and achieved
  higher customer retention and brand attachment scores.

Looking Ahead

2019 Strategic Initiatives to Drive Growth

The company will carry three of its 2018 strategic initiatives forward
and add two new areas of focus in 2019:

• Growth150: Expand growth investment strategy to another 100
  stores.
• Backstage: Add Backstage locations to 45 Macy’s stores and
  deliver positive comparable sales for the Backstage stores previously
  opened.
• Vendor Direct: Build on the success of the 2018 launch with
  continued aggressive expansion of vendors and SKUs.
• Mobile: Continue ‘mobile first’ strategy. Strategically enhance
  the Macy’s mobile app with new features and functions to deliver
  outsized growth in mobile sales.
• Destination Businesses: Invest in areas where the company
  already has strong market share to drive disproportionate growth.
  These categories are dresses, fine jewelry, big ticket, men’s
  tailored, women’s shoes and beauty.

The company also intends to focus on innovation both through technology
and new economic models. The company will double the number of Market @
Macy’s locations, all of which will be powered by the b8ta platform. The
company will also continue to expand its virtual reality furniture
experience in 2019.

Funding Our Future

As part of the North Star strategy, Macy’s, Inc. is committed to
increased productivity to fund investment in the business. The company
has launched a comprehensive, multi-year program focused on growing its
profitability rate by improving productivity across the enterprise. The
program includes initiatives to improve margin through enhanced
inventory planning and operations, supply chain efficiencies, pricing
optimization, improved private brand sourcing and customer acquisition
and retention strategies.

As an initial step in this productivity plan, the company has announced
a restructuring that reduces the complexity of the upper management
structure to increase the speed of decision making, reduce costs and
respond to changing customer expectations. Importantly, it also allows
the company to put additional resources behind three focus areas:

• Improving supply chain efficiency;
• Innovating and enhancing inventory management; and
• Building a larger and healthier customer base.

In addition to the expected 2019 savings, the company anticipates that
these activities will fuel the productivity plan over the next 3-5 years
and contribute significantly to profitable growth.

The areas for cost reduction in 2019 have been identified and are
reflected in guidance. Beginning in 2019, the company expects the
restructuring actions announced today to generate annual expense savings
of $100 million. For fiscal 2018, the company recorded one-time charges
of approximately $80 million pre-tax for restructuring activities.

2019 Guidance

Macy’s, Inc. is providing the following annual guidance for 2019.

About Macy’s, Inc.

Macy’s, Inc. is one of the nation’s premier retailers, with fiscal 2018
sales of $24.971 billion and approximately 130,000 employees, the
company operates approximately 680 department stores under the
nameplates Macy’s and Bloomingdale’s, and nearly 190 specialty stores
that include Bloomingdale’s The Outlet, Bluemercury, Macy’s Backstage
and STORY. Macy’s, Inc. operates stores in 43 states, the District of
Columbia, Guam and Puerto Rico, as well as macys.com,
bloomingdales.com
and bluemercury.com.
Bloomingdale’s stores in Dubai and Kuwait are operated by Al Tayer Group
LLC under license agreements. Macy’s, Inc. has corporate offices in
Cincinnati, Ohio, and New York, New York.

All statements in this press release 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
are subject to significant risks and uncertainties. Actual results could
differ materially from those expressed in or implied by the
forward-looking statements contained in this release because of a
variety of factors, including conditions to, or changes in the timing
of, proposed real estate and other transactions, prevailing interest
rates and non-recurring charges, the effect of federal tax reform, store
closings, competitive pressures from specialty stores, general
merchandise stores, off-price and discount stores, manufacturers’
outlets, the Internet, mail-order catalogs and television shopping and
general consumer spending levels, including the impact of the
availability and level of consumer debt, the effect of weather and other
factors identified in documents filed by the company with the Securities
and Exchange Commission. Macy’s disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by law.

NOTE: Additional information on Macy’s, Inc., including past news
releases, is available at www.macysinc.com/pressroom.
A webcast of Macy’s, Inc.’s call with analysts and investors will be
held today (February 26, 2019) at 9:30 a.m. ET. The webcast, along with
the associated presentation, is accessible to the media and general
public via the company’s website at www.macysinc.com.
Analysts and investors may call in on 800-281-7973, passcode 2586485. A
replay of the conference call and slides can be accessed on the website
or by calling 888-203-1112, passcode 2586485, about two hours after the
conclusion of the call.

Macy’s, Inc. is scheduled to present at the Bank of America Merrill
Lynch Global Consumer & Retail Technology Conference at 8:00 a.m. ET on
Tuesday, March 12, 2019, in New York City. Media and investors may
access a live audio webcast of the presentations at www.macysinc.com/investors.
A replay of the webcast will be available on the company’s website.

MACY’S, INC.

Consolidated Financial Statements (Unaudited)

MACY’S, INC.

Important Information Regarding 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 additional useful information in
evaluating operating performance. Management believes that providing
supplemental changes in comparable sales on an owned plus licensed basis
and changes in comparable sales on an owned plus licensed basis adjusted
for the 53^rd week calendar shift, which includes adjusting
for growth in comparable sales of departments licensed to third parties,
assists in evaluating the company’s ability to generate sales growth,
whether through owned businesses or departments licensed to third
parties, and in evaluating the impact of changes in the manner in which
certain departments are operated. Earnings before interest, taxes,
depreciation and amortization (EBITDA) is a non-GAAP financial measure
which the company believes provides meaningful information about its
operational efficiency by excluding the impact of changes in tax law and
structure, debt levels and capital investment. In addition, management
believes that excluding certain items from EBITDA, net income and
diluted earnings per share attributable to Macy’s, Inc. shareholders
that are not associated with the company’s core operations and that may
vary substantially in frequency and magnitude period-to-period provides
useful supplemental measures that assist in evaluating the company’s
ability to generate earnings and to more readily compare these metrics
between past and future periods.

The reconciliation of the forward-looking non-GAAP financial measure of
changes in comparable sales on an owned plus licensed basis to GAAP
comparable sales (i.e., on an owned basis) is in the same manner as
illustrated below, except that the impact of growth in comparable sales
of departments licensed to third parties is the only reconciling item.
In addition, the company does not provide the most directly comparable
forward-looking GAAP measure of diluted earnings per share attributable
to Macy’s, Inc. shareholders excluding certain items because the timing
and amount of excluded items are unreasonably difficult to fully and
accurately estimate.

Non-GAAP financial measures should be viewed as supplementing, and not
as an alternative or substitute for, the company’s financial results
prepared in accordance with GAAP. Certain of the items that may be
excluded or included in non-GAAP financial measures may be significant
items that could impact the company’s financial position, results of
operations or cash flows and should therefore be considered in assessing
the company’s actual and future financial condition and performance.
Additionally, the amounts received by the company on account of sales of
departments licensed to third parties are limited to commissions
received on such sales. The methods used by the company to calculate its
non-GAAP financial measures may differ significantly from methods used
by other companies to compute similar measures. As a result, any
non-GAAP financial measures presented herein may not be comparable to
similar measures provided by other companies.

Contacts

Media – Blair Fasbender Rosenberg
646-429-6032
media@macys.com

Investors
– Ryan Alleman
513-579-7780
investors@macys.com

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