Macy's Inc · NYSE:M
Macy's — Investor Day (2020)
98 slides from Macy's's investor day presentation, 2020
Slide 1: Investor Day 2020
* BLOOMINCGCODALE'S = vb JL AML AML, macys inc INVESTOR DAY 2020
Slide 2: Optimize Store Portfolio
MACY’S, INC. INVESTOR DAY 2020 OPTIMIZE STORE PORTFOLIO 2
Slide 3: Optimize Store Portfolio
MACY’S, INC. INVESTOR DAY 2020 Invest in best stores 4 Expand off-mall profitably OPTIMIZE STORE PORTFOLIO Test & prove market ecosystem 3
Slide 4: Everyone Is Competing for the Same Dollar
MACY’S, INC. INVESTOR DAY 2020 EVERYONE IS Big Box Luxury Rental Re-Commerce COMPETING FOR THE SAME DOLLAR Off Price Digital Subscription Native 4
Slide 5: Focused on Best Locations
MACY’S, INC. INVESTOR DAY 2020 FOCUSED ON BEST LOCATIONS Class A malls are here for the Macy’s Core Portfolio long term and have an ongoing place in U.S. retail GSA RATING % PORTFOLIO % SALES A 45.8% 56.4% Represent ~66% of sales and ~49% of stores moving forward FREESTANDING off-mall in urban setti
Slide 6: Growth Treatment Is Working
MACY’S, INC. INVESTOR DAY 2020 By 2021, top 250 stores will represent 78% of sales GROWTH These stores will be brand right and TREATMENT IS driving improved profit WORKING Working on labor models to find optimal mix and drive productivity 6
Slide 7: Growth Treatment Is Working
MACY’S, INC. INVESTOR DAY 2020 ~50% of 2019 total stores’ sales Total store comparable sales ~2 % improvement when a Backstage is GROWTH added TREATMENT IS WORKING +4pts Original 50 stores are outperforming the balance of the fleet ~400 Stores will receive have received the Growth treatment by the e
Slide 8: Closing ~125 of Least Productive Stores Over Next Three Years
MACY’S, INC. INVESTOR DAY 2020 CLOSING ~125 OF LEAST PRODUCTIVE STORES OVER NEXT THREE YEARS 25% Of fleet NEIGHBORHOOD <10% Of sales STORES 3pts Below fleet Leaner store portfolio will improve fleet profitability, working capital and inventory 8
Slide 9: Plan in Place to Manage Store Closures
MACY’S, INC. INVESTOR DAY 2020 PLAN IN PLACE TO MANAGE STORE CLOSURES Neighborhood stores form a region with dedicated management and focused strategy NEIGHBORHOOD STORES Annual store review process Customer retention strategies 9
Slide 10: Real Estate Strategy
MACY’S, INC. INVESTOR DAY 2020 REAL ESTATE STRATEGY Doug Sesler Head of Real Estate 10
Slide 11: Macy's Owns and Controls Great Real Estate
MACY’S, INC. INVESTOR DAY 2020 Broad footprint across US Market coverage in 49 of top 50 markets Low occupancy cost OUR FLEET Average occupancy cost less than MACY’S OWNS $5.00 / SF ~400 AND CONTROLS Typically limited escalations Core Stores (Magnets / Flagships) GREAT REAL High quality ESTATE Locat
Slide 12: Three Components of Our Real Estate Strategy
MACY’S, INC. INVESTOR DAY 2020 THREE COMPONENTS OF OUR REAL ESTATE STRATEGY MARKET AND FLEET REAL ESTEATE ASSET ANALYSIS DEVELOPMENT MONETIZATION • Identifies underperforming • Outparcel program • Spans three primary types of stores / sales candidates sales: • Major development program • Pinpoints o
Slide 13: Maximize Value Through Strategic Timing and Positioning
MACY’S, INC. INVESTOR DAY 2020 MAXIMIZE VALUE THROUGH STRATEGIC TIMING AND POSITIONING CANDIDATES FOR GUIDING MONETIZATION PRINCIPLES RESULTS Underperforming stores Think like the buyer / developer LAST 4 YEARS $1.6B 135 Proceeds Assets Opportunistic monetizations Understand “highest and best use” 2
Slide 14: Pre-Development or Development Can Enhance Proceeds
MACY’S, INC. INVESTOR DAY 2020 PRE-DEVELOPMENT OR DEVELOPMENT CAN ENHANCE PROCEEDS 1 Outparcels Small pads in parking areas; e.g., quick-service restaurants, banks 2 Large Scale Development Multi-acre developments; Typically mixed use Special Projects 3 Herald Square Office Tower, San Francisco Unio
Slide 15: Outparcel Development Program
MACY’S, INC. INVESTOR DAY 2020 OUTPARCEL DEVELOPMENT GAINS Program $1-3M To Develop Gains to Macy’s per Parcels pad on average Three regional PIPELINE development partners: • • Develop Lease 16 Pads in progress • Sell 40+ Pads on drawing board 15
Slide 16: Large-Scale Development Program
MACY’S, INC. INVESTOR DAY 2020 LARGE-SCALE DEVELOPMENT PROGRAM Leveraging in-house AVERAGE DEVELOPMENT SIZE and local JV partner expertise to densify $100-300M 10-15% excess land with Development cost Land value share of development mixed-use projects JV Structure Benefits • Create JV with local PIP
Slide 17: Large-Scale Development Program: Burlington Mall Overview
MACY’S, INC. INVESTOR DAY 2020 LARGE-SCALE DEVELOPMENT PROGRAM Burlington Mall Overview Carve out 8 of 19 owned acres for mixed-use development $250M project value 17
Slide 18: Large-Scale Development Program: Burlington Mall Overview
MACY’S, INC. INVESTOR DAY 2020 LARGE-SCALE DEVELOPMENT PROGRAM Burlington Mall Overview Carve out 8 of 19 owned acres for mixed-use development MACY’S $250M project value 18
Slide 19: Large-Scale Development Program: Burlington Mall Overview
MACY’S, INC. INVESTOR DAY 2020 LARGE-SCALE DEVELOPMENT PROGRAM Burlington Mall Overview Carve out 8 of 19 owned acres for mixed-use development $250M project value 19
Slide 20: Special Projects: Herald Square
MACY’S, INC. INVESTOR DAY 2020 SPECIAL PROJECTS: HERALD SQUARE Pre-development Planning Underway 1.5 million SF office tower above the store: Sky Lobby Working to up-zone property for project Superior location Penn Station District 14 transit lines near building Retains the store and historic charac
Slide 21: Special Projects: Herald Square
MACY’S, INC. INVESTOR DAY 2020 SPECIAL PROJECTS: HERALD SQUARE Pre-development Planning Underway 1.5 million SF office tower above the store: Sky Lobby Working to up-zone property for project Superior location Penn Station District 14 transit lines near building Retains the store and historic charac
Slide 22: Continue to Streamline and Invest in Fleet
MACY’S, INC. INVESTOR DAY 2020 HIGH-QUALITY REAL ESTATE IS AN ENDURING COMPETITIVE ADVANTAGE MARKET AND FLEET ANALYSIS Rigorous, regional fleet review • Identify candidates for monetization • Improve fleet quality while retaining critical locations CONTINUE TO STREAMLINE AND ASSET MONETIZATION Susta
Slide 23: Retail Ecosystem
MACY’S, INC. INVESTOR DAY 2020 RETAIL ECOSYSTEM 23
Slide 24: Off-Mall Market Share Growth Potential
MACY’S, INC. INVESTOR DAY 2020 ON-MALL OFF-MALL OFF-MALL HOUSEWARES 4% 96% MARKET SHARE GROWTH POTENTIAL HANDBAGS 43% 57% Source: NPD data 24
Slide 25: Off-Mall Growth Strategy
MACY’S, INC. INVESTOR DAY 2020 Significant opportunity with customers that know our brand OFF-MALL Leverage omni, non-mall based, retail GROWTH experience STRATEGY Innovate to serve this customer in two ways 25
Slide 26: Creating a Retail Ecosystem
MACY’S, INC. INVESTOR DAY 2020 CREATING A RETAIL ECOSYSTEM Growth opportunity through strategic placement of new stores off-mall Department store through off-price and lifestyle lens 26
Slide 27: Backstage: Runway for Expansion
MACY’S, INC. INVESTOR DAY 2020 ~5% 2019 comparable sales for SWS locations opened for more than one year BACKSTAGE: RUNWAY FOR EXPANSION 274 Number of SWS (261) and Freestanding (13) locations by the end of 2020 22 % Freestanding customers are new to the Macy’s brand 27
Slide 28: New Store Format Testing in 2020
MACY’S, INC. INVESTOR DAY 2020 Testing in 2020 Smaller than the average Macy’s store Located in lifestyle centers Curated Macy’s merchandise, local goods, community-oriented events 28
Slide 29: Creating a Retail Ecosystem
MACY’S, INC. INVESTOR DAY 2020 CREATING A RETAIL ECOSYSTEM Growth opportunity through strategic placement of new stores off-mall Department store through off-price and lifestyle lens 29
Slide 30: Market Ecosystem
MACY’S, INC. INVESTOR DAY 2020 Three growing metropolitan test markets with store base but gaps in coverage Opportunity to build model that improves profit MARKET with ability to scale ECOSYSTEM Significant digital business in each city Testing in Washington DC, Dallas, Atlanta markets 30
Slide 31: Dallas-Fort Worth Market Map
Dallas-Fort Worth Legend @ Core Store @ New Store Format O Backstage Target Area Upside Store Sales Opp. Low High Fort Worth @ wesiBend Hulen Mall-SwS Dent Denton Crossing Gold le Frisco. Cs" lage at Fairview Stonebriar The Village Centre @ at allen” ” The Shops at Lewisville Willow Bend-SwS Preston
Slide 32: Testing Our Market Ecosystems
MACY’S, INC. INVESTOR DAY 2020 WE WILL BE LOOKING FOR Evidence that we are building Customer Lifetime Value TESTING OUR MARKET Profitable growth for the total market ECOSYSTEMS including all stores and .com Customer satisfaction in individual stores and experience 32
Slide 33: Consumer-Driven Supply Chain
MACY’S, INC. INVESTOR DAY 2020 CONSUMER-DRIVEN SUPPLY CHAIN Dennis Mullahy Chief Supply Chain Officer 33
Slide 34: Created New Supply Chain Organization
MACY’S, INC. INVESTOR DAY 2020 CREATED NEW Sourcing Inventory Transportation Management SUPPLY CHAIN & Analytics ORGANIZATION Distribution & Procurement Sustainability Operations 34
Slide 35: Macy's Historical Supply Chain
MACY’S, INC. INVESTOR DAY 2020 X Lacked optimization throughout the Supply Chain MACY’S HISTORICAL X Limited in flexibility and speed SUPPLY CHAIN X Higher costs to serve 35
Slide 36: The Case for Change
MACY’S, INC. INVESTOR DAY 2020 THE CASE FOR CHANGE Macy’s is Modernizing Its Supply Chain Strategy By… In Order To… Creating a best-in-class sourcing capability 1 Drive profitable growth Redesigning inventory movement using Lower costs and improve analytics, advanced algorithms, improved 2 speed and
Slide 37: Updated Sourcing Strategy
MACY’S, INC. INVESTOR DAY 2020 UPDATED SOURCING STRATEGY Enhanced Agility Innovation Costing & Speed & Newness 37
Slide 38: Enhanced Costing
MACY’S, INC. INVESTOR DAY 2020 Leverage data and analytics ENHANCED Optimize supplier strategy COSTING Leverage raw materials consolidation and management 38
Slide 39: Faster and More Agile
MACY’S, INC. INVESTOR DAY 2020 Improved demand signals and trend intelligence FASTER AND Selective fabric platforming MORE AGILE Streamlining organization structure 39
Slide 40: Innovation and Newness
MACY’S, INC. INVESTOR DAY 2020 Leverage supplier capabilities to inform new product innovations INNOVATION AND NEWNESS Expanding on new fabrics 40
Slide 41: Supply Chain Strategy – Sourcing
MACY’S, INC. INVESTOR DAY 2020 ORIGINAL NEGOTIATED SAVINGS CATEGORIES COST COST (%) Cut & Sew Legging Program 6.76 5.16 24% Mockneck Program 5.61 5.01 11% SUPPLY CHAIN Shirts STRATEGY – Printed Dress Shirts 9.91 9.07 9% SOURCING Rayon Casual Shirts 13.81 11.92 14% Materials Management Core Fabric fo
Slide 42: Supply Chain Strategy – Sourcing
MACY’S, INC. INVESTOR DAY 2020 SUPPLY CHAIN STRATEGY – SOURCING 2019 2020-2022 DESIGN AND PILOT SCALE AND OPTIMIZE Achieved significant reduction in COGS $120 Cut & Sew Knits $6.4M Reduction in COGS Bedding and Bath $4.0M Sweaters $6.3M Shirts $2.3M At least 30 day improvement in lead time Total $19
Slide 43: Centralized Fulfillment Strategy
MACY’S, INC. INVESTOR DAY 2020 CENTRALIZED FULFILLMENT Inventory Distribution Transportation STRATEGY Management & Operations & Analytics Changing and building new capabilities across several supply chain competencies 43
Slide 44: Supply Chain Strategy – Centralized Fulfillment
MACY’S, INC. INVESTOR DAY 2020 SUPPLY CHAIN STRATEGY — CENTRALIZED FULFILLMENT Store Delivery Centers Direct to Consumer Centers 44
Slide 45: Current State
MACY’S, INC. INVESTOR DAY 2020 CURRENT STATE VENDORS DISTRIBUTION CUSTOMERS Stores STORE DELIVERY CENTERS DIRECT TO CUSTOMER CENTERS Customer 45
Slide 46: Current State
MACY’S, INC. INVESTOR DAY 2020 CURRENT STATE VENDORS DISTRIBUTION CUSTOMERS Stores STORE DELIVERY CENTERS DIRECT TO CUSTOMER CENTERS Customer 46
Slide 47: Current State
MACY’S, INC. INVESTOR DAY 2020 CURRENT STATE VENDORS DISTRIBUTION CUSTOMERS RESULTS Stores THIS STORE HAS HIGH SELLING STORE DELIVERY THIS STORE HAS LOW SELLING CENTERS DIRECT TO CUSTOMER CENTERS Customer 47
Slide 48: Current State
MACY’S, INC. INVESTOR DAY 2020 CURRENT STATE VENDORS DISTRIBUTION CUSTOMERS RESULTS Stores OUT OF STOCK STORE DELIVERY HIGHER MARKDOWNS CENTERS DIRECT TO CUSTOMER CENTERS Customer 48
Slide 49: Implementing Centralized Fulfillment
MACY’S, INC. INVESTOR DAY 2020 IMPLEMENTING CENTRALIZED FULFILLMENT Flexibility Speed Cost Management 49
Slide 50: Future State
MACY’S, INC. INVESTOR DAY 2020 FUTURE STATE VENDORS DISTRIBUTION CUSTOMERS Stores CENTRALIZED FULFILLMENT Customer 50
Slide 51: Future State
MACY’S, INC. INVESTOR DAY 2020 FUTURE STATE VENDORS DISTRIBUTION CUSTOMERS Stores SMALLER INITIAL STORE SHIPMENT, LESS WORK AND BACK STOCK AT STORE CENTRALIZED FULFILLMENT Customer FLEXIBLE INVENTORY 51
Slide 52: Future State
MACY’S, INC. INVESTOR DAY 2020 FUTURE STATE VENDORS DISTRIBUTION CUSTOMERS Stores THIS STORE HAS HIGH SELLING THIS STORE HAS LOW SELLING CENTRALIZED FULFILLMENT THIS STORE SELLS TO PLAN CUSTOMER ORDERS ONLINE Customer FLEXIBLE INVENTORY 52
Slide 53: Future State
MACY’S, INC. INVESTOR DAY 2020 FUTURE STATE VENDORS DISTRIBUTION CUSTOMERS RESULTS Stores Improved Sell through Reduced markdowns CENTRALIZED FULFILLMENT Customer FLEXIBLE INVENTORY 53
Slide 54: Supply Chain Strategy – Centralized Fulfillment
MACY’S, INC. INVESTOR DAY 2020 SUPPLY CHAIN STRATEGY – CENTRALIZED FULFILLMENT Store Delivery Centers Centralized Fulfillment Centers 54
Slide 55: Product Sell-Through Effective
MACY’S, INC. INVESTOR DAY 2020 PRODUCT SELL-THROUGH EFFECTIVE SUPPLY CHAIN Spring Dress STRATEGY – Capsules 22% improvement 6% lower CENTRALIZED FULFILLMENT Missy Top 13% improvement 8% lower 55
Slide 56: Supply Chain Strategy – Centralized Fulfillment
MACY’S, INC. INVESTOR DAY 2020 SUPPLY CHAIN STRATEGY – CENTRALIZED FULFILLMENT 2019 2020-2022 DESIGN AND PILOT SCALE AND OPTIMIZE 2-3% improvement in effective markdown 01 Improved sell through by 5% 01 rate ~ $180 M 02 Lowered effective markdown rate by 2.5% 02 3.5% reduction in average inventory ~
Slide 57: Procurement Transformation
MACY’S, INC. INVESTOR DAY 2020 PROCUREMENT TRANSFORMATION Procurement Targets Expense ENHANCED MODEL DRIVING Capital • Spend analytics • Benchmarking and deep category analytics • Category planning and procurement strategies • Leveraging third-party experts $200M in capital and expense savings oppor
Slide 58: Sustainability
MACY’S, INC. INVESTOR DAY 2020 SUSTAINABILITY 2019 report published in accordance with SASB guidelines Organized new sustainability team under one leader Improvements in sustainability over last 10 years Focused on driving sustainable solutions while reducing costs 58
Slide 59: The Case for Change
MACY’S, INC. INVESTOR DAY 2020 THE CASE FOR CHANGE Macy’s is Reshaping Its Supply Chain Strategy By… To Deliver… $120M Creating a best-in-class sourcing capability 1 in COGS improvement Redesigning inventory movement using $180M analytics, advanced algorithms, improved 2 operations and optimized tra
Slide 60: Stabilizing Profitability, Positioning for Growth
MACY’S, INC. INVESTOR DAY 2020 STABILIZING PROFITABILITY, POSITIONING FOR GROWTH Paula Price Chief Financial Officer 60
Slide 61: Agenda
MACY’S, INC. INVESTOR DAY 2020 AGENDA 1 2 3 4 RESET THE 2019 REVIEW LONG-TERM 2020 COST BASE OUTLOOK GUIDANCE REVIEW Right sizing the FY19 operating Plan to stabilize sales, FY20 guidance and organization and expense performance and profitability and cash expectations base capital allocation flows h
Slide 62: Agenda
MACY’S, INC. INVESTOR DAY 2020 AGENDA 1 2 3 4 RESET THE 2019 REVIEW LONG-TERM 2020 COST BASE OUTLOOK GUIDANCE REVIEW Right sizing the FY19 operating Plan to stabilize sales, FY20 guidance and organization and performance and profitability and cash expectations expense base capital allocation flows h
Slide 63: Reset Cost Base
MACY’S, INC. INVESTOR DAY 2020 Right-size organization & expense base 5 Balance sales & profit RESET COST BASE Improve productivity of working capital 63
Slide 64: Substantive Reset of Fixed Cost Base in 2020
MACY’S, INC. INVESTOR DAY 2020 SUBSTANTIVE RESET OF FIXED COST BASE IN 2020 ACTIONS BENEFITS • Closing San Francisco, Lorain, and downtown • Teams working closer together in fewer Cincinnati offices locations • Relocating Macy’s digital headquarters to NYC • Asset monetization or facilities sub-leas
Slide 65: Agenda
MACY’S, INC. INVESTOR DAY 2020 AGENDA 1 2 3 4 RESET THE 2019 REVIEW LONG-TERM 2020 COST BASE OUTLOOK GUIDANCE REVIEW Right sizing the FY19 operating Plan to stabilize sales, FY20 guidance and organization and performance and profitability and cash expectations expense base capital allocation flows h
Slide 66: 2019 Performance: Narrowing Earnings Guidance
MACY’S, INC. INVESTOR DAY 2020 2019 PERFORMANCE: NARROWING EARNINGS GUIDANCE OPERATING PERFORMANCE HOLIDAY 2019 FY19 PRELIMINARY SALES RESULTS • Strategic initiatives – Growth 150, Backstage, Vendor Direct and Destination Businesses – ~$24.5B Net sales were strong vs. expectations ~(0.7)% Owned + li
Slide 67: 2019 Performance: Narrowing Earnings Guidance
MACY’S, INC. INVESTOR DAY 2020 2019 PERFORMANCE: NARROWING EARNINGS GUIDANCE OPERATING PERFORMANCE CAPITAL ALLOCATION (estimated) FY19 PRELIMINARY SALES RESULTS ~ $1B Capital expenditures ~$24.5B Net sales ~ $565M Debt repayment ~(0.7)% Owned + licensed comp sales ~ 2.9x Adj. EBITDA leverage FY19 AD
Slide 68: Agenda
MACY’S, INC. INVESTOR DAY 2020 AGENDA 1 2 3 4 RESET THE 2019 REVIEW LONG-TERM 2020 COST BASE OUTLOOK GUIDANCE REVIEW Right sizing the FY19 operating Plan to stabilize sales, FY20 guidance and organization and performance and profitability and cash expectations expense base capital allocation flows h
Slide 69: Positive Growth Targeted by 2022
MACY’S, INC. INVESTOR DAY 2020 POSITIVE GROWTH TARGETED BY 2022 FY22 SALES FY22 EARNINGS FY22 CASH Net sales: Adjusted diluted EPS: Free cash flow1: ~ $23.2B to $23.9B $2.50 to $3.00 ~ $1.0B 2019-2022 O+L comp sales CAGR: Adjusted diluted EPS ~ (1.0)% to flat (excluding asset sale gains): $2.25 to $
Slide 70: Investing in Ways Customers Shop Today and in the Future
MACY’S, INC. INVESTOR DAY 2020 INVESTING IN WAYS CUSTOMERS SHOP TODAY AND IN THE FUTURE Expand Growth treatment strategy to stabilize sales in the face of secular headwinds Sustain healthy growth in digital channels and continue to improve our website capabilities Develop further in off-price drive
Slide 71: Committed to Sales Stabilization
MACY’S, INC. INVESTOR DAY 2020 COMMITTED TO SALES STABILIZATION 2019 Preliminary 2020 Guidance 2022 Target Net sales ~$24.5B $23.6B to $23.9B $23.2B to $23.9B Neighborhood stores ~($240M) ~($960M) Impact on net sales 1 O+L comp sales ~(0.7)% (2.5)% to (1.5)% (0.5)% to 0.5% Planned strategies will st
Slide 72: September 2019: Multi-Year Productivity Program
MACY’S, INC. INVESTOR DAY 2020 SEPTEMBER 2019: MULTI-YEAR PRODUCTIVITY PROGRAM Supply Merchandising Marketing Stores Private Brand Indirect Spend Chain Mix & Pricing Sourcing Procurement By … We will … • Improving gross margin • Counter macro headwinds • Improving SG&A productivity • Fund strategic
Slide 73: Broadened Scope of Productivity Improvement Goals
MACY’S, INC. INVESTOR DAY 2020 BROADENED SCOPE OF PRODUCTIVITY IMPROVEMENT GOALS Stabilize and then expand gross margin – proactively mitigate headwinds through profitable merchandising strategies and implementation of productivity initiatives Improve average profitability of fleet – redeploy capita
Slide 74: Earnings: Polaris Will Stabilize and Grow Gross Margins
MACY’S, INC. INVESTOR DAY 2020 EARNINGS: POLARIS WILL STABILIZE AND GROW GROSS MARGINS Gross margin improvement by function ~ $600 FEBRUARY 2020 Million Incremental Target under Polaris September Productivity Opportunity Supply chain Merchandising Marketing Private Brand 2022 run-rate mix & pricing
Slide 75: Earnings: Polaris Will Right-Size Our Cost Base
MACY’S, INC. INVESTOR DAY 2020 EARNINGS: POLARIS WILL RIGHT-SIZE OUR COST BASE SG&A improvement by expense category ~ $900 FEBRUARY 2020 Million Incremental Target under Polaris September Productivity Opportunity Marketing Supply Chain Stores Corporate 2022 run-rate & other savings More resilient an
Slide 76: Expanding Adjusted EBITDA Rate Through Stabilization
MACY’S, INC. INVESTOR DAY 2020 EXPANDING ADJUSTED EBITDA RATE THROUGH STABILIZATION 2019 Guidance 2022 Target 9.3% to 9.9% 9.4% Adjusted EBITDA % margin ~ $2.2B ~ $2.3B to $2.4B Adjusted diluted EPS $2.72 to $2.77 $2.50 to $3.00 Adjusted diluted EPS $2.35 to $2.40 $2.25 to $2.75 excluding asset sale
Slide 77: Generating Sufficient Cash to Support Strategy
MACY’S, INC. INVESTOR DAY 2020 GENERATING SUFFICIENT CASH TO SUPPORT STRATEGY CUMULATIVE CASH FROM KEY DRIVERS OF CASH FLOW IMPROVEMENT OPERATIONS Stabilizing profitability by investing in merchandising and $B 5.2 01 supply chain capabilities to mitigate margin headwinds and 4.8 optimize SG&A spend
Slide 78: Refocus Capital to Prioritize High Potential Businesses
MACY’S, INC. INVESTOR DAY 2020 REFOCUS CAPITAL TO PRIORITIZE HIGH POTENTIAL BUSINESSES CUMULATIVE CAPITAL EXPENDITURES Targeting ~$1 billion annually 2020-2022 Investing in assets that can • Investing for sustainable digital growth 26% 25% be our future • Testing and scaling new retail concepts 21%
Slide 79: Improving Earnings and Cash Flow Trajectory
MACY’S, INC. INVESTOR DAY 2020 IMPROVING EARNINGS AND CASH FLOW TRAJECTORY 2019 Estimate 2022 Target ADJUSTED ~ 9.9% EBITDA MARGIN Deliver balanced ~ 9.4% margin improvements ~ 9.3% ~ $1.0B FREE CASH ~ $0.5B Stabilize and grow free FLOW cash flow NET ~ $24.5B ~ $ (1.0B) due to Grow comp sales after
Slide 80: Cashflow: Consistent Capital Allocation Strategy
MACY’S, INC. INVESTOR DAY 2020 CASHFLOW: CONSISTENT CAPITAL ALLOCATION STRATEGY VALUE-ENHANCING CAPITAL STRUCTURE CAPITAL RETURNED TO INVESTMENTS SHAREHOLDERS • Investing in the business • Return to 2.5x to 2.8x • Maintain dividend to support growth debt-to-EBITDA leverage • Consider return to stock
Slide 81: Cashflow: Expect to Achieve Target Leverage by 2022
MACY’S, INC. INVESTOR DAY 2020 CASHFLOW: EXPECT TO ACHIEVE TARGET LEVERAGE BY 2022 Cumulative 3-Year Targets $1.9B to $0.7B ($1.0B) to $2.3B ($0.7B) EXPECT AN EXCESS OF $200 MILLION TO $800 MILLION BY ($1.4B) $0.2B 2022 TO ALLOCATE to $0.8B TO FURTHER VALUE CREATION Free Cash Proceeds Net Debt Divid
Slide 82: Agenda
MACY’S, INC. INVESTOR DAY 2020 AGENDA 1 2 3 4 RESET THE 2019 REVIEW LONG-TERM 2020 COST BASE OUTLOOK GUIDANCE REVIEW Right sizing the FY19 operating Plan to stabilize sales, FY20 guidance and organization and performance and profitability and cash expectations expense base capital allocation flows h
Slide 83: 2020 Guidance
MACY’S, INC. INVESTOR DAY 2020 2020 GUIDANCE Sales Net sales: O+L comp: $23.6B to $23.9B (2.5)% to (1.5)% Comp sales decline driven by: • Trajectory of our business over the last year • Continued challenged performance in mall-based retail • Disruption from significant structural changes to reset co
Slide 84: Stabilizing Margins and Right Sizing SG&A Cost Base
MACY’S, INC. INVESTOR DAY 2020 STABILIZING MARGINS AND RIGHT SIZING SG&A COST BASE FY20 Gross Margin Rate: Approximately flat • Greatest pressure in Q1; sequential improvement throughout the year • Polaris to contribute ~$100 million of savings • Headwinds: • Working hard to mitigate impact of Tranc
Slide 85: Stabilizing Profitability, Positioning for Growth
MACY’S, INC. INVESTOR DAY 2020 1 Stabilizing profitability and cash flows in transition year of 2020 STABILIZING PROFITABILITY, 2 Right sizing cost base and POSITIONING FOR expanding future gross margins GROWTH Capital allocation strategy 3 enhances long-term financial stability and value creation 8
Slide 86: Closing Remarks
MACY’S, INC. INVESTOR DAY 2020 CLOSING REMARKS 86
Slide 87: Strategic Priorities
MACY’S, INC. INVESTOR DAY 2020 WILL Strengthen Customer Curate Quality Accelerate Digital Relationships Fashion Growth Optimize Store Reset our Portfolio Cost Base 87
Slide 88: America's Department Store
MACY’S, INC. INVESTOR DAY 2020 AMERICA’S DEPARTMENT STORE 88
Slide 89: Fashion Value Celebration
MACY’S, INC. INVESTOR DAY 2020 FASHION VALUE CELEBRATION AMERICA LOVES TO SHOP 89
Slide 90: Macy's, Inc. Investor Day 2020
MACY’S, INC. INVESTOR DAY 2020 90
Slide 91: Q&A
MACY’S, INC. INVESTOR DAY 2020 Q&A 91
Slide 92: Forward-Looking Statements
MACY’S, INC. INVESTOR DAY 2020 Macy's, Inc. Forward-Looking Statements 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
Slide 93: Reconciliation of GAAP to Non-GAAP Financial Measures
MACY’S, INC. INVESTOR DAY 2020 Macy's, Inc. Reconciliation of GAAP to non-GAAP Financial Measures (All amounts in millions except for percentages) The company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes that cert
Slide 94: Reconciliation of GAAP to Non-GAAP Financial Measures
MACY’S, INC. INVESTOR DAY 2020 Macy's, Inc. Reconciliation of GAAP to non-GAAP Financial Measures (All amounts in millions except for percentages) Estimated changes in comparable sales 52 Weeks Ended February 1, 2020 Decrease in comparable sales on an owned basis (Note 1) (0.8)% Impact of growth in
Slide 95: Reconciliation of GAAP to Non-GAAP Financial Measures
MACY’S, INC. INVESTOR DAY 2020 Macy's, Inc. Reconciliation of GAAP to non-GAAP Financial Measures (All amounts in millions except for percentages) Adjusted EBITDA as a percent to Net Sales 52 Weeks Ended 53 Weeks Ended February 2, 2019 February 3, 2018 Most Comparable GAAP measure: Net income attrib
Slide 96: Reconciliation of GAAP to Non-GAAP Financial Measures
MACY’S, INC. INVESTOR DAY 2020 Macy's, Inc. Reconciliation of GAAP to non-GAAP Financial Measures (All amounts in millions except for percentages) Free Cash Flow 52 Weeks Ended 53 Weeks Ended February 2, 2019 February 3, 2018 Most comparable GAAP measure: Net cash provided by operating activities $
Slide 97: FY20 Guidance
MACY’S, INC. INVESTOR DAY 2020 FY GUIDANCE FY20 GUIDANCE Net Sales $23.6B to $23.9B Comp sales - owned Approximately 40BPS better than OL Comp sales - owned + licensed (OL) (2.5)% to (1.5)% Credit card revenues, net $700M to $715M Gross margin rate Approximately flat to FY19 SG&A expense rate Approx
Slide 98: Store Count Reconciliation
MACY’S, INC. INVESTOR DAY 2020 STORE COUNT RECONCILIATION Boxes Locations Macy's Flagships 16 11 Macy's Magnets 432 386 Macy's Core 448 397 Macy's Neighborhood 130 123 Macy's Furniture 54 49 Macy's Other 4 4 Freestanding Backstage 7 7 Bloomingdale's Dept. Stores 35 33 Bloomingdale's Furniture/Other