Macy’s, Inc. (NYSE:M) today reported earnings from continuing operations of $1.73 per diluted share for the 13-week fourth quarter of 2007, ended Feb. 2, 2008. This compares with diluted earnings per share from continuing operations of $1.45 for the 14-week fourth quarter last year.

Excluding May Company merger integration costs of $69 million ($43 million after tax or 10 cents per diluted share), fourth quarter diluted earnings per share from continuing operations were $1.83. Included in 2007 fourth quarter is a non-cash tax credit of $78 million (18 cents per diluted share) from the settlement of a federal income tax examination, primarily attributable to losses related to the disposition of a former subsidiary. Also excluding the tax settlement, fourth quarter diluted earnings per share from continuing operations were $1.65.

The fourth quarter of 2006 included merger integration costs and related merchandise inventory adjustments of $177 million ($110 million after tax or 21 cents per diluted share) and a gain of $54 million ($34 million after tax or 6 cents per diluted share) related to completion of the company’s debt tender offer. Excluding these items, diluted earnings per share from continuing operations were $1.60 for the fourth quarter of 2006.

For the full 52 weeks of fiscal 2007, Macy’s, Inc. reported diluted earnings per share from continuing operations of $2.01 per share, compared with $1.80 per share for the full 53 weeks of fiscal 2006. Excluding May Company merger integration costs of $219 million ($138 million after tax or 31 cents per diluted share) and the tax settlement of $78 million (17 cents per diluted share), diluted earnings per share from continuing operations were $2.15 for fiscal 2007. Fiscal 2006 included merger integration costs and related merchandise inventory adjustments of $628 million ($393 million after tax or 72 cents per diluted share), as well as gains on the sale of credit receivables of $191 million ($119 million after tax or 22 cents per diluted share). Excluding these items, as well as the gain of 6 cents per diluted share related to completion of the company’s debt tender offer and a 16 cents per diluted share tax settlement, diluted earnings per share from continuing operations were $2.08 for fiscal 2006.

“While a weakened economic environment led our industry to softer financial results than initially expected, Macy's, Inc. did outperform most of our primary competitors in the fourth quarter. We also generated significant cash flow despite weaker-than-expected sales trends. Going forward, we are aggressively pursuing our recently announced market localization initiative to drive future sales and earnings," said Terry J. Lundgren, chairman, president and chief executive officer of Macy's, Inc.

"In total, 2007 was a year of significant strategic progress as we successfully launched exclusive new brands such as Martha Stewart Collection, invested for continued growth in the direct-to-consumer businesses, expanded Bloomingdale's, changed our corporate name, and launched a breakthrough new marketing approach under the umbrella of The Magic of Macy's.”

Sales

Sales in the 13-week fourth quarter of 2007 totaled $8.594 billion, a decrease of 6.2 percent compared to total sales of $9.159 billion in the 14-week fourth quarter of 2006. On a same-store basis, the company’s fourth quarter sales were down 2.0 percent.

The company’s total sales for the 52 weeks of fiscal 2007 were $26.313 billion, down 2.4 percent from total sales of $26.970 billion in the 53 weeks of fiscal 2006. On a same-store basis, Macy’s, Inc.’s annual sales were down 1.3 percent.

In the fourth quarter, 12 Macy’s stores were closed (in Tucson, AZ; West Covina, CA; Lake Forest, IL; Indianapolis, IN; Prien Lake, LA; Akron, Canton and North Randall, OH; Oklahoma City, OK; Dallas and Houston, TX; and Riverdale, UT). In addition, three Macy’s stores were closed temporarily (in Rancho Cucamonga and Temecula, CA, and Las Vegas, NV). A new Macy’s opened in Peabody, MA.

Operating Income

Macy’s, Inc.’s operating income totaled $1.222 billion or 14.2 percent of sales for the quarter ended Feb. 2, 2008, compared to operating income of $1.260 billion or 13.8 percent of sales for the same period last year. Macy’s, Inc.’s fourth quarter 2007 operating income included $69 million in May Company integration costs. Excluding these costs, operating income for the fourth quarter of 2007 was $1.291 billion or 15.0 percent of sales. Fourth quarter 2006 operating income included $177 million in May Company integration costs and related inventory valuation adjustments. Excluding these items, operating income for the fourth quarter of 2006 was $1.437 billion or 15.7 percent of sales. Recurring gross margin rate in the quarter improved by 70 basis points, but SG&A as a percent to sales was up by 140 basis points primarily because of weak sales.

For fiscal 2007, Macy’s, Inc.’s operating income totaled $1.863 billion or 7.1 percent of sales, compared to operating income of $1.836 billion or 6.8 percent of sales for fiscal 2006. Macy’s, Inc.’s operating income for 2007 includes $219 million in May Company integration costs. Excluding these costs, operating income for fiscal 2007 was $2.082 billion or 7.9 percent of sales. Macy’s, Inc.’s operating income for fiscal 2006 includes $628 million in May Company integration costs and related inventory valuation adjustments, as well as gains of $191 million on the sale of credit receivables. Excluding these items, operating income for fiscal 2006 was $2.273 billion or 8.4 percent of sales.

Cash Flow

Macy’s, Inc. generated $2.231 billion in cash from continuing operating activities in fiscal 2007, compared to $3.692 billion, or $1.832 billion excluding the $1.860 billion in proceeds from the sale of proprietary accounts receivable, in fiscal 2006. Cash used in continuing investing activities was $789 million in 2007, compared with $1.273 billion generated last year. In 2007, continuing investing activities included $66 million of proceeds from the sale of After Hours Formalwear and $227 million of proceeds from the disposal of property and equipment, primarily from the sale of duplicate facilities associated with the May Company integration. In 2006, continuing investing activities included $1.787 billion of proceeds from the sale of Lord & Taylor, David’s Bridal and Priscilla of Boston, $679 million of proceeds from the disposal of property and equipment, primarily from the sale of approximately 60 duplicate store locations, and $182 million of net proceeds from the sale of repurchased accounts receivable.

Excluding these items in both years, as well as the proceeds from the sale of proprietary accounts receivable in 2006, cash from continuing operating activities net of cash used in continuing investing activities would be $1.149 billion in 2007, compared to $457 million in 2006.

Net cash used by continuing financing activities was $2.069 million in 2007, compared with $4.013 billion in cash used by continuing financing activities in 2006. In 2007, the company issued $1.950 billion in debt and repaid $649 million of debt.

The company repurchased approximately 13.0 million shares of its common stock for a total of approximately $318 million in the fourth quarter of 2007. In fiscal 2007, the company repurchased approximately 85.3 million shares of its common stock for approximately $3.3 billion. At Feb. 2, 2008, the company had remaining authorization to repurchase up to approximately $850 million of its common stock.

Looking Ahead

Effective with 2008, the company has decided to no longer report sales on a monthly basis in addition to its previously announced decision not to provide quarterly sales or earnings guidance. The company will continue to report sales and earnings quarterly and to provide guidance on an annual basis.

Macy’s, Inc. has provided guidance for same-store sales in fiscal 2008 to be in the range of down 1.0 percent to up 1.5 percent, with earnings per share on a diluted basis of $1.85 to $2.15, excluding one-time costs.

Macy's, Inc., with corporate offices in Cincinnati and New York, is one of the nation's premier retailers, with fiscal 2007 sales of $26.3 billion. The company operates more than 850 department stores in 45 states, the District of Columbia, Guam and Puerto Rico under the names of Macy's and Bloomingdale's. The company also operates macys.com, bloomingdales.com and Bloomingdale's By Mail. Prior to June 1, 2007, Macy's, Inc. was known as Federated Department Stores, Inc.

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 transactions, prevailing interest rates, competitive pressures from specialty stores, general merchandise stores, manufacturers' outlets, off-price and discount stores, new and established forms of home shopping (including the Internet, mail-order catalogs and television) 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.

(NOTE: Additional information on Macy’s, Inc., including past news releases, is available at www.macysinc.com/pressroom. A webcast of Macy's fourth quarter earnings call with analysts will be held beginning at 11 a.m. ET on Tuesday, February 26. The webcast is accessible to the media and general public either via the company's Web site at www.macysinc.com or by calling in on 1-800-474-8920 (719-457-2727 for international callers), passcode 4700212.)

Contacts:

Macy’s, Inc.
Media - Jim Sluzewski, 513-579-7764
Investor - Susan Robinson, 513-579-7780