Revenue and margins
Macy’s aims to achieve low double-digit adjusted EBITDA margins annually and in 2024, the company expects to be within a range of 11.5-12%. For gross margin, the company is targeting a rate in the high 30s even as digital penetration rises to the low to mid 40s as a percent of net sales.
Cash and capital
Looking at its long-term capital allocation plans, Macy’s is targeting capital expenditures of approx. $3 billion over the next three years. This spend will mainly be targeted towards building technological capabilities, improving the digital platform as well as fulfillment capabilities in stores, and personalization efforts. During this time, the company also expects to meaningfully monetize its real estate.
After accounting for Capex and asset sale proceeds, Macy’s expects to generate between $3.2 billion and $3.6 billion of free cash flow over the next three years. The company will continue to return capital to shareholders through dividends and share repurchases. Macy’s increased its dividend by 5% and authorized a new open-ended $2 billion share repurchase program.
Near-term outlook
For full-year 2022, Macy’s expects net sales to be flat to up 1%. The company expects a three-year compound annual growth rate of between 1.1% and 1.4% for its owned plus licensed comp sales. Digital sales are estimated to make up around 37% of net sales. Gross margin is expected to range between 38.1-38.3%, reflecting a slight decrease from last year mainly due to increased digital penetration and cost pressures from inflation.
Adjusted EPS is estimated to range between $4.13-4.52 and this excludes the impact of any share buyback that might take place during the year. Adjusted EBITDA margin is expected to range between 11-11.5%. The company expects to generate asset sale gains of $60-90 million during the year. For the first quarter of 2022, Macy’s expects net sales of $5.3-5.4 billion and adjusted EPS of $0.77-0.85.
Click here to read the full transcript of Macy’s Q4 2021 earnings conference call