Macy's 2010 Annual Report Download - page 25

The Company’s effective tax rate of 35.8% for 2010 and 35.2% for 2009 differ from the federal income tax
statutory rate of 35%, and on a comparative basis, principally because of the effect of state and local income
taxes and the settlement of various tax issues and tax examinations. Federal, state and local income tax expense
for 2009 included a benefit of approximately $21 million related to the settlement of federal income tax
examinations, primarily attributable to the disposition of former subsidiaries.
Comparison of the 52 Weeks Ended January 30, 2010 and January 31, 2009. Net income for 2009 was $329
million, compared to the net loss of $4,775 million for 2008. The net income for 2009 included the impact of
$391 million of impairments, store closing costs and division consolidation costs. The net loss for 2008 included
the impact of $5,382 million of goodwill impairment charges and $398 million of impairments, store closing
costs and division consolidation costs.
Net sales for 2009 totaled $23,489 million, compared to net sales of $24,892 million for 2008, a decrease of
$1,403 million or 5.6%. On a comparable store basis, net sales for 2009 were down 5.3% compared to 2008.
Sales from the Company’s Internet businesses in 2009 increased 19.6% compared to 2008 and positively affected
the Company’s 2009 comparable store sales by 0.6%. Geographically, sales in 2009 were strong in the Midwest
and weaker in Florida and California. By family of business, sales in 2009 were strongest in moderate apparel,
updated better women’s sportswear, women’s shoes, outerwear, jewelry and watches, housewares, home textiles
and mattresses. Sales of the Company’s private label brands continued to be strong and represented
approximately 19% of net sales in the Macy’s-branded stores in 2009. The weaker businesses during 2009
included traditional better women’s sportswear, men’s suits, handbags, fragrances, fine china and crystal and
furniture. The Company calculates comparable store sales as net sales from stores in operation throughout 2008
and 2009 and all net Internet sales. Stores undergoing remodeling, expansion or relocation remain in the
comparable store sales calculation unless the store is closed for a significant period of time. Definitions and
calculations of comparable store sales differ among companies in the retail industry.
Cost of sales was $13,973 million or 59.5% of net sales for 2009, compared to $15,009 million or 60.3% of
net sales for 2008, a decrease of $1,036 million. The improved cost of sales rate reflected the benefit of good
inventory management throughout 2009. The valuation of merchandise inventories on the last-in, first-out basis
did not impact cost of sales in either period.
SG&A expenses were $8,062 million or 34.3% of net sales for 2009, compared to $8,481 million or 34.1%
of net sales for 2008, a decrease of $419 million. The SG&A rate as a percent of net sales was higher in 2009, as
compared to 2008, primarily because of weaker sales. SG&A expenses in 2009 benefited from consolidation-
related expense savings, lower depreciation and amortization expenses, lower workers’ compensation and
general liability insurance costs and lower advertising expense, partially offset by higher stock-based
compensation expense, higher performance based incentive compensation expense, lower income from credit
operations and higher costs in support of the Company’s omnichannel operations. Depreciation and amortization
expense was $1,210 million for 2009, compared to $1,278 million for 2008. Workers’ compensation and general
liability insurance costs were $124 million for 2009, compared to $164 million for 2008. Advertising expense,
net of cooperative advertising allowances, was $1,087 million for 2009 compared to $1,239 million for 2008.
Stock-based compensation expense was $76 million for 2009, compared to $43 million for 2008. Income from
credit operations was $323 million in 2009 as compared to $372 million in 2008. Pension and supplementary
retirement plan expense amounted to $110 million for 2009, compared to $114 million for 2008.
Impairments, store closing costs and division consolidation costs for 2009 amounted to $391 million and
included $115 million of asset impairment charges, $6 million of other costs and expenses related to the store
closings announced in January 2010, and $270 million of restructuring-related costs and expenses associated with
the division consolidation and localization initiatives, primarily severance and other human resource-related
costs.
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