Macy's, Inc. (NYSE:M) Q2 2019 Earnings Conference Call - Final Transcript
Aug 14, 2019 • 09:30 am ET
Paula A. Price
pricing and markdown decisions, which will also enhance our margins. We are now rolling out our new pricing capabilities at scale, following our successful Spring test also with sizable EBIT benefits expected.
Moving on to SG&A. We recorded $2.2 billion of expense in the quarter, an increase of $13 million or 50 basis points on a rate basis over last year. The increase in SG&A dollars was primarily driven by investment in our strategic initiatives. As a reminder, given the front loaded nature of these investments, we continue to expect the growth in SG&A year-over-year to be weighted towards the spring season and the benefits of the $300 million in restructuring and normal ongoing cost reductions that we previously discussed to be weighted more towards the fall season.
Interest expense continue to benefit from lower debt levels in our balance sheet remains healthy. While our effective tax rate was 25.9% in the second quarter, we expected to be 23% for the year. The variances caused by certain normal and discrete tax benefits that occur unevenly through the year. Summing it all up, we delivered $88 million of adjusted net income in the quarter versus $219 million last year. Included in these net income figures are asset sale gains of $5 million and $34 million respectively.
Adjusted EPS was $0.28 in the quarter compared to $0.70 last year, of which asset sale gains represented about $0.01 and $0.11 respectively. Year-to-date cash flow from operating activities was $350 million compared to $544 million last year. The variance is due to lower merchandise payables and adjusted EBITDA, offset by lower tax payments. Capital expenditures were $501 million compared to $408 million last year. We remain on track to achieve our existing guidance of approximately $1 billion of capital expenditures.
Cash dues by financing activities was $239 million less than a year ago as we paid down less debt this year than we did last year. Here is our guidance. For the full year, we continue to expect approximately flat total sales growth and comps of flat to up 1% and an owned-plus licensed basis. We are confident that we can deliver in the upper end of this sales range. We will be at full strength with our strategic initiatives, we have learned from our challenges during the holiday season of 2018 and consumer spending continues to be healthy. Although as Jeff noted, we are mindful of being up against some macro uncertainty, which our full guidance range contemplates.
Looking at the fall's season sales specifically. We expect the fourth quarter comp to be meaningfully greater than the third quarter comp. In the third quarter, we will be cycling our toughest comp sales comparison of the year, in large part due to the benefit we saw from cooler temperatures last October. On the flip side, in the fourth quarter, we will be cycling the disruption caused by the fire in our West Virginia Mega Centre, and the underperformance of our pre-Christmas promotional events. Gross