Macy's Inc

Greetings and welcome to the Macy's Inc. First Quarter 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this call is being recorded. I would now like to turn the call over to Pamela Quintiliano, VP of Investor Relations. Pamela, you may now begin.

Thank you, operator. Good morning, everyone, and thanks for joining us. With me on the call today are Tony Spring, our Chairman and CEO, and Adrian Mitchell, our COO and CFO. Along with our first quarter 2025 press release, a Form 8K has been filed with the Securities and Exchange Commission, and a presentation has been posted on the Investor section of our website, Macy's Inc.com, and it's being displayed live during today's webcast. Unless otherwise noted, the comparisons we provide will be versus 2024. All references to our prior expectations, outlook, or guidance refer to information provided on our March 6th earnings call. On today's call, we will refer to certain non-GAAP financial measures. Reconciliation of these measures can be found in our earnings presentation and SEC filings available at .macy'sinc.com. All references to comp sales throughout today's prepared remarks represent comparable owned plus licensed plus marketplace sales and owned plus licensed sales for our store locations, unless otherwise noted. Go Forward Macy's Inc. comp sales includes the approximately 350 Macy's Go Forward locations in digital and Bloomingdale's and Blue Mercury nameplates inclusive of stores in digital. Go Forward Macy's comp sales includes the approximately 350 Macy's Go Forward locations and Macy's digital. All forward-looking statements are subject to the safe harbor provisions of the Private Securities Legation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today. A detailed discussion of these factors and uncertainties is contained in our filings with the SEC. Today's call is being webcast on our website. A replay will be available approximately two hours after the conclusion of this call. With that, I'll turn it over to Tony.

Thank you, Pam, and good morning, everyone. Today we'll begin with a discussion of our first quarter results. We'll then share our thoughts on the current environment and how it's informing our view for the second quarter and the remainder of the year. First quarter net sales, comparable O plus L plus M sales, and adjusted diluted EPS were all above our previously issued guidance. Results benefited from better than expected omni-channel performance at each of our nameplates and continued progress on our three pillars of the Bold New Chapter strategy. At Macy's, our reimagined 125 locations outperformed the remainder of the fleet. Our luxury businesses, Bloomingdale's and Blue Mercury, both delivered another quarter of positive comps. And in -to-end operations, we improved our in-store inventory allocation and leveraged generative AI to further modernize our supply chain. Macy's Inc. achieved net sales of $4.6 billion compared to guidance of $4.4 to $4.5 billion. Comparable O plus L plus M sales declined .2% compared to the guidance for a decline of 4.5 to 2.5%. International tourism negatively impacted comps by about 30 basis points. Go Forward business comps outperformed total, declining 0.9%. Momentum built in the March-April period, which we look at on a combined basis given the later Easter, and has improved quarter to date. I am proud of how our teams are navigating the current environment. We are working closely together and maintaining a high level of flexibility. We are sharing ideas and leveraging relationships across departments, nameplates, vendors and channels. And as a result, adjusted diluted EPS of $0.16 was above our guidance range of $0.12 to $0.15. We entered the second quarter with inventories down 0.5%. We have ample open to buy for the remainder of the year and remain committed to providing a healthy flow of high quality relevant assortments at a compelling value proposition. Now let's discuss progress on each of the pillars of the Boulder Chapter strategy, starting with strengthening and reimagining Macy's. In the first quarter, Macy's NPS continued to improve year over year. Customers appreciate our renewed emphasis on the shopping experience and a commitment to providing relevant fashion and newness at a compelling value across the good, better and best price spectrum. Recently introduced contemporary apparel brands Good American, Furi and Nick & Zoe have been well received and Coach and Donna Karan continue to resonate. Our off-price concept backstage and our Macy's marketplace remain strong. Backstage outperform the full line stores in which they operate by several hundred basis points while marketplace achieved approximately 40% GMB growth. Backstage and marketplace fill white space in our assortments and help us retain customers seeking more price and brand variety while we maintain our commitment to limit redundancy. During the quarter, the reimagined 125 posted a negative .8% comp versus a negative .1% comp for the total Macy's nameplate. These locations outperformed across all categories and we expect momentum to build as the year progresses. The second pillar of our strategy is accelerating and differentiating luxury. In the first quarter, both Bloomingdale's and Blue Mercury continued their positive comp trend. Bloomingdale's posted a positive .8% comp benefiting from brand launches such as Prada shoes and handbags online, Reformation ready to wear and Burberry men's and ready to wear as well as improvements in availability and pricing. Bloomingdale's continues to emphasize special capsules and exclusive partnerships that align and reinforce its core identity, including the White Lotus and Aqua collection, Coach Topia's carousel, Alice and Olivia's flagship takeover, Mother's boogie woogie boardwalk and the Farm Rio wedding capsule. It's an exciting time at Bloomingdale's. As strategic initiatives bear fruit and the competitive landscape continues to shift in our favor, there's no question we are taking share. Our aspirational to luxury positioning, compelling on-trend assortments and service orientation continue to attract new customers and new vendor partners. In addition, our Bloomies and Bloomingdale's The Outlet concepts are allowing us to enter new markets and expand our presence as well as share of wallet in existing markets. Our other luxury concept, Blue Mercury, achieved a positive .5% comp, its 17th consecutive quarter of gains. Results were driven by the 24 new and remodeled locations opened last year, ongoing strength in dermatological skin care, recent brand launches and a more targeted approach to loyalty and communications and offers. The third pillar of our will do chapter strategy is simplifying and modernizing -to-end operations. Our efforts to drive meaningful change to our customer and for our operational and financial performance remain on track. We are challenging the complexity of our business model, containing the cost to serve the value chain and streamlining our asset portfolio to deliver profitable sales growth, all while reinvesting the benefits captured to self-fund improvement in customer experience. I like where Macy's Inc. is positioned today. The bold new chapter continues to gain traction and our multi-category and multi-branded model provides a high level of flexibility to read and react. Our three nameplates span off price to luxury and catered roughly 40 million active consumers. When combined with our strong balance sheet and limited near-term debt maturities, these serve as positive differentiators in discussions with our vendors. Now let's turn to tariffs. Our teams and partners are in active dialogue as we navigate this uncertain environment together. At the end of last fiscal year, roughly 20% of total Macy's Inc.'s product originated in China. National brands, which represent the majority of our sales, sourced approximately 18% from China. Private brands, where we have more direct control of the supply chain, sourced roughly 27% from China. This is down from 32% last year and over 50% pre-pandemic. We are confident that we can continue to diversify countries of origin for both our private and national brands. With the recent announcement of these tariffs, we've renegotiated orders with suppliers, we've canceled or delayed orders where the value proposition is just not where it needs to be. Beyond China, we're closely monitoring Southeast Asia and Europe, and we've had limited sourcing exposure to Canada and Mexico. In this evolving environment, we are controlling what we can control. Based on actions taken through today and our assumption that current tariffs remain in place, we estimate a combined tariff impact to Macy's Inc.'s annual gross margin of roughly 20 to 40 basis points. This incorporates inventory previously bought under the 145% China tariffs, those bought more recently, shared cost negotiations, vendor discounts, and selectively raising tickets. It does not include a potential increase in tariffs from the EU or any other country. As of today, we have a good handle on the tariff-related costs, but we're cognizant that the environment is fluid. The impact on demand is less clear. Quarter to date, Macy's Inc. comps are above the March-April period. We believe this reflects improvements in product and experience, more seasonable weather, and some pull forward of demand. We are encouraged by the first quarter in May results, which are another proof point that the Bold New Chapter initiatives are working and that we remain on a path to achieving sustainable, profitable growth. Yet, the majority of the second quarter sales volume is still ahead of us. Given uncertainty regarding the tariff impact on consumer health and demand, we believe it's prudent to incorporate a more choiceful consumer into our outlook for the quarter and for the remainder of the year. Our second quarter in full year guidance ranges, which Adrienne will discuss in more detail, assume that the promotional landscape intensifies as the year progresses, international tourism does not rebound, and we continue to reinvest savings from closed stores and distribution centers in the initiatives that support our long-term growth. Reflecting these assumptions, we are being disciplined with our inventory commitments. If trends remain at the May levels, inventory is available and we have the flexibility to chase. Looking specifically at the second quarter, there are two unique factors impacting gross margin. First, we are taking markdowns on early spring product that arrived late in the fourth quarter and in February. This will ensure we continue to provide newness throughout the summer and are well positioned for the fall and holiday season. Second, a meaningful portion of the product bought under the 145 percent tariffs flows through the quarter. Regarding our full year guidance, the low end assumes sales trends soften from first quarter levels and we take additional actions to maintain a healthy inventory to sales ratio, including canceling receipts and taking deeper markdowns. The high end assumes a continuation of the March-April sales trend and only moderate gross margin pressure. In this environment of uncertainty, we remain focused on navigating the near term while executing to our long-term goals. We are in a unique moment and we will not be complacent. This is our time to take advantage of the disruption in the market and capitalize on the opportunity to further build share of wallet across all of our nameplates. At Macy's, customers are responding well to our redefined product and experience. The re-imagined 125 locations are outperforming the rest of the Macy's fleet. Backstage provides an off-price offering while marketplace and concession allows greater inventory flexibility. Finally, we closed 64 underperforming locations under the Boulder chapter last year. At our luxury nameplates, our customers are responding well to the accessible through premium product. And we have proven growth strategies firmly in place with small format Bloomys, Bloomingdale's The Outlet Store, and updated Blue Mercury Store format. And in our supply chain, we have become more nimble, leveraging knowledge and relationships across the business to increase our responsiveness while creating a more efficient, diverse, and productive operation. We are resilient. We have successfully navigated macro and geopolitical uncertainty in the past and we will do so again. Aided by our guiding principles, we plan to 1. Be flexible so that we can react to the consumer demand and make purchasing decisions as late as possible. 2. Maximize gross margin dollars through strategic pricing decisions, being mindful of the price value relationship between our market brands and private brands and the broader marketplace. 3. Partner with our suppliers on alternative sourcing and pricing options. And 4. Manage inventory to protect against markdown risk, set us up for success, and ultimately return to sustainable, profitable growth. With that, I'll turn it over to Adrian.

Thank you, Tony, and good morning, everyone. Today we will begin with a detailed discussion of our first quarter results before turning to our assumptions for the second quarter and full year guidance. First quarter Macy's Inc. net sales were $4.6 billion, down .1% to last year. As a reminder, approximately $170 million of the -over-year decline was due to last year's 64 non-Go Forward store location closures. Total enterprise comps were down 1.2%, while Macy's Inc. Go Forward business comps declined 0.9%. By nameplate, Macy's net sales, which includes all Macy's locations in digital, were down .5% and comps were down 2.1%. Macy's Go Forward business comps, which includes approximately 350 Go Forward locations and digital, were down 1.9%. At Macy's, re-imagine 125 comps were down 0.8%. Backstage continued to outperform the total Macy's fleet and the full-line locations that they operate in. At our luxury nameplates, Bloomingdale's net sales were up .6% and comps rose 3.8%, while Blue Mercury net sales were up .8% and comps rose 1.5%. Net credit card revenues were $154 million or $37 million higher -over-year. The increase was driven primarily by higher profit share, reflecting both our strong credit portfolio and continued active management of net credit card losses driven by strong underwriting. Macy's media network revenues were $40 million or up 8% -over-year due to growth in advertiser spend. Ghost margin was $1.8 billion or .2% as a percent of net sales, flat to the prior year. On a rate basis, merchandise margin improved 40 basis points, inclusive of favorable shortage and lower liquidations. This improvement was offset by higher delivery expense as a percent of net sales, reflecting increased digital penetration. We continued to take a disciplined approach to receipts, with -of-quarter inventories down .5% -over-year. SG&A expense dollars were relatively flat to last year at $1.9 billion. During the quarter, we continued to self-fund customer-facing initiatives through our -to-end operations work and savings from closed locations that support our bold new chapter strategy. As a percent of total revenue, SG&A was .9% or 170 basis points higher than last year, reflecting lower net sales. During the quarter, we recognized $16 million of asset sale gains as we continued to monetize store locations and right-size our supply chain network. First quarter adjusted EBITDA was $324 million or .8% of total revenue. Core adjusted EBITDA, which is adjusted EBITDA excluding asset sale gains, was in line with our guidance at $308 million or .4% of total revenue. First quarter EPS of $0.16 exceeded our guidance range of $0.12 to $0.15 and compared to $0.27 last year. For the quarter, operating cash flow was an outflow of $64 million and free cash flow was an outflow of $203 million, with capital expenditures of $177 million and monetization proceeds of $38 million. We returned approximately $152 million to shareholders, consisting of $51 million in quarterly cash dividends and $101 million of share repurchases. During times of uncertainty, the strength of our balance sheet and ample liquidity are critical to supporting our business and are a source of resiliency. We remain committed to exercising our prudent fiscal discipline, which is centered around free cash flow generation and a healthy balance sheet as we continue to thoughtfully invest in our business for long-term growth and return capital to shareholders. Now turning to guidance. We assume our customer will become more choiceful as the year progresses. Our full year and second quarter guidance provides flexibility to respond to an uncertain promotional environment and competitive landscape. Guidance also assumes that our current tariffs remain in place and that we're able to mitigate a meaningful portion, although not all, of the increased costs. It does not incorporate the potential for higher EU or other country tariffs. For the year, we expect Macy's Inc. net sales of $21 to $21.4 billion. Please keep in mind that fiscal 2024 store closures contributed roughly $700 million to net sales. Even with the first quarter beat, we believe it is prudent to maintain our prior net sales outlook given the uncertain environment. Macy's Inc. comps to be down roughly 2% to down roughly 0.5%. Macy's Inc. go-forward comps to be down roughly 2% to roughly flat. Other revenue of $815 to $825 million with credit card revenues of $620 to $630 million. Gross margin as a percent of net sales to be roughly 30 to 70 basis points below the comparable period last year. Tariffs account for roughly 20 to 40 basis points of the difference to last year or 10 to 25 cents of annual EPS. The remainder reflects planned actions to strategically capture customer share of wallets while navigating a more competitive promotional landscape. SG&A to be down low single digits on a dollar basis. As a reminder, our SG&A growth investments are purposely planned to grow below the historic rate of inflation. As a percent of total revenue, we expect SG&A to be up 80 to 110 basis points. We are reinvesting savings from simplifying -to-end operations and store closures into customer-facing growth initiatives that enhance omni-channel shopping experiences across our nameplates. We expect adjusted EBITDA as a percent of total revenue of 7.4 to 7.9%. Core adjusted EBITDA as a percent of total revenue of 7 to 7.5%. Adjusted diluted EPS of $1.60 to $2, which does not contemplate potential share buybacks. We continue to anticipate capital expenditures of approximately $800 million as we are committed to investing in our business, supported by our Healthy Balance Sheet to position Macy's Inc. for long-term profitable growth. For the second quarter, we expect net sales of $4.65 to $4.75 billion. Last year's store closures contributed approximately $170 million to sales in the comparable period. Macy's Inc. comps to be down .5% to up 0.5%. Core adjusted EBITDA as a percent of total revenue to be 6% to 6.2%, with SG&A dollars roughly flat to last year. And adjusted EPS of $0.15 to $0.20, which does not consider potential share repurchases and assumes $10 million of asset sale gains compared to $36 million in the same period last year. Before turning it back over to Tony, I want to take a moment to thank the Macy's Inc. leadership team, the board, and all of the colleagues I've had the pleasure to work with over the past four and a half years. It has been an enriching and rewarding experience personally and professionally. Based on the talent in place across the organization and all of the work we have accomplished together, I am confident that Macy's Inc. is well positioned to return to sustainable, profitable growth. With that, I'll turn it back over to Tony.

Thank you, Adrian. Before we begin Q&A, on behalf of the board and the entire Macy's leadership team, I want to thank Adrian for his leadership and contributions to Macy's Inc. I appreciate his personal support over the last few years, and I wish him the best in his future endeavors. Operator, with that, we're now ready for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We do ask that you please limit yourself to one question and one follow-up. Once again, that's star one to register a question. Our first question today is coming from Blake Anderson of Jefferies. Please go ahead.

Hi, guys. Thanks for taking our question. So, I just wanted to start off on the sales guide. Sounds like you're holding that constant for the year. You talked about some consumer pressure and promotions. So, I just wanted to get your thoughts on maybe confidence in the sales guide for the rest of the year and how to think about the cadence of Q2 versus the back half, compared to Q1, more sounds like you outperformed.

Thanks, Blake, for the question. We reaffirmed our annual guide for the year, as you noted, with the first quarter beat. We did see a stronger performance in March, April versus February, which was more weather affected, and come into the second quarter with a stronger performance in the month of May. I think the guide appropriately reflects the level of uncertainty that we're navigating, controlling what we can control, making sure that we're well positioned with the flow of inventory, with a thoughtful approach to our marketing calendar, investing in both top of funnel and bottom of funnel activities, and making sure that we're well positioned across all three nameplates. So, you know, I would look at it as being cautiously optimistic. We're taking the beat in the first quarter, and we're making sure that we are prudently planned for the rest of the year.

That makes sense.

And then the follow up was on the strategic pricing decisions. Any more commentary you can provide on what kind of categories or items or magnitude you would be looking at for pricing to offset some of the tariffs?

Blake, I would just say it's a work in progress that I feel really good about how the team has actioned what we've had to action now based on the shipment and the current tariffs that are in place. But remember, as a multi-brand, multi-category retailer, we have a lot of optionality. If something isn't priced fairly, we're not going to buy it. If a price point is important, we're going to hold it. We're going to negotiate fairly and aggressively with our partners, as well as with our factories. And right now, I feel good about how we've positioned our pricing and our inventory for the remainder of the year, but we've got a lot in front of us, and we're going to take it kind of day by day and month by month.

Sounds great. Thanks so much. Thank you.

Thank you. The next question is coming from Paul Kearney of Barclays. Please go ahead.

Okay. Good morning. Thanks for taking my question. Two parts. To what degree has pricing already been impacted from the higher tariff goods that are flowing into 2Q? And in your view, what is the consumer ability and willingness to accept those higher prices? And then two, under the current tariff outlook, can you talk about what exactly is your expectation for pricing for the fall season? And are the negotiations with vendors on sharing those costs largely completed? Thank you.

Thanks, Paul. You know, first, I would say the pricing is working its way into the system slowly. So you certainly saw little to no pricing in the first quarter. You're seeing some limited pricing in the second quarter. And so that's why we've taken a more cautious approach to our outlook for the remainder of the year. I feel good about the negotiations with the marketplace and obviously with our suppliers. It is a shared approach and mentality. It is not a one size fits all or an across the board approach to anything. We're really trying to make sure that we are sharpening our value where necessary. We are looking at the elasticity of pricing across the entire enterprise and leveraging marketplace, backstage, Bloomingdale's, Macy's, Blue Mercury to make sure that we're using the fulsomeness of our entire retail portfolio to capture share of market. We really believe in this disrupted time period, the health of our balance sheet, the quality of our team, the focus of our strategy is a competitive advantage.

Paul, if I could just add just a little bit of commentary to the question that both you and Blake added, I think it's important to understand that we are not just broadly increasing price. We're being incredibly surgical about the situation with tariffs. Let me give you a little bit of color of the kinds of things that we're doing. Given the tariffs that we see today and that are currently in place, we've reduced our exposure to China as Tony referenced earlier in the call. We've renegotiated orders with vendors to make sure that we have the right brands and styles available for what customers are actually going to buy. We've even canceled certain orders and delayed other orders as we're just navigating all of the choppiness and uncertainty that we're dealing with. We've been able to gain some vendor discounts, which has been helpful to us, but we're absorbing some of that price as well. We're making selective price increase in selective brands, selective categories, because we believe the value equation for the customer is still very relevant. Some of the impact on our gross margin this year is going to be around the tariffs, but we're also investing in getting market share because we really do believe as we get into the back half of the year, that price value dimension is going to be very good. It's very critical.

Thank you. Thank you.

Thank you. The next question is coming from Brooke Roach of Goldman Sachs. Please go ahead.

Good morning, and thank you for taking my question. Tony, you've mentioned a couple of times about the opportunity to strategically capture market share while you navigate this uncertain environment. Beyond some of the pricing decisions that you've made to be more relevant to the consumer, what other actions are you taking to capture that market share throughout the rest of the year, whether that's promotional calendar, marketing calendar, et cetera? And then a follow-up for Adrian. Adrian, can you help us understand the magnitude of the gross margin pressure in 2Q from more transitory factors such as the spring product markdowns and the tariff on the 145% tariff rate versus what might be a little bit more sustainable in rate? Thank you.

Thanks, Brooke. Appreciate the question. It is a disrupted marketplace. You know, we all don't come into this environment in an equal position. Macy's Inc. has done a lot of work over the last couple of years setting up the bold new chapter, doing a lot of research with 80,000 consumers, understanding the power of Bloomingdale's Blue Mercury and Macy's closing underproductive stores. So I don't think that's comparable to what other department store retailers have experienced. We have a strategy that we are in the second year of. We're excited about the improvements that we've made in the re-imagine 125. We're equally excited about the continued growth in Bloomingdale's and Blue Mercury. But to answer your question specifically, number one is product. We are flowing newness into all three brands. We are seeing opportunities because of the competitive landscape to add brands to Macy's, add brands to Bloomingdale's, add brands to Blue Mercury. We have a healthy balance sheet, which means to the vendor community, we're going to be around and we're going to pay our bills. Secondly, we're improving the quality of our marketing. We have a better balance today that we had a year ago in top of funnel and bottom of funnel investments. That means we are equally committed to having a higher brand relevance as well as better conversion in our digital tactics. Third, we are improving the experience inside our stores. We have added colleagues. We are getting a different net promoter score at Macy's and Bloomingdale's because the store experience as measured by the customer feedback is improving. And so the stores are well-merchandised. There is better storytelling. There are colleagues available to assist the customer in the fitting room. Those are all reasons why I believe we can take share in this moment in time.

Brooke, good morning. Just to address your question around the gross margin, what we're trying to accomplish is really managing the health and level of our inventory and being responsive in terms of the customer experience that Tony just described. We haven't shared the gross margin impact for Q2, but here's what we're doing in terms of our actions. As Tony mentioned a little bit earlier, we are going to be taking markdowns based on some of the volume of inventory that we received at the end of the fourth quarter into the early part of the quarter. But also responding to the soft sales that we saw in February because the health of the inventory is actually quite important. In addition, we do have some receipts that came through under the 145 percent China tariffs and a meaningful portion of that will actually flow through the second quarter. So we're just being very judicious around that. If I take a step back and look at the year, there are really two factors that we're managing on the gross margin. The first is the 20 to 40 basis points of impact based on the current tariffs that we see that are in place and how we believe that will impact the second quarter and the fall season. But we're also investing in price and value because we do believe that we have an opportunity to take share. We have an opportunity to be competitive, especially in an environment that we anticipate will be more competitive and discretionary as we get into the back half of the year.

Great. Thanks so much. I'll pass it on.

Thank you. Thank you.

Thank you. The next question is coming from Alex straight and of Morgan Stanley. Please go ahead.

Perfect. Thanks so much.

Just

on the re, imagine one 25 group that that comp still being negative. Can you just talk through the path to that turning positive? Is it possible this year? And then also, what will more stores be added to that group this year? And then just the second question is, is on the widened as she and a guidance range. Can you talk about the drivers of that for the year? What would put you on either end? Thanks so much.

Thanks for the question. Alex, the re, imagine one 25, we still feel really good about and the stores are not immune to the kind of macro pressures that we're seeing across the landscape. The good news is the March, April trend and the re, imagine one 25 was better than February as the weather improved. The May trend is better than the February, March or March, April performance. So I can't comment on where we're going to see any individual segment of stores and the year, but I feel very good about the rollout of the initiatives into those stores. The additional staffing, the improvement in presentation, the additional brands, the better in stock position, the localized marketing, all in flight. Like last year, as the year progresses, we'll talk about what are the opportunities to test additional ideas and additional stores and what the expansion might be in 2026. But, you know, so far I would say the improvement in the one 25, we continue to see the differential between the rest of the Macy's stores and I'm cautiously optimistic that we have opportunity to improve that trend as the year progresses.

Alex, good morning to you. You know, as we look at the SG&A, the thing that I would highlight is that we do expect it to be down low single digits versus last year. So that's an important dimension. When we look at the breadth of the range, what we're really doing is giving ourselves the flexibility to be able to navigate a variety of scenarios as we think about the uncertainty over the course of the next several quarters. So as we really look at it from our perspective, we have a track record of achieving SG&A reductions. We have a healthy pipeline of initiatives that's already in flight and we're just giving, excuse me, ourselves some flexibility in terms of the range to be able to navigate multiple scenarios that could unfold in the upcoming quarters.

Thanks so much. Good luck.

Thank you,

Alex. Thank you. The next question is coming from Matthew Boss of JP Morgan. Please go ahead.

Great, thanks. So Tony, on the sequential improvement, have comps in May improved to positive territory across nameplates and maybe more specifically, could you walk through customer behavior that you're seeing in your reimagined doors that gives you confidence in bold new chapter into year number two and maybe just opportunities you see to accelerate initiatives in these doors?

Sure, Matt. Thanks. I'm not going to get into the specifics of the May performance, but I will tell you that the consumer is continuing to react differently than the sentiment. So while sentiment, I guess, yesterday improved a little bit, the demand is still better than the sentiment. So the consumer remains under pressure, but is responding to newness, is responding to good value, is responding to improve presentation, is responding to inspiring marketing. You know, I think we can control some of these elements. You know, I can't control how much discretionary spend the consumer is willing to lay out, but I can control the quality of our execution. I feel like in the reimagined 125 and in the digital experience at Macy's, we are better positioned today than we were three months ago and certainly better than we were a year ago. You feel the difference in our stores a year and a half into this strategy. You feel the colleague engagement. You feel the consumer sentiment as they shop for regular price merchandise. So where we have reduced the amount of clearance sales that we have as we improve the quality of our inventory, we're seeing better regular price performance in the reimagined 125. That I think is a good indicator along with customer sentiment about what the future potentials of these stores. I think the store execution continues to get stronger. The density on the floor still looks impactful, but we're not over-inventoring the stores beyond what is necessary in any given quarter or season. And finally, I would say the turnover amongst colleagues in these stores is down. So we're getting the benefit of being able to provide the product knowledge and education, and the customer is getting the benefit of seeing those colleagues in those same stores.

Great color. Best of luck. Thank you,

Matt. Thank you. The next question is coming from Dana Telsey of Telsey Advisory Group. Please go ahead.

Hi. Good morning, everyone. As you think about inventory, which I believe was down a half a percent, how are you planning inventory going forward in light of all the tariff planning or pull forward for holiday? And then the competitive landscape is definitely changing, whether it's the turmoil of SACS, the privatization of Nordstrom. As you think about the landscape, Tony, both for Macy's and for Bloomingdale's, what are the opportunities that you see for each of the banners going forward? I just have a quick follow up. Thank you.

Thanks, Dana, for the question. You know, on inventory, we know we've got a good track record of really being disciplined about how we flow inventory, and we're going to continue to be disciplined. And that means that if pricing is opportunistic and we're trying to mitigate or avoid the nature of tariffs in certain markets, we're going to do that. We've got the liquidity, we've got the balance sheet to kind of move inventory, but I'm not going to buy six months or a year worth of product just to avoid tariffs that may or may not materialize in different parts of the world. I do believe, you know, again, I'm not going to speak to an individual competitor, but I think you sized it up exactly right, that we are in a market environment where both Macy's and Bloomingdale's have opportunity to take share. We have vendors that are more committed to our brands and to our partnership than I've seen at my time with the company. We have new brands that we've added at both Macy's and Bloomingdale's that are resonating with the customer. We're seeing feedback from the customer that is acknowledging the different experience that they're seeing in a department store environment that they haven't seen in years. We have to remain committed to our investments. We have to remain committed to this strategy. And we have to take advantage of this moment in time and this opportunity to get our fair share of the business.

Thank you. Thanks, Dana.

Thank you. The next question is coming from Oliver Chen of TD Securities. Please go ahead.

Hi, Tony and Adrienne. This is Julianne for Oliver Chen. With the comp beat across all nameplates, how did your comps perform relative to your expectations and what were the main catalysts relative to what you expected aside from the calendar shift? Which categories and levers were stronger and then what is assumed in terms of category dynamics throughout the year? Thank you.

Thanks, Julia. We again saw a better performance in March and April than in February. February was disrupted with a softer, I would say, weather environment. We hate to use weather as an excuse, but it is helpful at defining why seasonal categories perform or don't perform. We certainly saw a better performance in the March-April time period and now we see that continuing into May. I think we talked about the fact that we're in an apparel cycle, so we're continuing to see categories like denim perform well, denim dressing. Whenever there's a change in silhouette or fabrication, we see a benefit to the business and we're certainly seeing that at both Macy's and Bloomingdale's. We're seeing improved performance in categories like fine jewelry, certainly the fine watch and fashion watch business has been healthier. We're seeing better performance in parts of the home furnishings area, particularly in Big Ticket. We have a good mattress business at both of our brands and we're seeing category like textiles, sheets and towels improve as the quarters progress. So I think what I'm underscoring is the fact we have a diversity. We have a variety of products and because we're not limited to any one category, any one segment, we can pivot and adjust our receipts and our marketing to where we see the business materializing.

Great,

thank you.

Thank you.

Thank you. The next question is coming from Michael Benetti of Evercore ISI. Please go ahead.

Hey guys, thanks for taking our question here. Was there anything one time in the SG&A dollars in one queue? I'm trying to go back in time here as you kind of guided us forward on what the SG&A per store was with some of the closures. I guess the dollars were up just a little bit in the quarter. I'm trying to think if there's anything we should adjust out as we think of the rest of the year with the stores closed and then maybe lapping it next year. And then also I'm curious as you, I know you guys focus on recapturing sales from store closures. As you measure it, can you talk to any evidence that you've seen of transfer from some of the stores that have closed or anything we should try to keep an eye on there? Thank you.

I'll go ahead and get us started, Mike. I mean, the simple answer to your question is no. When you think about a lot of the adjustments, we typically take those in the fourth quarter, but nothing unusual in the first quarter. Tony?

Yeah, I would just say in terms of sales from store closures, you have the interesting impact, just to frame it for folks, that when the stores are closing, you have a slight depression of sales in the existing stores because of the going out of business communication in that environment. And then following, you start to see the recovery and opportunity to recapture. What I would say is we're slightly ahead of our expectations in terms of what we thought would happen with closed stores recapture. And I think that remains an opportunity for us to kind of lean in kind of by category and by geography to make sure that we're getting our fair share of that business.

That's great. If I could sneak one in on beauty, good to see blue mercury positive. I'm curious, maybe just a comment on the beauty business in total as you look across all your banners. Any comment on total category trends, prestige versus mass or important shifts between the categories that we should think about as we as we model forward some of the center core and the blue mercury numbers for the rest of the year?

Sure, Mike. I think the category has had a lot of distribution expansion, and we are certainly fighting for our fair share of the business. What I feel good about is that Macy's, Blue Windows, and Blue Mercury are great holiday destinations. So coming off of Mother's Day, heading into Father's Day, being a great destination for Christmas and Hanukkah. So, you know, we have more competition. I feel good about our reaction to the environment, making sure that we are doing everything in our control to show up well for the customers. That can include the value sets that we negotiate in the marketplace to make sure that we have value day in and day out in the fragrance and cosmetics area. To the quality of the staffing, maintaining a full service environment in beauty across all three of our brand or nameplates. We think it's very important to making sure that we offer both value and great service in that zone of business.

Thanks a lot, guys. Best of luck.

Thank you.

Once again, ladies and gentlemen, that is Star 1, if you would like to register a question at this time. Our next question is coming from Chuck Grahame of Gordon Haskett. Please go ahead.

Hey, thanks. Good morning and best of luck, Adrian. It's been great working with you. I wanted to just to focus on the first quarter a little bit and talk about the health of the consumer across income cohorts. Also, category performance during the first quarter, particularly in March and April and into May, if you could. And then, Tony, you talked about demand pull forward in the month of May. I was curious if we could just dive into which categories you think you saw that pull forward. Thank you.

Sure, Chuck. Thanks for the questions. You know, the consumer health, I would say, remains under pressure. You know, discretionary spending is something that I think we've seen from the middle of last year kind of forward that, you know, as inflation subsided a little bit, as gas prices became more affordable, the consumer still felt the pinch of other costs that were rising. And so we're maintaining our, you know, aggressive position and trying to make sure that we're capturing our fair share. I would say at the high end, the consumer is not obviously pressured, but they remain choiceful and they don't like uncertainty. So there are fits and starts, I would say, at times to the way in which they respond. They love newness. They obviously love a good value. They like a compelling presentation and storytelling. So we're leaning into that. I think you heard, you know, at Bloomingdale's, all of these pop ups and activations are really well received. The vendor community is very interested in investing in Bloomingdale's to bring their brands to life. And I think that's just a winning strategy in terms of categories. You know, it's hard to say what part is pulled forward, but I would just acknowledge that you can't say there isn't any pull forward. So as we're all as consumers kind of watching what's happening, there is this mentality that I've got to buy something now. Maybe that's a part of some of the growth we've seen in fine jewelry, for instance, maybe some of the big ticket areas where there's more uncertainty around the size of the impact of pricing changes that may come over the course of the year. But I continue to be very bullish on the fact that we have a better distributed model today than we even had a year ago. And what I mean by that is we have a better balance across categories of business. We have a better balance between marketplace and 1P. We have a better balance between off price and full price. And we have a better balance between Macy's, Bloomingdale's and Blue Mercury. That just helps us with 40 million active customers to be in a position to, while others are disrupted, take share. And so it doesn't we don't have a right to it. We don't get it automatically. But I think if we remain, you know, surgical and aggressive on the things that we do well, we're going to get our fair share of the business.

Okay, great. Thank you. And then as you as you toggle between investing in value to Adrian's point and then and then raising prices, can we dive into, I guess, maybe which categories you would expect to see the largest price changes as you progress throughout the year?

Again, I don't think Chuck, it's about any one category. I think there are brands that have more elasticity and there are items that have more elasticity and others that don't. And the benefit that we have as a retailer is we don't have to buy those things where we think the pricing is too big a pinch on the consumer. And conversely, in other items or within categories within brands, we will surgically take prices up because the customer votes and says the product is worth it. And so, again, not pointing names, but you between coach and Ralph Lauren. And there are plenty of names out there that have talked about surgically adjusting prices where they think the product commands and the value is apparent. Conversely, we're going to be aggressive on pricing and make sure that those things where the customer is highly attuned to price, we're going to be very competitive.

Great answer. Thank you. And I'm just one quicker for Adrian. Just on capital allocation, you bought back looks like about 100 million dollars of stock first time in a couple of years. I just wanted to understand that the guide does not assume any more additional share buybacks. It looks like your diluted share guide is about seven or eight million lower than what it was back in March.

Thanks. Yeah, absolutely. Chuck. So, you know, really the buyback of shares is really a signal of the confidence in the business. And, you know, as we reflect on the past year and the momentum, the momentum that we see coming into this year, even with the uncertainty of tariffs, you know, we're pretty excited about the health of the business. And we're also excited about how we're managing our cash, managing our inventories and managing multiple dimensions of the business. Now, our practice is not to provide guidance on future buybacks. That's just not something that we typically would do. So as we think about the balance of the year, we're not assuming any further buybacks. But that being said, you know, we have one point three billion dollars of authorization still left on our on, you know, our approvals. And we're actually quite pleased that we resumed share buybacks in the first quarter. So, again, it's really reflection of the health of the business and to help this company. And so we were pretty encouraged to be able to return one hundred and one million dollars back to shareholders and buybacks and an additional fifty one million in terms of dividends.

Thank you. Thanks.

Thank you. This brings us to the end of the question and answer session. I would like to turn the floor back over to Mr. Tony Spring for closing comments.

Thank you to everybody for your active participation on the call today. Thank you again to the Macy's Inc. team for your leadership during these unusual and uncertain times. And I want to wish everybody a very happy summer holiday season. And please make sure you tune in and check out the Macy's Fourth of July fireworks. We have a great show planned for this year. Have a great day, everyone.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines and lock off the webcast at this time and enjoy the rest of your day.