Macy's Inc

Greetings and welcome to the Macy's Inc. Second Quarter 2025 Earnings 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 conference 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 Tom Edwards, our COO and CFO. Along with our second 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, macysinc.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 May 28th earnings call. On today's call, we will refer to certain non-GAAP financial measures. Reconciliations of these measures can be found in our earnings presentation and SEC filings available at www.macy'sinc.com slash investors. 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 include the approximately 350 Macy's Go Forward locations and digital, and Bloomingdale's and Blue Mercury nameplates inclusive of stores and 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 Litigation 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.

Good morning, and thank you for joining us today. We're encouraged by recent quarterly performance and the execution of our Bold New Chapter strategy. We've made substantive, enterprise-wide improvements to our business, yielding meaningful results. For the second quarter, top line, bottom line, and core adjusted EBITDA exceeded our guidance. Macy's Inc. and Macy's Nameplate both had their strongest comparable sales in 12 quarters. Macy's go-forward comparable sales were positive, inclusive of growth in our reimagined 125 locations and digital. Bloomingdale's achieved its fourth consecutive quarter of comparable sales growth and continued to gain market share. and Blue Mercury achieved its 18th consecutive quarter of comparable sales gains. I want to thank our teams and our brand partners for helping us deliver improved product and omni-channel experiences for our customers. Turning to a more detailed view of the quarter, Mazes Inc. achieved comparable sales growth of 1.9%, and our go-forward businesses delivered comparable sales growth of 2.2%. Adjusted EPS of 41 cents was above our guidance range of 15 to 20 cents, reflecting comparable sales growth, disciplined expense controls, and tariff mitigation actions. End-of-quarter inventories were down 0.8%, and we feel good about our composition headed into the fall season. Our second quarter results highlight the benefit of being a portfolio of nameplates that are multi-brand, multi-category, and multi-channel. This model provides sourcing optionality, economies of scale and negotiations, and product and price diversification. And with our off-price to luxury offerings and strong financial position, we're leaning into areas of opportunity, chasing important trends, and providing more reasons for the customer to shop with us. Now let's discuss how each pillar of the Bold New Chapter strategy contributed to our results, beginning with strengthening and reimagining Macy's. Our goal for Macy's is simple, offer customers access to the brands and categories they're looking for at a great value with a compelling omni-channel shopping experience. Macy's achieved 1.2% comparable sales growth in the quarter. This was led by Go Forward Macy's, which rose 1.5%, inclusive of the Reimagine 125 that were up 1.4%. Macy's off-price concept backstage along with Macy's Marketplace, were both strong contributors. These fill white space in our assortments and help us retain customers seeking more price and brand variety. Recent results illustrate that improvements in our Macy's omnichannel customer experience are resonating. We have shifted from being an operationally-led to customer-led organization and are calibrating our assortments on both a brand and category basis. Highlighting our progress, Macy's delivered its strongest second quarter net promoter score on record. We view this as an important measure of customer sentiment and a leading indicator of future sales. I recently received a note from a customer who had just visited a store, and they said shopping at Macy's was such a pleasant surprise. The store was clean and organized, and most importantly, the employees were a joy to interact with. The service has improved tremendously over what it was just a few years ago. I will definitely recommend shopping there, and I will return to shop there myself. I read every customer note that I receive. Listening to feedback is one of the most important ways we can improve and grow our business. In addition to improving the shopping experience, we've also made strides in product curation. Our vendor relationships are strong, and we are viewed as a valued partner that helps broaden their reach and deliver against customer needs. Our balance sheet, large addressable market, and loyal customer base are attractive differentiators, and market brands are excited to work alongside our teams. As one of their largest partners, we receive compelling product from the brands our customers are asking for, including Coach, Donna Karan, Levi's, and Ralph Lauren, just to name a few. And as these brands thrive at Macy's, other brands are taking notice. We've been attracting new partners, including Abercrombie Kids, expanding our distribution of existing labels such as Sam Edelman, Hugo Boss, Good American, and we're continuing to update our private brand assortment. Turning to category performance, comparable sales of women's contemporary and career as well as men's tailored clothing outperformed. In addition, fine jewelry and watches, textiles, and mattresses continue to experience strong demand. The success of these categories illustrates the breadth of product and price points that we offer and our ability to cater to customers' evolving lifestyle needs. Rounding out the conversation on Macy's, our strategy of closing underperforming locations while investing in areas of opportunities will create a more focused and profitable store base. I believe we are positioned to deliver long-term growth in our Macy's go-forward business, inclusive of digital. This is driven by exceptional customer omnichannel experiences, improved selling, enhanced colleague development, and inspired merchandising, including more variety with reduced redundancies. The second pillar of the Bold New Chapter strategy is accelerating and differentiating luxury. In the second quarter, both Bloomingdale's and Blue Mercury maintained their positive comparable sales trend. Bloomingdale's achieved a positive 5.7% comp and its highest second quarter sales and net promoter score on record. Our ambition is to be the leader in local markets that we serve And our recent performance underscores that Bloomingdale's is gaining momentum. Our strong heritage of customer service and premium contemporary to luxury positioning is differentiated in the market. And we are able to offer the best of current trends in an accessible and compelling environment that has broad, multi-generational appeal. During the second quarter, ready-to-wear, fine jewelry, fragrance, and tabletop performances were a few standouts. Bloomingdale's is also well known for its special and exclusive capsule collections and partnerships, which build brand heat and excitement and support increased visits to our stores and online. This summer, we had takeovers by contemporary brands Mother and Staud and introduced our latest limited edition Aqua collaboration, Aqua and Ava Phillippe. This week, we're launching our fall campaign, which is called Just Imagine. The campaign celebrates creativity, art, and style, and is supported by a robust lineup of activations, impressive visuals, and new and exciting and exclusive product. Looking ahead, we remain focused on growing Bloomingdale's through attracting new brands and partnerships, expanding distribution, growing digital, and increasing our national footprint through Bloomingdale's small format stores and Bloomingdale's outlet locations. These initiatives help us to take additional share across categories, markets, and brands as we capitalize on disruption in the marketplace. Our other luxury concept, Blue Mercury, achieved 1.2% comparable sales growth, representing its 18th consecutive quarter of gains. Results were driven by dermatological skin care and recent brand launches, including Byredo, Victoria Beckham Beauty, and Charlotte Tilbury. Our Bloomingdale's and Blue Mercury customers were responding well to our aspirational to luxury positioning. We have proven growth strategies in place for both and are confident in the luxury category and its long-term potential. The third pillar of our Bold New Chapter strategy is simplifying and modernizing end-to-end operations. We have an always-on approach to profit improvement and are finding efficiencies through automation, resource optimization, and the streamlining of processes. Our end-to-end work gives us the ability to invest in our growth ambitions while delivering an improved return for our shareholders. Now let's discuss our view on the consumer. Our customer cross nameplates has remained resilient through the first half of the year and quarter to date. However, given the uncertainty regarding the impact of tariffs on demand, we believe it's prudent to continue to incorporate a more choiceful consumer into our guidance for the remainder of the year. Our third quarter and full year ranges assume we continue to reinvest most of the savings from closed stores and distribution centers in initiatives that support our long-term growth aspirations. In addition, reflecting the incremental tariffs that have been announced since our last earnings call, full-year guidance now incorporates a 40 to 60 basis point tariff impact to gross margin. This compares to our prior expectation of 20 to 40 basis points and equates to roughly 25 to 40 cents of EPS versus our prior expectation of 10 to 25 cents. To conclude, I like where Macy's Inc. is positioned. Our first half and third quarter-to-date performance is encouraging, especially in our go-forward business inclusive of Reimagine 125, Bloomingdale's, and Blue Mercury. We've made meaningful positive changes to our product and to our omnichannel experiences across nameplates, and our customer is responding. At Macy's, we're testing We're iterating and we're refining our initiatives to drive relevant assortments, inspiring experiences, and compelling value for our customers. At Bloomingdale's, we're continuing to drive profitable growth through our unique positioning, our strong appeal to our customers and our partners, and we'll continue to capitalize on the disruption in the marketplace. And at Blue Mercury, our curated assortments and agnostic selling are both strong differentiators. This is all supported by the important work in end-to-end operations where we've become increasingly nimble, leveraging knowledge and relationships to improve responsiveness and create more productive operations. Now, before turning the call over to our new COO and CFO, Tom Edwards, I'd like to take a moment to welcome him to the team. Tom joins us following a successful career across a variety of publicly traded consumer discretionary companies. While many of you know him from his time as COO and CFO at Capri, He has held senior positions at Brinker and Wyndham as well. Tom's experiences and financial acumen uniquely complement the hospitality-oriented work we're doing to support the Bold New Chapter strategy, our focus on building and strengthening brand partnerships, and our ability to deliver long-term growth. Tom, welcome.