Macy's Inc

Greetings and welcome to the Macy's Inc. 4th 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, Vice President 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 fourth 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, MacyDink.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 December 3rd 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 backslash investors. All references to comp sales throughout today's prepared remarks represent comparable owned plus license plus marketplace sales, or OLM, unless otherwise known. Go Forward Macy's Inc.' 's comparable sales and other Go Forward metrics include Macy's Go Forward locations in digital and Bloomingdale's and Blue Mercury nameplates inclusive of stores in digital. As a reminder, we recently announced an update to our non-GAAP financial disclosures, the details of which are available in a Form 8-K filed on February 18. These changes do not impact our historical or future GAAP metrics and disclosures. The updated disclosures, which encompass comparable sales, OLM dollar sales, revenues, and non-GAAP earnings, are intended to both simplify disclosures and provide increased clarity on the key metrics that support our growth profile and go-forward operating performance. For fourth quarter and full year 2025 results, we reported non-GAAP earnings consistent with previous disclosures and prior guidance. All prior and updated non-GAAP metrics will be available in our investor presentation located on our website. Beginning with the first quarter of fiscal 2026, adjusted earnings metrics will reflect our new non-GAAP metrics. Please note that 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, let me turn it over to Tony.

Good morning, everyone, and thank you for joining us today. 2025 was a year of transformation. Solid execution of our Bold New Chapter strategy, supported by our strong balance sheet, drove enterprise-wide improvements. We're gaining measurable traction and delivering meaningfully positive results. As we look back on 2025, we achieved several major milestones. First, we returned to positive comparable sales for Total Macy's Inc. and Macy's nameplate, marking an important inflection point. Second, we achieved better-than-expected top-line and bottom-line results in every quarter, demonstrating strong and consistent execution. And third, we delivered adjusted diluted EPS well above our most recent guidance. Results were also above our initial guidance, despite the unanticipated impact of tariffs and lower-than-expected asset sale gains. I'm thankful to our colleagues. Their leadership, talent, and commitment are the driving force behind our performance. Our teams have worked collaboratively with our partners to deliver the bold new chapter, and together we are making meaningful progress towards our long-term sustainable profitable growth. Now let me provide a brief overview of fourth quarter results before turning to our full year performance and fiscal 2026 expectations. In the fourth quarter, Macy's Inc. net sales, comparable sales, and core adjusted EBITDA all exceeded guidance. Results were driven by better than expected performance across key line items and positive go-forward comparable sales at each nameplate, led by Bloomingdale's impressive 9.9% growth. Adjusted diluted EPS of $1.67 was well above our guidance range of $1.35 to $1.55. During the fourth quarter, customers responded favorably to our merchandising, marketing, and promotional events, supported by an improved omnichannel shopping experience. Macy's Thanksgiving Day Parade drew a record 34 million plus viewers and had over 3 billion earned social media impressions, up about 30% to last year. We leveraged the power of the parade into our retail offerings, holiday destination categories including fragrances, jewelry, and handbags outperformed. Other highlights included women's contemporary, denim, dresses, and children's. At Bloomingdale's, our Happy Together campaign generated roughly 15 billion unique impressions per month in earned media for November and December. Our Burberry and Bloomingdale's partnership generated buzz through its in-store pop-ups and exclusive products. While almost every category had positive comps in the quarter, standouts included fragrances, women's contemporary, designer apparel, and fine jewelry. Fourth quarter performance wrapped up a successful second year of our bold new chapter strategy. For fiscal 2025, we exceeded expectations on all key line items, including net sales, comparable sales, EBITDA, and core adjusted EBITDA. An adjusted diluted EPS of $2.32 was well above our most recent guidance of $2 to $2.20. Now let's review how our strategic pillars drove annual results, beginning with strengthening and reimagining Macy's. Macy's nameplate achieved 0.6% go-forward comparable sales growth, representing 190 basis point improvement versus last year, and a 690 basis point improvement on a two-year basis. Performance was led by the reimagined 125 locations and digital. The reimagined 125 comparable sales grew 1%. Stores that have received initiatives delivered positive comps in seven of the past eight quarters and serve as a strong proof point of our ability to return to growth. Performance reflects our customer-led focus, including clear and purposeful changes at Macy's. We've improved our assortment relevancy. We're investing in staffing and events, and we're leveraging local market strengths. These initiatives are having a halo effect on Macy's omni-channel business and contributing to positive digital comparable sales results. Speaking of digital, Macy's digital channel represents approximately one-third of our annual sales. It is benefiting from a modernized Macy's.com, inspired by what we're doing in stores. Over the past year, we have shifted to a more editorialized approach that reinforces our fashion authority and facilitates shopping across categories that drives commerce. Across stores and digital, we are emphasizing products and experiences. Our inventory composition and in-stocks have improved. We have a better balance of newness and evergreen product and have further refined our assortments and brand matrix. In 2025, we introduced 60 new brands, including Abercrombie Kids, MFK, BCBG, and Good American. At the same time, we expanded distribution on top existing brand partners such as Yvette Lafee, Sam Edelman, and Donna Karan, while we continued to edit less productive brands. Our omni-channel customer experience is supported by investments in our colleagues. We've rolled out enhanced education, a tiered approach to staffing and events, and dedicated frontline colleagues to specific merchandise areas. In addition, we're taking a more localized approach to provide store-level empowerment and deliver against direct customer preferences in each of the markets we serve. This year, we achieved our best net promoter score on record. We're proud of the results and our deep customer engagement. We had approximately 900,000 respondents participate in surveys throughout the year, and we remain committed to continuous improvement. As I reflect on 2025, Macy's has a clear, well-defined strategy that is gaining traction. And combined with our strong financial foundation, I am confident we can further build momentum. Now turning to our second pillar of strategy, accelerating and differentiating luxury. In 2025, Bloomingdale's achieved 7.4% comparable sales growth, representing a 490 basis point improvement versus last year and a 1,030 point improvement on a two-year basis. Strength was broad-based across stores and digital, with growth in almost all product categories. Our Bloomingdale strategy is anchored on being the local leader in the markets we serve. We have a clear emphasis on discovery, newness, and connection with the premium, contemporary to luxury customer. Over the past year, we have raised the bar on curation, At the same time, we've deepened brand partnerships and further invested in experiences. This approach is resonating. We continue to gain market share across brands, categories, and regions. Our unique multi-generational audience is drawn to our inviting and vibrant shopping environment and compelling assortments. During the year, we introduced new brands, including Totem, Christian Louboutin, Victoria Beckham Beauty, Skims, Messica, and Viore, just to name a few. These brands have inspired existing customers, attracted new ones, and further strengthened Bloomingdale's relevancy. It's an exciting time at Bloomingdale's. Our team is strong and has never felt better. We have a highly loyal and engaged customer base and excellent vendor partnerships. We also have an omni-channel roadmap for growth. Recent performance demonstrates how a disciplined focus, clear brand strategy, and consistent execution can drive results. We are well positioned to build on this foundation, and deliver sustained performance. Rounding out the conversation on luxury, Blue Mercury achieved 1.6% annual comparable sales growth. Results continue to be driven by dermicological skin care and fragrances, including SkinCeuticals, Dr. Diamond's Medicine, Cicely of Paris, and Perfume de Marly. We are also encouraged by the performance in our new stores, which continue to pose growth as we iterate on assortments and develop each store's client base. The third pillar of our strategy is simplifying and modernizing end to end operations to improve customer service and drive greater efficiencies. Initiatives are delivering results. As our business continues to evolve, we are expanding the aperture of end to end to encompass a broader view of organizational excellence and operational efficiency. This continues to incorporate the use of AI, where we are building capabilities throughout the organization. The team has walked me through over 35 different use cases, all of which are designed to support how customers shop and how our colleagues serve them, and I'm excited about what's to come. Looking to fiscal 2026, we are focused on the factors in our control. We continue to execute our Boulder Chapter strategy. We'll build on what's been working, including our go-forward fleet, product, and brand relevancy, and our improved omni-channel experiences and messaging. This will be supported by our strong culture and seasoned leadership team. At Macy's, we're confident in the reimagined location's ability to deliver profitable growth. Earlier this year, we introduced initiatives to an additional 75 locations, creating the reimagined 200. Now, nearly 60% of our Go Forward Macy's store base has the full suite of initiatives, accounting for roughly 75% of our Go Forward Macy's store sales. delivering meaningful scale to our overall business. 2026 is a year of milestones. We have the 50th anniversary of our 4th of July fireworks and the 100th anniversary of the Macy's Thanksgiving Day Parade. And we will be top of mind during these key moments, as well as many others. We are calling 2026 Celebration Start at Macy's. In addition to the large-scale event that the whole country celebrates with us, We also have localized strategies designed to engage customers, generate excitement, increase brand loyalty, and enhance the shopping experience. We had our first celebration. Prom starts here last Saturday. Customers at Herald Square and our stores across the country were able to meet their favorite content creators, explore curated prom edits, attend beauty masterclasses, and personalize their looks. These activations drove social engagement and our overall sales. Prom is just one of the many events that Macy's will host for the entire family this year. And Macy's is not celebrating alone. Last week, Bloomingdale's launched its spring fashion campaign, California Love, featuring unique experiences, exclusive products, and community-driven moments. At its heart is Surf Shop, a new carousel spotlighting California-owned and inspired products. The carousel introduces 16 new California brands, 270 limited-time exclusives, from customer favorites including Vince, Citizens of Humanity, A. Goldie, Staud, Timkai, Frame, and Mother, and it also has an Aqua and Lisa Says Ga collaboration. Bloomingdale's has strong momentum with multiple levers for continued growth. We're a partner of choice, allowing us to introduce more new relevant and exclusive brands while expanding our points of distribution with existing brands. Our immersive shopping environment, which invite customers to spend the day with us, are differentiated and resonate across geographies. With stores in just 14 of the top 50 designated U.S. markets, there is significant room for expansion of small-format Blimmies and outlets, and we are methodically evaluating all opportunities. I am confident in our ability to further expand our position as a leading modern luxury shopping destination. Now I would like to discuss the consumer and our approach to 2026 guidance. Thus far, our customers have remained resilient, and we are pleased with our quarter-to-date results. Our customers across nameplates skew more towards the middle and upper income tiers. Performance remains stronger in these cohorts, while the lower tiers remain more choiceful. As we look ahead, there are many macroeconomic and geopolitical factors that could influence discretionary spend. While we remain confident in our strategy and believe we are well positioned to build on our recent momentum, we are taking a prudent approach to guidance. Our first quarter and fiscal 2026 guidance ranges support our go-forward growth initiatives while preserving flexibility to respond to changes in the competitive landscape and consumer demand. To close, our commitment to the Boulder Chapter is unwavering. It is delivering results. We have achieved four consecutive quarters of better-than-expected top-line and bottom-line performance and three consecutive quarters of comparable sales growth led by our go-forward Macy's and Bloomingdale's business. In 2026, we are well-positioned to deliver further progress. Looking further ahead, our proven initiatives, strong execution, strategic clarity, and customer focus should drive sustainable growth and unlock future value creation. Now, let me turn it over to Tom.