Operator: Greetings and welcome to the Macy's Inc. First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Pamela Quintiliano, Vice President of Investor Relations. Pamela, you may begin.

Pamela Quintiliano: 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 2024 press release, a presentation has been posted on the Investors section of our website, macysinc.com, and is being displayed live during today's webcast. Unless otherwise noted, the comparisons we provide will be versus 2023. All references to our prior expectations, outlook or guidance refer to information provided on our February 27 earnings call, unless otherwise noted. In addition, all references to comp sales growth throughout today's prepared remarks represent comparable owned plus license plus marketplace sales growth and owned plus license sales growth for our store locations unless otherwise noted. 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 Securities and Exchange Commission. In discussing the results of our operations, we will be providing certain non-GAAP financial measures. You can find additional information regarding these non-GAAP financial measures, as well as others on the Investors section of our website. 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.

Tony Spring: Thanks, Pam, and good morning, everyone. On today's call, we will provide updates on our Bold New Chapter strategy as well as our first quarter results and second quarter and full year outlooks. But first, let's discuss the current macro climate. Our customers across all three nameplates continue to benefit from strong wage and job growth. However, inflationary pressures persist, and they're feeling that pinch. The outlook provided on our fourth quarter earnings call as well as today's update assumes our customers will continue to carefully scrutinize their discretionary purchases. We are reading and reacting to the dynamic economic environment and competitive promotional landscape in real time. Regardless of income tier, we know our customer responds to fashion newness at compelling price points in an engaging environment. We continue to evaluate inventory depth and composition to ensure we strike the right balance. Despite the ongoing pressure on the consumer, we are confident in our ability to return to profitable growth as we execute on the pillars of our Bold New Chapter strategy, which are, one, to strengthen the Macy's nameplate, two, to accelerate luxury growth, and three, to simplify and modernize end to end operations. This morning, we are pleased to report that although early days, we are on or ahead of plan across all three pillars and that our first quarter EPS results exceeded our outlook. Now a brief update on our bold new chapter progress. At our largest nameplate, Macy's, the customer is responding well to our omnichannel initiatives across product, presentation and experience. In luxury, we are pleased with Bloomingdale's advanced contemporary growth and acceleration of digital. While at Bluemercury, skin care remains a differentiator and a standout. For both nameplates, we are evaluating new store opportunities that will strengthen our ability to accelerate omni growth. In end to end operations, we are actively advancing on solutions to consolidate capacity, increase automation and reduce costs across the network. And for our non-go-forward Macy's locations and distribution centers, given our strong balance sheet, we are able to be thoughtful and strategic with our approach to monetization. We have good traction thus far and are encouraged by the pace of deal making. The entire Macy's, Inc. organization is focused on understanding and meeting the evolving needs and preferences of our customers. They are committed to our future and making sure our Bold New Chapter is a success. The level of enthusiasm and engagement is palpable, and every single function is working together to get a better result. I'm pleased to report that the first quarter net sales of $4.8 billion were near the high end of our outlook, and adjusted EPS of $0.27 was above our outlook. By nameplate, Macy's was in line with our expectations. Comps were down 0.4% and were led by our first fifty locations, which registered a 3.4% comp gain. The first fifty serve as pilots to test new ideas that are based on customer feedback. Results are encouraging as they are an early indicator for the go-forward Macy's fleet and ultimately, the entire Macy's, Inc. go-forward businesses' ability to return to growth. The first fifty represent what we can do when we deliver on our customers' expectations. During the Q1, we enhanced merchandising through elevated product rollouts. Full price and planned promotional sell-throughs of new and expanded assortments has been strong. Importantly, our vendor partners are embracing our journey. They are joining with us and helping us raise the bar on both the quality and the differentiation of our assortments, and we truly appreciate their commitment and support. During the quarter, we also piloted new marketing and animation, bringing retail as theatre to life. Activations included personal styling sessions, fashion shows, beauty services such as fragrance bottle engraving and craft stations. Our customers were engaged and these events serve as strong traffic and sales drivers. Rounding out our First 50 conversation, during the quarter, we shifted store staffing to key merchandise departments and to the checkout area and added visual merchandise staffing. These changes were well received by our customers. Net promoter scores improved roughly 500 basis points year-over-year and were over 250 basis points above all other Macy's stores. Improvements are not limited to our First 50. Across the entire Macy's nameplate, we are offering product newness in our most important categories. Within apparel, we introduced and expanded distribution in several market brands to address areas of opportunity where we have experienced softness in both women's and men's assortments. Customers are responding well to Donna Karan, which is a new brand for us, where we're seeing no price resistance. We also expanded distribution and content of Free People, French Connection, Karl Lagerfeld and Hugo Boss, just to name a few. Positive customer response to fashion newness was partially offset by weakness in select warmer weather categories. Our private brand apparel initiative is moving forward as planned. We have completed the majority of our brand exits and reimagined and launched several new ones. During the quarter, I.N.C. and Style & Co., which have led the initiative, continued to outperform the Macy's women apparel segment. This summer, we are refreshing our kids brands, Epic Threads and First Impressions. And later this year, we'll introduce a new men's contemporary private brand, which will be the last launch of this phase. In the near term, as this transition continues, we expect private brand sales volumes to remain depressed relative to historic levels and to realize improvements beginning later in the year. As a reminder, in fiscal 2023, private brands represented about 15% of Macy's sales, reflecting the exit of several heritage women's brands. Beyond apparel, accessories was better than expectations with strengths in women's shoes and fine jewelry, offset by ongoing weakness in handbags. Beauty continued to be a standout and key traffic driver, driven primarily by fragrances, our selection of brands, including CHANEL, Dior, YSL, Carolina Herrera and Valentino, as well as our strong presentation online and in stores keeps our customers engaged. In big ticket and home, the overall business remains challenged, although we've seen some recent traction in certain categories. We believe there is an opportunity to recover lost sales. The team is actively working on the market brand matrix, and we plan to begin a complete refresh of our home private brands in fiscal 2025. Digital is also an important part of our Bold New Chapter strategy. It serves as both a gateway to the Macy's brand and is a source of commerce and omni engagement. Under new leadership, the team is making progress on optimizing the customer journey, including addressing places of greatest friction and enhancing and expanding the shopping experience across platforms. Recently, we launched an online baby registry with over 150 new brands, which has been well received. In addition, Marketplace provides an opportunity to serve our customer better and gain a greater share of their wallet. For example, this year, we're offering a compelling selection of electronics for Father's Day and the graduation season. Our digital and marketing teams are working together closely to leverage Macy's iconic events and create a modern and cohesive experience. We kicked off the spring season in Herald Square with our 49th Annual Flower Show, where we partnered with Christian Dior perfumes to create floral installations using 16,000 individual plants, representing over 50 varieties. The installation centered around different Dior scents and were supported by interactive components, including an online activation about the origins of Miss Dior. We are excited for our newest marketing campaign, The Greatest Hits of summer, which represents the beginning of a modern interpretation of the Macy's brand, and is the first under our new Head of Marketing. Finally, during the quarter, we opened a 31,000 square foot small format Macy's in Mount Laurel, New Jersey. With each new opening, we continue to learn and adjust. We remain on track to introduce 11 more this year, bringing the total to 24 by year-end. Turning to Luxury. Bloomingdale's and Bluemercury continue to be bright spots within our portfolio. Both foster brand love and loyalty through the unique customer experiences and curated selection of market and private brands across price points. At Bloomingdale's, first quarter results were in line with our expectations. While our customer is not immune to macro pressures and has become more judicious with their spend, the power of Bloomingdale's position in the upscale market is its diversification across categories and price points. It has the flexibility and the tools to quickly adjust to the market, allowing it to gain wallet share even as there are shifts in popular categories and brands. During the quarter, Bloomingdale's top two household income brackets and loyalty tiers increased their total spend. Contemporary apparel, including brands like L'AGENC and MOTHER and [San Cassette] (ph), just to name a few, continued to be well received. Along with the beauty category, they serve as powerful engines for growth. And our private brands at Bloomingdale's are a complement to our contemporary matrix. During the quarter, AQUA registered a double-digit year-over-year increase in its ready-to-wear sales, benefiting from the quiet luxury-inspired collaboration with celebrity stylist, Liat Baruch. Looking ahead, we have several exciting upcoming collaborations on the horizon. We remain committed to growing the Bloomingdale's physical footprint and associated digital presence, and are on track to open roughly 15 new Bloomie's and Bloomingdale's outlet locations through fiscal '26, including three later this year. Comps at both concepts are continuing to outperform the broader fleet, giving us confidence in our expansion strategy. Digital continues to be a strength and great expression of the Bloomingdale's brand. We have a highly engaged customer who appreciates the depth and breadth of our offering across price points. This has been complemented by marketplace, which enriches our assortment and content, helps us gain wallet share amongst loyal customers and introduce new customers to Bloomingdale's. At Bluemercury, we experienced our 13th consecutive quarter of comp growth, driven by continued strength in skin care and the expansion of key brand partners, including Sisley Paris, SkinCeuticals and Augustinus Bader. Our plans to open at least 30 new locations and remodel about 30 others are underway, with one new location and three remodels slated for the second quarter. These stores will incorporate learnings from our recent Bronxville and [New Caney] (ph) remodels to inform our future stores, including an elevated aesthetic, which improves the luxury perception of Bluemercury and expanded assortment and an enhanced selling model, which has had a positive impact on the client experience. Overall, we continue to view fiscal 2024 as a transition and investment year for Macy's, Inc. Although early stages, we are proud of the progress we are making on our Bold New Chapter strategy. Our teams are collaborating to make quick and strategic decisions, and we're making investments to create an improved experience that will better serve our customer and sets the foundation for our future. With that, I'll hand it over to Adrian to provide more detail on our recent performance and our outlook.

Adrian Mitchell: Thank you, Tony, and good morning, everyone. Let me start by thanking our teams for their support of our Bold New Chapter strategy. As I've been out in the field visiting our stores and distribution centers, I've been impressed with the dedication and commitment to our customers. As Tony mentioned, we're encouraged by early progress across all three pillars of our strategy and the positive impact our investments are having on the go-forward Macy's, Inc. enterprise and our largest nameplate, Macy's. Total Macy's Inc. enterprise comps were down 0.3% year-over-year and net sales were $4.8 billion, down 2.7% from last year and near the high end of our outlook. For the go-forward Macy's Inc. business, defined as Macy's, Bloomingdale's and Bluemercury go-forward locations plus digital, comps rose 0.1% year-over-year. We are pleased with the emerging trends. We view our First 50 locations, go-forward Macy's nameplate and go-forward Macy's Inc. business as evidence that our Bold New Chapter investments are working, and they are what we are tracking most closely as predictors of our ability to return to profitable growth. At the Macy's nameplate, comps were down 0.4% and net sales were down 3.3%, while go-forward business comps were flat to last year. Our First 50, which we view as the leading indicator of go-forward store growth, achieved a positive 3.4% comp. To size that business, these locations represented about 15% of the Macy's Inc. go-forward enterprise and close to 20% of the Macy's nameplate go-forward sales last year. The First 50 comp results compared to a negative 1.3% in the remaining go-forward locations, which have not yet received growth investments, a positive 0.1% for all go-forward locations and a negative 4.5% for all non-go-forward locations. At our luxury nameplates, Bloomingdale's comps were up 0.3% and net sales were up 0.5%, and Bluemercury comps were up 4.3% and net sales rose 4%. Turning to the rest of the P&L. Other revenues were $154 million, down 19.4% from the prior year. Net credit card revenues declined $45 million or 27.8% from the prior year to $117 million. Delinquency rates and net credit losses were both higher than last year, but in line with our expectations. Macy's Media Network revenue rose 27.6% to $37 million, as the team continued to increase vendor engagement. Gross margin rate declined 80 basis points to 39.2%. The decline was steeper than our outlook, primarily reflecting additional discounting for slower moving warm weather products. We recognize that our customer is searching for newness at the right value, and we're responding appropriately to ensure we deliver on both. Discounting pressure was partially offset by better delivery expense, which improved 20 basis points as a percent of sales. End of quarter inventories were up 1.7% year-over-year. Entering the second quarter, we are delivering fresh goods and are well positioned for the summer season. Next, SG&A expense was $1.9 billion, down 2% from the prior year and better than our expectations, reflecting our continued cost discipline. As a percent of total revenue, SG&A was 38.2%, 50 basis points higher than last year due to the decline in total revenue. Adjusted diluted EPS was $0.27. This compares to our previously provided outlook of $0.10 to $0.16 and $0.56 in the prior year. Turning to cash and capital allocation. For the quarter, cash generated from operating activities was $129 million, while capital expenditures totaled $229 million. Free cash flow was an outflow of $96 million, a year-over-year improvement of $70 million. And we paid $48 million in cash dividends. We will continue to deploy capital prudently to ensure financial flexibility and a healthy balance sheet that supports our longer-term growth aspirations. With that, let's discuss how we are approaching the remainder of 2024. We are raising our annual EPS outlook and narrowing our sales range to reflect a portion of our first quarter earnings beat. While we are encouraged by recent results and early traction of our Bold New Chapter strategy, we're also cognizant of the dynamic macro environment we are operating in. With continued pressure on the consumer and the majority of the year ahead, our second quarter and full year outlook provides flexibility to respond to the competitive landscape and the promotional environment. For the year, we now expect Macy's Inc. comps, inclusive of non-go-forward locations and digital, to be down approximately 1% to up approximately 1.5%, with both Macy's nameplate go-forward locations in digital and our luxury nameplates to be roughly flat to up 2.5%, net sales of approximately $22.3 billion to $22.9 billion, total revenues of $23 million to $23.6 billion. This includes other revenue of approximately $665 million to $680 million. Credit card revenues of approximately $490 million to $505 million, which is above our prior forecast due to better-than-expected profit share, resulting from higher balances within the portfolio. We continue to exclude any potential impact for the late fee ruling. We also expect gross margin rate as a percent of net sales to be 39% to 39.3%, benefiting from ongoing inventory controls, higher full price sell-throughs and private brand expansion, partially offset by elevated discounting of warmer weather spring product and targeted promotions to address a value-conscious consumer. SG&A rate of 36.3% to 36.4% of total revenue as we continue to effectively manage expenses to properly support our new strategy and the associated areas of opportunity. And full year adjusted EBITDA as a percent of total revenue of 8.7% to 9%. There is no change to our capital spend, asset sale proceeds or asset sale gains assumptions for the year. After interest and taxes, we expect adjusted diluted EPS of $2.55 to $2.90, which does not assume any share repurchases. For the second quarter, we expect net sales of $4.97 billion to $5.1 billion. Total revenues of $5.1 billion to $5.25 billion, with other revenue at about $155 million. Credit card revenues are expected to be flat with last year's $120 million. As a reminder, 2023 results included the pro rata adjustment for the midyear increase in our annual net credit loss outlook due to the normalizing credit environment. Gross margin rate to be at least 170 basis points better than last year, reflecting the lapping of heightened clearance markdowns on excess seasonal goods, quarter-to-date discounting of the remaining spring assortments and the planned liquidation of select men's private brands as part of our broader reimagination strategy. Adjusted EPS of $0.25 to $0.33 and end-of-quarter inventories to be up low single-digits to last year, as we reinvest in private brands and conduct additional national brand tests in our First 50 and go-forward locations. To wrap up, we are encouraged by the momentum in our Bold New Chapter strategy and our future growth prospects. Despite ongoing macro pressures on our consumer, we remain committed to our previously stated fiscal 2025 financial targets and are excited to return Macy's, Inc. to profitable growth. I'll now hand it back over to Tony.

Tony Spring: Thank you, Adrian. Our Bold New Chapter sets us firmly on a path to change our trajectory. Although early days, our investments are gaining traction, and reinforce our belief that Macy's Inc. can return to sustainable profitable growth, accelerate free cash flow generation and unlock shareholder value. Our focus on serving the customer is unwavering. We are confident that we have the right team and strategy in place to achieve our goals, and look forward to updating you on our progress. With that, operator, we are ready for questions.

Operator: [Operator Instructions] Today's first question is coming from Matthew Boss of JPMorgan Chase. Please go ahead.

Matthew Boss: Great. Thanks and congrats on the progress.

Tony Spring: Thank you.

Matthew Boss: So, Tony, could you elaborate on the key initiatives, which you saw drive the 3% to 4% comp in the First 50 doors? Maybe what you're seeing between traffic and AUR in these stores? And how quickly could you scale this playbook? And then, Adrian, just maybe drivers on second quarter gross margin expansion and any change in your back half merchandise margin expectations?

Tony Spring: Thanks, Matt. Appreciate the question. Look, we're excited by the early innings of First 50. It's a combination of the things that we have talked about in people, product, presentation and experience. People, it's having the right people in place at the right time. It sounds easy, but using technology and the data we have on traffic and conversion by day, by hour, making sure that we have people in the shoe department, people in the ready wear fitting rooms, people in the big ticket area and fine jewelry. But the team is all over it, and I think doing a great job in leaning into the opportunities to increase the quality of the experience in our stores. That's why we saw a 500 basis point improvement in Net Promoter Scores in the First 50 stores. It's the product, the team feeling the obligation to meet the needs of the customer, and whether that's the rollout of new brands like Donna Karan or the expansion of brands like French Connection, Free People and Karl Lagerfeld and Hugo Boss. We need more variety. We need less redundancy. We need more interest within the assortment, and I think that's making a difference in the customers' reception to the stores. The experience, it's adding animation and events into the stores, and it's also making sure from a presentation standpoint, we look crisp, we look compelling. That's the partnership with the brands to make sure that the impact is in each of the categories of business. And again, I would add that we're in the early innings. So we're going to study this. Capital is something that we care a lot about, capital allocation. We're going to be very discerning in terms of what we decide to do and where. But I feel good, and I think opportunities exist to expand this as the year progresses as soon as we see another quarter or more consistency amongst the stores and the overall results. Traffic is good. The AUR is up about 4%. So, conversion, I think, is reflective of the discerning customer who feels under pressure and is going to wait to buy the things that they love. So we accept the challenge and we'll respond to it appropriately.

Adrian Mitchell: Good morning, Matt, and thank you for your question on gross margin. Let me set a little bit of context as we think about the second quarter gross margin because I think what we observed and how we navigated the first quarter is pretty important. As you look at our first quarter results, we're very much pleased with how we navigated the first quarter. And as you saw, we delivered earnings that exceeded our outlook. Now the key thing, as Tony pointed out, is that we're very much focused on delivering on our customer experience. But we also recognize that the customer is under pressure, the macro environment remains uncertain and that we can only control what we can control. So as we navigated the first quarter, we're balancing a number of different variables given that context. We're balancing sales growth, delivering value for more value-conscious customers as we thought about our markdowns and discounts, ensuring healthy inventory turns and also managing our operating expenses, particularly our variable expenses pretty effectively. But really the headwind in the first quarter was really warm weather products that just simply didn't move as fast as we had expected, but we had to respond to maintain the help of the inventory. If I pivot to the inventory, as you know, we have a proven track record on inventory discipline. This is something that we've really leaned into the last several years. And what you saw in the first quarter is that we took actions -- the actions needed to maintain the health of our inventory in terms of volume and composition. What I can tell you as it relates to your question about the second quarter, is that we're entering the second quarter with less aged inventory than last year and more transitional product relative to last year. So we feel that we're well positioned for the summer season as we enter the second quarter, but also well positioned as we enter the balance of the year. And what we're trying to do here is provide ourselves the appropriate level of flexibility to respond to an environment that's more competitive, that's more promotional so that we can be able to navigate and adjust based on whatever is on the horizon. To your pointed question about the Q2 outlook in the back half of the year, as we look at gross margin outlook forecasted for the second quarter, we expect to be at least 170 basis points above last year. We like that trajectory, especially as the weather gets warmer, and we're well positioned on warm weather goods. And as we think about the composition shifting to the fall season, it's all about inventory discipline and inventory control, watching that level as we enter the third quarter and the holiday season and making sure that we have the right composition.

Matthew Boss: Great color. Best of luck.

Tony Spring: Thank you.

Adrian Mitchell: Thanks, Matt.

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

Warren Cheng: Hey, good morning. This is Warren Cheng on for Michael. I wanted to follow up on your comment that the vendor partners are engaging with the enhancements you're making in these First 50 stores. Is that driving a lift in the vendor mix or allocations versus what you had planned? And also curious if that's driving any impact on the full price sell-through or margins you're realizing in those First 50 stores?

Tony Spring: Thanks, Warren, for the question. I think the vendors feel a sense of partnership and there is a natural obligation that we have to each other. We do well when the vendors do well, the vendors do well when we do well. And I think that we have seen a level of engagement relative to these First 50. I think as we talked about on the last call, we hate closing stores or even rationalizing the store base, but the vendors were very supportive of that idea, meaning they wanted to focus on our most productive assets. They wanted to invest with us. They wanted to offer us a better assortment in the stores. They see higher full priced sell-through in those stores. And that's really all kind of coming to fruition. Again, it's early innings, so we're going to be careful, but we wouldn't do these weekly events if our vendors weren't partnering with us. We wouldn't be able to add the level of staffing if our vendors weren't partnering with us. We certainly wouldn't be able to offer the distinction and variety within our assortment if our vendors weren’t partnering with us. And so I feel it's a story of two mutually dependent partners. I think we said private brand was 15% last year. Maybe one day, we'll get it back to closer to 20%. But ideally, we're going to lean into the partnerships where 80% of our business is to make sure that they feel Macy's, Bloomingdale's and Bluemercury are the best places to do business.

Warren Cheng: Thanks. That's really helpful. And I wanted to ask a follow-up on your credit card revenues. 1Q came in a little bit better than you expected. You also raised the rest of the year slightly. Can you give us an update on how you're seeing credit losses and delinquencies trend over the last three months?

Adrian Mitchell: Yeah. I'll go ahead and take that one. When we think about our credit card results in the first quarter, we're pretty pleased. And to your point, Warren, we did increase our annual outlook by about $15 million. The reality is that we saw higher balances in our portfolio. In terms of the delinquency metrics, the payment metrics, they are very much in line with our expectations. But also what contributed to our beat in the first quarter was also better than expected profit sharing with Citi as well.

Warren Cheng: Thanks. Good luck.

Adrian Mitchell: Thank you.

Tony Spring: Thank you.

Operator: Thank you. The next question is coming from Ashley Helgans of Jefferies. Please go ahead.

Ashley Helgans: Hey, good morning. For the First 50 locations that were up 3.3%, how much was ticket versus traffic? And then maybe you could talk about the level of promotions at those stores versus the rest of the fleet?

Tony Spring: Sure, Ashley. There was no difference in the level of promotion in those stores versus the rest of the fleet. So no change there. The difference was in traffic, a higher conversion rate and a comparable increase in average unit retail. The customers are responding, as we said, to the right recipe. And I use the analogy of a recipe because a recipe means you have to get all the ingredients right. Sometimes in our business, the merchants want to do their part only if the stores do their part. And the stores only want to do their part if the digital team does their part. In First 50, we're all doing our part, and we're getting credit for product improvement. We're getting credit for visual animation. We're getting credit for the experiences we're adding. We're getting credit for the service experience. Those Net Promoter Scores are a great indicator, and we drill down to perception on availability of size and color. We drill down to the inspiration from visual animation. We drill down to have the brands and styles and products that I like. We're seeing meaningful increase across all of those metrics. And I think that's a good indicator, early innings, but the team working together and improving the overall experience in our First 50 stores.

Adrian Mitchell: Tony, if I may just add, I just want to amplify Tony's point about this being early innings. On one dimension, we're 90 days in. And we're still practicing around things like selling and service. We're getting better every day on staffing, on moving the team around the store. But also there are a number of changes that have not been implemented in these First 50 yet. So to amplify Tony's point, it's early innings. We're still experimenting. There's still more changes coming into the store based on what our customers expect of us. But overall, we're encouraged by the early wins.

Ashley Helgans: That's super helpful. And if I could just squeeze in one more. So what is the high end of your comp guide for the fiscal year as soon -- in terms of the health of the consumer versus current levels? I guess, said differently, would the consumer need to get better to hit that range?

Adrian Mitchell: Yeah. From our perspective, we've been pretty consistent that the pressure on the consumer is a given in terms of how we think about our business. So as we think about the range of our comp this year, it does not assume any improvement in the consumer. What it doesn't assume is improvement in how we're executing our business and how well we're serving the customer, given the growth investments that we're placing in our stores, in digital and the acceleration of growth within our luxury nameplate. The range that you see is really reflective of the competitive environment and the continued pressure on the consumer. But from our perspective, we feel that what we can control is really what we're going to be focused on, but the consumer, we believe, will remain under pressure for the balance of the year.

Ashley Helgans: Great. That’s helpful.

Adrian Mitchell: Thanks, Ashley.

Operator: Thank you. The next question is coming from Paul Lejuez of Citi. Please go ahead.

Tracy Kogan: Thanks. It's Tracy Kogan filling in for Paul. I had a question on SG&A. It came in below your expectations this quarter, and I was wondering what the drivers of that were? And then what kind of expense initiatives you have for the remainder of the year? Thank you.

Adrian Mitchell: Good morning, Tracy. So to your point, we are pleased with how we're managing expense ongoing. And from a cost savings standpoint or an SG&A control standpoint, there are really two things that we focused on. The first is managing variable expenses well as we progress through the quarter as well as really making sure that we're gaining traction on the structural cost savings initiatives that we spoke about on the last call as it relates to end-to-end operations. The good news is that with regards to end-to-end operations, we're gaining traction. We're seeing the benefits flow through from the consolidation of our tech vendors on routine service contracts. We are -- we have fortunately transitioned through the offshoring of a large part of our finance team. We're better balancing fulfillment activities. But we're still in the early innings on end-to-end, but it's nice to see the progress that we're making and the value that we've been able to deliver in the first quarter. But I would say, to your question, Tracy, the combination of how we're managing variable expenses day-to-day and the traction gained on the longer-term transformation work we're doing on end-to-end operations.

Tracy Kogan: Great. Thanks, guys.

Adrian Mitchell: Thanks, Tracy.

Tony Spring: Thank you.

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

Dana Telsey: Hi, good morning, everyone. As both of you think about the health of the consumer and having come through the first quarter with the unseasonal weather, staying the same, getting better, getting worse? What are you seeing? And does it differ by income levels? And lastly, can you expand on the small store format? Any tweaks or adjustments? What's working, what will be adjusted or tweaked and how you're thinking about it? Thank you.

Tony Spring: Thanks, Dana. The health of the consumer, I never claim to be an economist. I would say, as we've described, under pressure, discerning, very choiceful. There are certainly categories that are stronger than others. The great part of being a department store is that we can move inventory. We can move people. We can move our marketing and assets and homepage exposure. And the key thing is for us to just keep our ear to the grinds on making sure that we understand where the business is happening and move our resources there appropriately. I think the teams in general are doing a very good job. We are reordering. We are canceling. And that's what you'd expect from a good merchant and planning organization, that they are active in the market making decisions based on what they're seeing in the business. I expect the consumer to remain under pressure. We got a big year in front of us. Maybe there'll be rate cuts, maybe there'll be one war ending, but it's an uncertain environment. And I think our job is not to assume anything different on the things we don't control, but to play our game with strength, to play a game with confidence, to play a game with agility. And I think the team is doing that. With regard to the different income levels, we're certainly seeing at the high end, the Bloomingdale's consumer is interested in purchasing, but she's being very thoughtful in the category she's purchasing in. So I think we said that luxury handbag and shoe business is much softer than it was, still up strong to 2019, but she's investing now in advanced contemporary. She's investing now in parts of the beauty business. She's investing now in aspects of the home. So there's just a difference, I think, as you look at the income tier. The customer at the lower tier has to make choices based on rent and family obligations. The customer at the higher tier is going to do it based on where she has interest or they have interest and passion and something that we are doing, I think that creates the motivation to buy. You want to comment, Adrian, on small format?

Adrian Mitchell: Yes. Thank you, Tony. We continue to remain very encouraged by the rollout of our small format stores. On the Macy's side, we just opened up a new store in New Jersey, but we have 11 more openings to go. We continue to be pleased with the small formats that we're seeing on the Bloomingdale's side, they continue to exceed our expectations. So we continue to believe that -- we expect to have one additional Bloomingdale's this year, my apologies, Dana. But look, we're encouraged. We're learning a ton. We're seeing how the customer is responding and we're going to continue to lean in.

Dana Telsey: Thank you.

Adrian Mitchell: No problem, Dana.

Tony Spring: Thank you.

Operator: Thank you. The next question is coming from Chuck Grom of Gordon Haskett. Please go ahead.

Chuck Grom: Hey, good morning. Congrats on success with the First 50. Curious how quickly you guys can roll these efforts out to more stores to help the total company comp? I'm curious what categories in those stores you're seeing the greatest lift in those locations?

Tony Spring: Sure. Thanks, Chuck, for the question. I don't think it's a question of if we can, it's when we can. All of these are capital-light decisions that we've made. You really revolve around variable SG&A. And so we're going to roll them as soon as we see enough continued results. And the good news is we're seeing them in the majority of the stores. So it's not a handful of stores. That's a really good sign. We're seeing it in the merchandise content. That's a really good sign. We're seeing it in multiple FOBs. That's also a really good sign. As I mentioned, again, the Net Promoter Score, the customer is voting, both with her wallet and her commentary, taking the time to give us a lot of feedback. So I would say, it's not a question of if we're going to roll out, it's a question of when. And that when is going to be -- we're not going to trip on our way to success. As an organization, we are highly committed to delivering on our commitments to the Street and our commitments to our colleagues. So I think that we will have green shoots this first and second quarter. It will allow us to do some things later in the year, and I hope we're in a position to talk to you about more stores in 2025.

Chuck Grom: Okay. Great. And then one for you, Adrian. Just can you talk about the cadence of your comps throughout the quarter by month? And any early reads on how May and the second quarter has started? Thanks.

Adrian Mitchell: Yeah. Good question. Look, we have not commented on the monthly cadence. We're navigating the quarter -- we navigated the quarter as best as we could. We felt good about how we navigated the quarter, and that's certainly reflected in our performance. As we think about quarter-to-date results, we're just simply -- I'm not going to comment on that either. We have a lot of the quarter ahead of us, Chuck. We've got graduations, we've got Fathers' Day, we've got fourth of July. So I think it would be premature to think about the balance of the quarter based on just a couple of weeks into the quarter.

Chuck Grom: Okay, great. Thank you.

Tony Spring: Thanks, Chuck.

Adrian Mitchell: Thanks, Chuck.

Operator: Thank you. The next question is coming from Alex Straton of Morgan Stanley. Please go ahead.

Unidentified Analyst: Hi, this is [Katie Delahunt] (ph) on for Alex Straton. My question was on the CFPB credit card regulations. Can you give us an update on what your latest view is there? And then maybe remind us of your mitigation efforts as well as if you've had any success so far with those?

Adrian Mitchell: Sounds good. Thank you, Katie. Our perspective is that it remains uncertain. And so what we plan to do is to disclose the impact of the late fees once it becomes certain. The size of the impact is uncertain, the timing is uncertain. So once the final ruling comes out, we'll be able to share more information at that time. We've not shared a lot of specifics with regards to mitigation strategies, but definitely know that we're exploring them with our partner, Citi. We're exploring a variety of strategies. Some of those strategies are in development. But from our perspective, we're really waiting and seeing what's going to -- what the final ruling will be and be able to proceed at that time.

Unidentified Analyst: Great. Thank you so much.

Adrian Mitchell: Thanks, Katie.

Operator: The next question is coming from Oliver Chen of TD Cowen. Please go ahead.

Oliver Chen: Hi, Tony and Adrian, I would love your thoughts on targeted promotions ahead and discounting pressure that you're seeing. I know you've been making really good strides on pricing analytics. Also, as we think about apparel, there's great changes in the private label portfolio. What are your thoughts on apparel comping positive and timing for that to happen in relation to the newness that you're introducing? And finally, as we think about marketplace model as well as digital advertising, you've made nice strides there. What should we know about modeling that and how material it will be as you continue to make progress there as well? Thank you.

Tony Spring: Thanks, Oliver. You got a number of questions in there. Let me take them one at a time. On promotion, I feel good about the team's work, and we're obviously looking at our discount rate on a daily basis versus last year in comp events and trying to again, through our personalization engine, apply the value where it's necessary to either incent the customer to buy or to move aged inventory. And again, as Adrian talked about, we come into the second quarter in a healthier inventory position from an age standpoint, but it's a long game. And so we're playing it on a daily basis to make sure that we are making the right decisions on promotion to attract but not overinvest in value. In terms of ready-to-wear growth, I'd tell you, this learn from each other without becoming one another has great application when I look at the ready-wear business at Bloomingdale's, which right now is terrific. And it gives me optimism that we are in the early stages of that opportunity at Macy's. We have to get through the remainder of the private brand disposition that we're up against. We have to roll out more of the newer brands to gain the level of materiality to our overall business. But the impact at Bloomingdale's is really good to see, and I think it will be helpful as it relates to the opportunity at Macy's. In terms of marketplace, we had a great quarter, and that was on top of a great year in 2023. I'm excited about the baby registry launch, which puts us in the baby registry and along with wedding registry, launching over 150 brands with the start and getting good reaction from the consumer. And I think as Adrian mentioned, MMN, our media network, is up more than 20% to last year. We're seeing good vendor engagement that goes beyond just the important beauty category where we had an immediate impact. And we're diversifying what we're doing in MMN to include search and other facets of -- or the way in which we engage the consumer. So marketplace, healthy. MMN, growing. Promotion, discerning and thoughtful and targeted. And ready-to-wear growth happening at the Bloomingdale's and determined to see that result at Macy's as we progress.

Oliver Chen: Thank you. Best regards.

Tony Spring: Thank you.

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

Brooke Roach: Good morning and thank you for taking our question. I was hoping you could talk a little bit more about the trends that you're seeing in luxury and some of those luxury initiatives that could be rolled out to the Macy's network in aggregate especially in Bluemercury as well. Thank you.

Tony Spring: Thanks, Brooke. Appreciate the question. Yeah, I think that, again, this portfolio, we call Macy's Inc, offers this benefit that we get to look at the business across different consumer income levels and different value spectrums. And the Macy's team and the Bluemercury team and the Bloomingdale's team are talking and they're sharing more than ever before. And again, I have no interest in one becoming the other, but I do believe it's an advantage for us as we try and understand where peaks and valleys happen in the business. In terms of luxury trends that are happening right now, obviously, a lot has been discussed about quiet luxury. So you're seeing less logo. And that's certainly playing out in the Macy's business at a more accessible level. So we are leaning into opportunities on products and categories and brands with less logo right now. You know our business is very cyclical. So the minute I say logos are out, it will be six months or a year and logos will be back in, in some meaningful way. We're all interested to see what Alessandro will do at Valentino. And certainly, that won't be quiet luxury. In terms of Bluemercury and the beauty category, I think what they've discovered is the appetite of the consumer for high-end skin care and regimens that the consumer has no price resistance to what will help them take care of themselves, help them look their best, help them to be able to retain their youth, help recognize the difference in people's skin types. It's just not the same when you're 20 versus 40 versus 60. And I think the other thing is Bluemercury benefited from looking at the penetration of fragrances and other categories at Macy's and Bloomingdale's and has done an outstanding job at growing the fragrance business in a short period of time. So we're -- as we said on the call, really bullish on the growth opportunities at Bluemercury. We have 30 stores that we'll open over the next couple of years. We have 30 remodels, and that all begins in the second quarter. So opportunities for growth at Blue Mercury, learning between Bloomingdale's, Macy's and Bluemercury, and really trying to react and respond to where the consumer is interested and where she's stepping back.

Brooke Roach: Great. Thanks so much. I’ll pass it on.

Operator: Thank you. The next question is coming from Bob Drbul of Guggenheim Partners. Please go ahead.

Bob Drbul: Hi, good morning. I was just wondering if you could focus a little more on your asset monetization plans this quarter -- I'm sorry, this year and over the next few years, just sort of what you're seeing, how you're approaching it and just your visibility on, especially the plans for this year? Thanks.

Adrian Mitchell: Absolutely. The punchline on asset monetization, Bob, is that we're seeing a lot of traction. We're certainly encouraged by the deal-making activity that we've been seeing. And our focus is very much on quality deals, finding the right buyers and offering -- making sure that we're getting the right price. As you know, we have a very healthy balance sheet. We also have an apparatus of strong real estate partners and developers that we're working with to unlock value for our shareholders, but we're very encouraged by the traction that we've seen since we announced the closure of approximately 150 stores back in late February. The strategic importance is still quite critical to us, right, which is the sales proceeds that we are able to generate from a large portion of the stores that we will be closing and monetizing allows us to reinvest in the business, and you see the performance of the First 50 stores as well as return capital to shareholders. But I would tell you, we certainly recognize that we're in an elevated interest rate environment. But I've got to tell you, we're very encouraged by the pace of dealmaking that we're seeing and very encouraged about how we think about the closures of these stores and the monetization impact that it will have on our business over the next three years.

Bob Drbul: Thank you very much.

Adrian Mitchell: Thanks.

Operator: 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. Spring for closing comments.

Tony Spring: Thank you, operator. We hope everyone has a great Memorial Day and summer. Spend some time with your friends and family, hopefully, get a good vacation in there. And we hope to see some of you or many of you at our amazing Fourth of July fireworks. Should be spectacular this year. Have a good rest of the day, everybody.

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