Q4 2023 Macy's Inc Earnings Call

Operator: Greetings, and welcome to the Macy's Inc. 4th Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Macy's, Inc. Fourth quarter 2023 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Operator: 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. 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. Ms. Quintiliano, you may now begin. Thank you, operator. Good morning, everyone.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Minder this call is being recorded.

Speaker Change: I would now like to turn the call over to Panama Quintile Yano, Vice President of Investor Relations Ms couldn't tell me I know you may now begin.

Speaker Change: Thank you operator, good morning, everyone and thanks for joining US with me on the call today are Chinese spring, our CEO and Adrian Mitchell, our CLO and CFO, along with our fourth quarter 2023 press release presentation has been posted on the investors section of our website Macy's, Inc. Dot com and.

Pamela Nagler Quintiliano: And thanks for joining us. With me on the call today are Tony Spring, our CEO, and Adrian Mitchell, our COO and CFO. Along with our fourth quarter 2023 press release, a presentation has been posted on the investors section of our website, macysinc.com, and is being displayed live during today's webinar. Unless otherwise noted, the comparisons we provide will be versus 2021.

Speaker Change: Being displayed live during today's webcast.

Speaker Change: Unless otherwise noted comparisons we provide will be versus 2022.

Pamela Nagler Quintiliano: Comparisons to 2019 are provided where appropriate to best benchmark performance. All references to our prior expectations, outlook, or guidance refer to information provided on the November 16th earnings call, unless otherwise necessary. All forward-looking statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Speaker Change: Paresh, its 2019 provided where appropriate to that benchmark performance.

Speaker Change: All references to our prior expectation outlook or guidance refresh information provided on November 16th earnings call unless otherwise noted.

Speaker Change: All forward looking statements are subject to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Pamela Nagler Quintiliano: 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, used in the investor 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 webinar. With that, I'll turn it over to you.

Speaker Change: These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations and assumptions mentioned today.

Speaker Change: Detailed discussion of these factors and uncertainties is contained in our filings with the Securities and Exchange Commission.

Speaker Change: 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 viewed on the investors section of our website.

Speaker Change: 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 Todd.

Tony Spring: Thanks, Pam. It's great to be here on my first call as CEO. We have a lot to cover this morning, including our fourth quarter results, our outlook for fiscal 2024, and our strategy, a bold new chapter, The Bulletproof Executive 2013, Taking a step back, this holiday season, we offered an improved omni-channel experience with effective merchandising and a clear demonstration of value. Fourth quarter and full year adjusted EPS were above our most recent guidance, reflecting better than expected gross margin, SJ& We are a company defined by the quality of our people, and we could not have accomplished these results without the enthusiasm and dedication of our teams across stores, distribution centers, and our corporate offices. Throughout the year, our customers proved to be more resilient than expected. While there was pressure from ongoing reallocation of spend to non-discretionary items, our focus on new and relevant private and national brands enabled us to effectively compete. The likelihood of a recession is now lower than it was a year ago.

Todd: Thanks Pam.

Todd: Great to be here on my first call as CEO.

Todd: Have a lot to cover this morning, including our fourth quarter results our outlook for fiscal 2024, and our strategy of bold New chapter, which is designed to accelerate financial improvement and deliver sustainable profitable growth.

Todd: Taking a step back this holiday season, we offered an improved omnichannel experience with effective merchandising and a clear demonstration of value.

Todd: Fourth quarter and full year adjusted EPS were above our most recent guidance, reflecting better than expected gross margin SG&A and other revenues and higher asset sale gains.

Todd: Our company defined by the quality of our people and we could not have accomplished these results without the enthusiasm and dedication of our teams across stores distribution centers and our corporate offices.

Todd: Throughout the year, our consumer proved to be more resilient than expected. While there was pressure from ongoing reallocation of spend to non discretionary items, our focus on new and relevant private and national brands enabled us to effectively compete the likelihood of a recession is now lower than it was a year ago inflation has slowed but so.

Tony Spring: Inflation has slowed, but so has labor and wage growth. As such, we expect our consumer to remain under pressure. It is against this backdrop that we share our vision for a modern Macy's Inc. that takes a holistic view of our portfolio of brands. It is the thoughtful culmination of comprehensive research and reflection that began in earnest early last year.

Todd: As labor and wage growth as such we expect our consumer to remain under pressure. It is against this backdrop that we share our vision for a modern Macy's Inc. That takes a holistic view of our portfolio of brands. It is a thoughtful combination of comprehensive research and reflection that began in earnest early last year.

Tony Spring: A bold new chapter is designed to return Macy's Inc. to enterprise growth, unlock shareholder value, and better serve our customers. It builds on our five growth vectors, as newly identified and stress-tested areas of opportunity, and it's supported by our financial discipline. Over the next three years, we intend to, one, strengthen the Macy's nameplate and return it to top-line growth.

Todd: Sure.

Todd: Bold new chapter is designed to return Macy's, Inc. Enterprise growth unlock shareholder value and better serve our customers' it builds on our five growth factors as newly identified and stress tested areas of opportunity.

Todd: And is supported by our financial disciplines over the next three years, we intend to one strengthen the macys nameplate and return it to top line growth.

Tony Spring: Accelerate luxury growth 3. Simplify and modernize end-to-end operations. We view fiscal 2024 as a transition and investment year, as we begin to implement real change for our customers. Beginning in 2025, we expect Macy's Inc. to deliver low-single-digit comp growth, mid-single-digit EBITDA dollar growth, and a return to pre-pandemic levels of free cash. As we look across our omnichannel enterprise, we are taking a balanced portfolio approach to establish the right mix of on and off mall Macy's, Bloomingdale's, and Blue Mercury stores in the best locations Grow our Bloomingdale's and Blue Mercury store bases by a combined roughly 20% and monetize $600 to $750 million of assets primarily related to stores and distribution center closures. In setting our bold new chapter strategy, we have been our own toughest critics.

Todd: To accelerate luxury growth and three simplify and modernize end to end operations.

Todd: We view fiscal 2024, as a transition and investment year as we begin to implement real change for our customers. Beginning in 2025, we expect Macy's Inc. To deliver low single digit comp growth mid single digit EBITDA dollar growth and a return to pre pandemic levels of free cash flow.

Todd: As we look across our omni channel enterprise, we are taking a balanced portfolio approach to establish the right mix of on and off mall, Macy's Bloomingdale's and Blue Mercury stores in the best locations and markets.

Todd: By the end of 2026, we plan to close approximately 150 under productive Macy's locations and re prioritize investments in our roughly 350 remaining locations inclusive of full line furniture and current off mall doors.

Todd: Grow our bloomingdale's and Blue Mercury store basis by a combined roughly 20% and monetize 600 to 750 million of assets, primarily related to stores and distribution center closures.

Todd: In setting our bold new chapter strategy, we've been our own toughest critics, we have challenged the status quo identified what we've gotten right and where we could have done better. We also conducted external focus groups and surveys with current lapsed and potential customers were driving a higher level of accountability amongst our teams.

Tony Spring: We have challenged the status quo, identified what we've gotten right and where we could have done better. We have also conducted external focus groups and surveys with current, lapsed, and potential customers. We're driving a higher level of accountability amongst our teams to ensure we keep up with customers' evolving tastes, needs, and preferences. As I now turn to discussing each element of a bold new chapter in more detail, I'd like to stress that this work is already underway. We are moving swiftly and methodically. While some aspects of this plan should take time to bear fruit, others are intended to have a more immediate impact.

Todd: To ensure we keep up with customers evolving tastes and needs and preferences.

Todd: As I now turn to discussing each element of a bold new chapter in more detail I'd like to stress that this work is already underway, we are moving swiftly and methodically while some aspects should take time to bear fruit others are intended to have a more immediate impact.

Tony Spring: The first component is strengthening the Macy's nameplate. Coming from Bloomingdale's, I have approached Macy's with an outsider's point of view. There are few brands that have a deep heritage and a strong emotional connection with their customers.

Todd: The first component is strengthening the macys nameplate coming from Bloomingdale's I have approached Macy's with an outsider's point of view.

Todd: There are a few brands that have the deep heritage and a stronger emotional connection with its customer.

Tony Spring: But as we conducted surveys and focus groups with some of our 41 million active multi-generational customers, it became increasingly clear that their needs are not being fully met. They want an omni-channel shopping environment that's neat, easy, and convenient. An edited and updated selection of relevant trending products, Clarity on value and pricing, and greater availability of colleagues to find products and complete a purchase. This list is similar to what I first encountered at Bloomingdale's. While there are certainly differences, the core formula for success is the same.

Todd: But as we conducted surveys and focus groups with some of our 41 million active multi generational customers. It became increasingly clear that the needs are not being fully met.

Todd: They want an omnichannel shopping environment, that's neat easy and convenient and edited and updated selection of relevant trending product clarity on value and pricing and greater availability of colleagues defined product and complete a purchase.

Todd: This list is similar to what I first encountered at Bloomingdale's, while there are certainly differences the core formula for success is the same it's going back to basics and balancing the art and science of retail by putting the customer first which has always been my priority, we improved bloomingdale sales profit and net promoter scores.

Tony Spring: It's going back to basics and balancing the art and science of retail. By putting the customer first, which has always been my priority, we will improve Bloomingdale's sales, profit, and net promoter scores. We will do the same for Macy's. First, by focusing our resources and optimizing our store footprint to meet the customer where they are. Second, revitalizing the assortment to improve relevance and value. And third, modernizing the shopping environment to ensure a convenient, easy, and frictionless customer experience across channels.

Todd: We will do the same for Macy's.

Todd: First by focusing our resources and optimizing our store footprint to meet the customer where they are second revitalizing the assortment to improve the relevance and value.

Todd: And third modernizing the shopping environment to ensure a convenient easy and frictionless customer experience across channels.

Tony Spring: Strengthening the Macy's nameplate should result in healthier sell-throughs and more productive stores, benefiting Macy's sales and margin profile and returning the nameplate to growth. The first step is to close and monetize underproductive locations so that we can prioritize the investments in stores that will lead us to a healthier future. Over the past 10 months, we have refined our approach to closures and developed an even more sophisticated framework to evaluate our assets. Consequently, our thresholds to keep a store open have become more stringent. In the past, we may have continued operating an underproductive store that was four-wall cash flow positive. However, the bar has now been raised.

Todd: Strengthening the macys nameplate should result in healthier sell throughs and more productive stores benefiting Macy's sales and margin profile and returning the nameplate to growth.

Todd: First step is to close and monetize under productive locations. So that we can prioritize the investments in stores that will lead us to a healthier future over the past 10 months, we have refined our approach to closures and have developed an even more sophisticated framework to evaluate our assets our thresholds to keep us are open have been.

Todd: I'm more stringent in the past we may have continued operating and under productive store that was four wall cash flow positive. The bar has now been raised we have conducted extensive internal and external analysis of our Macy's Fleet Center by center and market by market, we have compared value to operate.

Tony Spring: We have conducted extensive internal and external analysis of our Macy's fleet, center by center, and market by market. We have compared value-to-operate versus value-to-closed and looked at demand in each market to determine the right construct of stores and digital with a focus on being in the strongest centers. This is not a one-time exercise.

Todd: Versus value to closed and looked at demand in each market to determine the right construct of stores and digital with a focus on being in the strongest centers.

Todd: This is not a onetime exercise given rapidly shifting market dynamics and consumer preferences. It will be an always on practice.

Tony Spring: Given rapidly shifting market dynamics and consumer preferences, it will be an ongoing process. Through our work, we have identified approximately 150 Macy's stores for closure over the next three years. We call these our "non-go-forward" locations.

Todd: Through our work we have identified approximately 150 Macy's stores for closure over the next three years. We call. These are non go forward locations.

Tony Spring: In fiscal 2023, they represented about 25% of Macy's Inc.'s gross square footage but less than 10% of its sales. The roughly 350 remaining Macy's, inclusive of full line, furniture, and our current small formats, are referred to as Go Forward locations. In fiscal 2023, comp sales of Macy's go-forward locations outperformed non-go-forward locations by approximately 500 basis points, and the four-wall adjusted EBITDA rate outperformed by about 950 basis points. Simply put, the value to monetize non-go-forward locations is higher than the value to operate them.

Todd: In fiscal 2023, they represented about 25% of Macy's, Inc. Gross square footage, but less than 10% of its sales.

Todd: The roughly 350 remaining Macy's inclusive of full line furniture and our current small formats are referred to as go forward locations in fiscal 2023 comp sales of basic go forward locations outperformed non go forward locations by approximately 500 basis points and the four wall adjusted EBITDA rate.

Todd: [noise] outperformed by about 950 basis points.

Todd: Simply put the value to monetize non go forward locations is higher and the value to operate we expect to close about 50 non go forward stores by the end of this fiscal year and prioritize our focus where we have the most opportunity to improve square footage productivity and better serve our customer.

Tony Spring: We expect to close about 50 non-go-forward stores by the end of this fiscal year and prioritize our focus where we have the most opportunity to improve square footage productivity and better serve our customers. Over the next three years, we estimate non-go-forward store monetization proceeds of roughly $500 to $650 million and asset sale gains of about $250 to $350 million. We will make sure that the economics of each closure and monetization transaction makes sense.

Todd: Over the next three years, we estimate non go forward store monetization proceeds of roughly 500 and $650 million in asset sale gains of about $250 million to $350 million.

Todd: We will make sure the economics of each closure and monetization transaction makes sense working together with our real estate advisors. Our team has generated over $2 4 billion of real estate monetization proceeds from 2015 to 2023, and we will leverage that expertise and those relationships as we continue to refine and assess.

Tony Spring: Working together with our real estate advisors, our team has generated over $2.4 billion of real estate monetization proceeds from 2015 to 2023, and we will leverage that expertise and those relationships as we continue to refine and assess our base. Importantly, our healthy balance sheet allows us to be opportunistic on the timing of the closures to deliver the highest value for our shareholders. We have recently stopped all but required maintenance investments in our non-go-forward fleet. We plan to reallocate some of the capital to our go-forward fleet, and we'll work closely with our vendor partners on joint business plans. We will also work with non-GoForward location colleagues to support and place them into open roles in nearby locations whenever possible.

Todd: Our base <unk>.

Todd: Accordingly, our healthy balance sheet allows us to be opportunistic on timing of the closures to deliver the highest value for our shareholders.

Todd: We have recently stopped all but required maintenance investments in our non go forward locations. We plan to reallocate some of the capital to our go forward fleet and will work closely with our vendor partners on joint business plans.

Todd: We will also work with non Gulfport location colleagues to support and place them into open roles in nearby locations whenever possible. In addition will educate our customers on the proximity of our go forward stores and access to our digital platforms.

Tony Spring: In addition, we will educate our customers on the proximity of our GoForward stores and access to our digital platforms. Exiting stores allows us to prioritize our highest return on mall opportunities and open more small format off-mall Macy's. At the end of the year, we operated 12 small formats.

Todd: Exiting stores allows us to prioritize our highest return on mall opportunities and open more small format off mall Macy's at the end of the year. We operated 12 small formats as previously disclosed we plan to open up 30 more in the next two years, including 12. This year informed by the real estate analysis discussed early.

Tony Spring: As previously disclosed, we plan to open 30 more in the next two years, including 12 this year, informed by the real estate analysis discussed earlier. With these additional stores, we will have a better understanding of our competitive positioning and long-term potential. Having the right footprint and location is important, but we must also have the right product at a value that we know appeals to our customers. That is why we're revitalizing the Macy's Assortment. Recently, we shifted our merchant responsibilities to a full category approach rather than separate teams for owned and licensed. Consolidating roles creates more accountability.

Todd: With these additional stores, we will have a better understanding of our competitive positioning and long term potential.

Todd: Having the right footprint and location is important but we must also have the right product at a value that we know appeals to our customer that is why we're revitalizing the Macy's assortment.

Todd: Recently, we shifted our merchant responsibilities to a full category approach rather than a separate teams for owned and license.

Todd: Consolidated roles creates more accountability.

Tony Spring: There is an increased focus on the nuances that make each category thrive. With increased visibility and awareness across the entire category, merchants should be able to provide more consistency in product and experience and reduce duplication. Bloomingdale successfully adopted this model several years ago.

Todd: There is increased focus on the nuances that make each category thrive.

Todd: With increased visibility and awareness across the entire categories merchant should be able to provide more consistency in product and experience and reduce duplication.

Todd: Bloomingdale successfully adopted this model several years ago. It resulted in stronger relationships with our partners diversified product and choice across price points and helped us grow market share.

Tony Spring: It resulted in stronger relationships with our partners, diversified product and choice across price points, and helped us grow market share. We also continue to rebuild our private brand portfolio, which capitalizes on white space opportunities that complement market brands and give customers more reasons to shop with us. Private brands have higher merchandise margins and profit contributions relative to market brands.

Todd: We also continue to rebuild our private brand portfolio, which capitalizes on white space opportunities that complement market brands and give customers more reasons to shop with us.

Todd: Private brands have higher merchandize margins and profit contributions relative to market brands in fiscal 2023 private brands represented about 15% of Macy's sales versus 16% in 2022, reflecting the exit of several heritage women's brands, including <unk> and Karen Scott.

Tony Spring: In fiscal 2023, private brands represented about 15% of Macy's sales versus 16% in 2022, reflecting the exit of several heritage women's brands, including Alfani and Karen Scott. We expect to complete all private brand exits this year. Longer term, we expect private brand volumes to grow as we reimagine existing brands and introduce others, including our latest, State of Day. With a rationalized and focused existing store fleet and a better product, we also want to improve the omni-channel experience. Reflecting learnings from our research, we know we can better serve our customers. We plan to increase resources and investments to improve the experience in our roughly 350 remaining Go Forward Macy's locations. We will test and learn and not fight off more than we can chew.

Todd: We expect to complete all private brand exits this year longer term, we expect private brand volumes to grow as we re imagine existing brands and introduce others, including our latest state of day.

Todd: With a rationalized and focused existing store fleet and better product. We also want to improve the omnichannel experience.

Todd: Reflecting learnings from our research we know we can better serve our customer we plan to increase resources and investments to improve the experience in a roughly 350 remaining go forward Macy's locations, we will test and learn and not bite off more than we can chew will be thoughtful methodical and unemotional in our approach.

Tony Spring: We'll be thoughtful, methodical, and unemotional in our approach. For example, in fiscal 2023, we had a small number of incubator stores that tested new ideas that were based on customer feedback and prioritized conversion. Comps outperformed the broader Macy's fleet by over 350 basis points. That's given us confidence to expand the pilot to 50 doors, which we refer to as our first 50 programs. The FIRST50 program is purposefully different from past pilots.

Todd: In fiscal 2023, we had a small number of incubator stores, which tested new ideas that were based on customer feedback and prioritize conversion.

Todd: <unk> outperformed the broader Macy's fleet by over 350 basis points that's.

Todd: That's given us confidence to expand the pilot to 50 doors, which we refer to as our first 50 program.

Todd: The first 50 program is purposely different from past pilots it centers on the customer and is representative of our go forward geographic footprint.

Tony Spring: It centers on the customer and is representative of our go-forward geographic footprint, balanced across volume tiers, in stores with strong vendor engagement, supported by more associates on the floor to serve customers, and focused on merchandising and visual presentation. We are conducting additional tests in the first 50 doors this year and plan to apply pertinent learnings to a broader set of go-forward locations beginning in fiscal 2025. Now let's turn to digital, which is also an important part of Macy's current and future customer experience. We view digital as the gateway for customers to research, discover, connect, and transact with Macy's. It's imperative that we show up with inspiring content at the right place, time, and value.

Todd: <unk> across volume tiers in stores with strong vendor engagement supported by more associates on the floor to serve customers and focused on merchandising and visual presentation.

We are conducting additional tests in the first 50 doors this year and plan to apply pertinent learnings to a broader set of go forward locations beginning in fiscal 2025.

Todd: Now, let's turn to digital which is also an important part of the Macy's current and future customer experience.

Todd: Digital is the gateway for customers to research discover connect and transact with Macy's, It's imperative that we show up with inspiring content at the right place time and value.

Tony Spring: Our digital team is relentlessly seeking to better understand our customers' pain points across mobile, app, and desktop platforms. We have re-evaluated our foundation to improve search and notification. Customers will be offered personalized communications and recommendations that have a definitive Macy's point of view, culminating in an efficient and speedy checkout. Rewriting this digital journey should generate greater loyalty and increased conversion. We also expect growth of Marketplace and Macy's Media Network, both of which were designed to improve profitability and increase customer engagement. To conclude on the Macy's nameplate, our focused omni-channel portfolio will empower us to provide a better customer experience. We intend to fuel go-forward locations and our digital channels with curated and compelling assortments, have a better in-stock position, and appropriate investments to create a more welcoming environment and enhanced service. Our new Chief Marketing Officer, who joined us in December, is working closely across teams to align Omni touchpoints to customer expectations and create a modern brand platform for all of our communications. More to come as the year progresses.

Todd: Our digital team is relentlessly seeking to better understand our customer's pain points across mobile app and desktop platforms.

Todd: We have reevaluated, our foundation to improve search and navigation tools.

Todd: Customers will be offered personalized communications and recommendations that have a definitive Macy's point of view, culminating in an efficient and speedy checkout rewriting. This digital journey should generate greater loyalty and increased conversion.

Todd: We also expect growth of marketplace, and Macy's media network, both of which were designed to improve profitability and increase customer engagement.

Todd: To conclude on the Macys nameplate are focused omnichannel portfolio will empower us to provide a better customer experience, we intend to fuel go forward locations and our digital channels with curated and compelling assortments have a better in stock position and appropriate investments to create a more welcoming environment enhanced service.

Our new Chief Marketing Officer, who joined US in December is working closely across teams to align omni touch points to customer expectations and create a modern brand platform for all of our communications more to come as the year progresses.

Tony Spring: As I shared earlier, we view fiscal 2024 as a transition and investment year, and we expect to return Macy's Inc. to consistent comp sales and EBITDA dollar growth beginning in 2025. Longer term, we aspire to have a compelling physical and digital portfolio in the strongest markets. We are one Macy's Inc., and our future relies on our ability to offer customers the option to shop how, where, when, and for what they desire. As Macy's rebuilds, our luxury nameplates, Bloomingdale's and Blue Mercury, are poised for acceleration.

Todd: As I shared earlier, we view fiscal 2024 is a transition and investment year and we expect to return Macy's, Inc to consistent comp sales and EBITDA dollar growth beginning in 2025.

Todd: Longer term, we aspire to have a compelling physical and digital portfolio in the strongest markets, where one Macy's Inc, and our future relies on our ability to offer customers, the optionality to shop, how where and when and for what they desire.

Todd: As macys rebuilds are luxury nameplates, bloomingdale's and Blue Mercury are poised for acceleration, which brings us to the second component of our bold new chapter luxury growth.

Tony Spring: Which brings us to the second component of our Bold New Chapter, luxury growth. During my tenure leading Bloomingdales and Blue Mercury, we strengthened relationships with our customers and vendor partners. Both nameplates have been outperformers within our portfolio and are viewed as leaders in identifying up-and-coming trends and brands. They provide a mix of accessible and aspirational product, top-notch customer service, and an elevated omni-channel shopping experience that's warm and inviting, but doesn't take itself too seriously. Over the next three years, we plan to take advantage of our leadership position to more aggressively grow our luxury name. While cognizant of luxury brand headwinds, with the aspirational customer stepping back, we believe Bloomingdale's and Blue Mercury are uniquely positioned within the broader retail landscape. Today, Bloomingdale's current foothold is predominantly coastal.

Todd: During my tenure, leading blooming doesn't blue Mercury, we strengthened relationships with our customers and vendor partners.

Todd: Both named plays have been outperformers within our portfolio and are viewed as leaders in identifying up and coming trends and brands. They.

Todd: They provide a mix of accessible and aspirational product top notch customer service and an elevated omnichannel shopping experience, that's warm and inviting but it doesn't take itself too seriously.

Todd: Over the next three years, we plan to take advantage of our leadership position to more aggressively grow our luxury nameplates.

Todd: While cognizant of luxury brand headwinds with the aspirational customer stepping back we believe bloomingdale's and blue Mercury are uniquely positioned within the broader retail landscape.

Todd: Today Bloomingdale's current foothold is predominantly coastal the adage that fashion trends begin in L. A new York or Miami, and then migrate no longer holds true with the rapid growth of social media in recent population shifts the fashion playing field is level and psychographics of moved.

Tony Spring: The adage that fashion trends begin in LA, New York, or Miami and then migrate no longer holds true. With the rapid growth of social media and recent population shifts, the fashion playing field has leveled, and psychographics have moved. Of the top 50 designated market areas in the U.S., the Bloomingdale's nameplate is physically only in 14 of them. This morning, we're announcing the accelerated rollout of our small format Bloomingdales, which we call Bloomies, and our outlet. At the end of fiscal 2023, we operated just 33 Bloomingdales, 3 Bloomies, and 21 Outlets, which we refer to collectively as the Bloomingdales Nameplate. Over the next three years, we plan to open a combined 15 Bloomies and Outlets across new and existing markets. Bloomingdale's also has a strong digital presence, offering compelling content updated regularly and a highly curated marketplace. Currently, about 80% of Bloomingdale's digital sales are in markets where we have physical stores. We believe that entering new markets should only benefit our digital business further.

Todd: Of the top 50 designated market areas in the U S. The bloomingdale's nameplate is physically only in 2014. This morning, we're announcing the accelerated rollout of our small format Bloomingdale's, which we call Blum is and our outlets at the end of fiscal 2023, we operated just 33, bloomingdales <unk> and 'twenty one outlets.

Todd: Which we refer to collectively as the bloomingdale's nameplate over the next three years, we plan to open a combined 15 blue amazing outlets across new and existing markets.

Todd: Bloomingdale's also has a strong digital presence offering compelling content updated regularly and a highly curated marketplace. Currently about 80% of bloomingdale's digital sales were in markets, where we have physical stores we.

Todd: We believe that entering new markets should only benefit the digital business further.

Tony Spring: We have taken the time to prove out the Bloomies and Bloomingdale's Outlet concept before committing capital to this accelerated rollout. We are doing the same at Blue Mercury, where we have the opportunity to be the fastest growing luxury beauty retailer and own a greater piece of the approximately $90 billion North American beauty market. Customers love Blue Mercury's elevated skin care, beauty, spa offerings, and high-touch customer service. We operate at 159 locations at the end of the fiscal year.

Todd: We have taken the time to prove out the <unk> and bloomingdale's outlet concept before committing capital to this accelerated rollout. We are doing the same at blue Mercury, where we have the opportunity to be the fastest growing luxury beauty retailer and own a greater piece of the approximately $90 billion North American beauty market.

Todd: Customers Love Blue Mercury's elevated skincare beauty spa offerings and high touch customer service. We operated 159 locations at the end of the fiscal year. Our latest Remodels located in Bronxville, New York and New gaming, Connecticut have been well received and will serve as the foundation for the new Blue, which encompasses our total omni evolution.

Tony Spring: Our latest remodels, located in Bronxville, New York, and New Caney, Connecticut, have been well-received and will serve as the foundation for the New Blue, which encompasses our total omni-evolution. Inclusive, I've Outdated Branding They'll have an expanded assortment, elevated aesthetics, centralized customer service hubs, integrated spa facilities, and technology to support relationship selling. Over the next three years, we anticipate at least 30 Blue Mercury store openings and renovations of roughly 30 others. Learnings from these doors will guide long-term expansion plans. Similar to other nameplates, digital remains a meaningful opportunity for Bloomberg.

Todd: Inclusive of updated branding they will have an expanded assortment elevated aesthetics centralized customer service hubs integrated spa facilities and technology to support relationship selling.

Todd: Over the next three years, we anticipate at least 30 blue Mercury store openings and remodeling roughly 30 others.

Todd: Learnings from these stores will guide long term expansion plans.

Todd: Similar to other nameplates digital remains a meaningful opportunity for blue Mercury.

Tony Spring: To close out the discussion on luxury, we have a high degree of confidence in the Bloomingdales and Blue Mercury nameplates, which are healthy, accretive, and have strong investment profiles. Now is the time to capitalize on this momentum, and we expect these investments that we are making will fuel sales growth and margin expansion. Turning to the third and final component of our Bold New Chapter strategy, simplifying and modernizing end-to-end operations, we are committed to delivering a more efficient operating model that better serves our customers. Over the next three years, we have plans to rationalize and monetize our supply chain asset portfolio, streamlining fulfillment, improve inventory planning and allocation, and deliver a more scalable technology platform.

Todd: To close out the discussion on luxury we have a high degree of confidence in the bloomingdale's and Blue Mercury nameplates, which are healthy accretive and a strong investment profiles now was the time to capitalize on this momentum and we expect these investments that we're making will fuel sales growth and margin expansion.

Todd: Turning to the third and final component of our bold new chapter strategy, simplifying and modernizing end to end operations.

Todd: We are committed to delivering a more efficient operating model that better serves our customers over the next three years, we have plans to rationalize and monetize our supply chain asset portfolio streamline fulfillment improve inventory planning and allocation and deliver a more scalable technology platform.

Tony Spring: A modern operation is our objective throughout the company. Aligning to the anticipated future, Omni-Demand provides synergistic cost savings and allows us to improve our ways of working. To support that, in January, we reduced our corporate workforce by 13%.

Todd: Our modern operation as our objective throughout the company aligning to the anticipated future omni demand provide synergistic cost savings and allows us to improve our ways of working to support that in January we reduced our corporate workforce by 13%.

Adrian Mitchell: We took out layers of management, consolidated positions, and offshored selected roles. At the same time, we remain focused on hiring the best talent to support our view of the future. Adrian is leading the end-to-end operations work. He will now provide more detail before discussing our fourth quarter results and forward outlook.

Todd: We took out layers of management consolidated positions and Offshored selected roles at the same time, we remain focused on hiring the best talent to support our view of the future Adrienne.

Todd: Adrian is leading the end to end operations work. He will now provide more detail before discussing our fourth quarter results and forward outlook Adrian.

Adrian Mitchell: Thank you, Tony, and good morning, everyone. Over the past several years, we've taken proactive steps to fortify our operations, including strengthening our balance sheet, managing expenses, and tightening inventory control. This provides the foundation for a bold new chapter, which is designed to return Macy's Inc. to sustainable, profitable growth, provide meaningful free cash flow generation, and enhance shareholder value. Our new strategy gives us the opportunity to simplify and modernize our supply chain, planning and allocation, and technology operations, which should drive improved inventory productivity and ultimately better sales. Efforts should result in about $100 million of cost savings this fiscal year, an increase to an annual run rate savings of approximately $235 million by 2026.

Adrian Mitchell: Thank you Tony and good morning, everyone.

Adrian Mitchell: Over the past several years, we've taken proactive steps to fortify our operations, including strengthening our balance sheet managing expenses and tightening inventory controls. This provides the foundation for a bold new chapter, which is designed to return Macy's, Inc to sustainable profitable growth provide meaningful.

Adrian Mitchell: Free cash flow generation and enhanced shareholder value.

Adrian Mitchell: Our new strategy gives us the opportunity to simplify and modernize our supply chain planning allocation and technology operations, which should drive improved inventory productivity and ultimately better sales.

Adrian Mitchell: Efforts should result in about $100 million of cost savings. This fiscal year, an increase to an annual run rate savings of approximately $235 million by 2026.

Adrian Mitchell: Savings will fund the investments necessary to support our strategy, offset inflationary cost pressures, and constrain fulfillment expense and SG&A dollar growth, and are factored in our near and longer-term outlook. For supply chain, we should benefit from consolidating capacity as we close centers with higher processing costs and monetize select assets. In addition, we plan to further reduce fulfillment costs by increasing automation across several facilities.

Adrian Mitchell: Savings will fund the investments necessary to support our strategy offset inflationary cost pressures and constrained fulfillment expense in SG&A dollar growth and are factored in our near and longer term outlooks.

For supply chain, we should benefit from consolidating capacity as we close centers with higher processing costs and monetize select assets.

Adrian Mitchell: In addition, we plan to further reduce fulfillment costs by increasing automation across several facilities.

Adrian Mitchell: Our efforts should result in faster and more reliable deliveries, greater efficiencies, and a right-sized distribution center network. The inventory planning and allocation changes on the way should help improve how we flow products from vendors to customers. They should provide quick replenishment in stores and fulfillment centers, reduce split shipments, and lead to higher end stocks, particularly for best-selling items. We also plan to streamline and automate business processes.

Adrian Mitchell: Our efforts should result in faster and more reliable deliveries greater efficiencies and a right size distribution Center network.

Adrian Mitchell: The inventory planning and allocation changes underway should help improve how we flow products from vendors to customers. They should provide quicker replenishment in stores and fulfillment centers, we do split shipments and need to hire and stops, particularly for best selling items.

Adrian Mitchell: We also plan to streamline and automate business processes, we will leverage this across the Macy's Inc. Portfolio. These efforts are already underway and encompass reducing dependency on expensive software and hardware by consolidating our vendor base simplifying our application portfolio by moving over.

Adrian Mitchell: We will leverage this across the Macy's Inc. portfolio. These efforts are already underway and encompass reducing dependency on expensive software and hardware by consolidating our vendor base, simplifying our application portfolio by moving over 90% from on-premise to the cloud and eliminating mainframe applications, which reduces expensive consumption. Embedded in our end-to-end operations is AI, which helps speed up decision-making through access to real-time data and tools.

Adrian Mitchell: We're 90% from on premise to the cloud and eliminating mainframe applications, which reduces expensive consumption.

Adrian Mitchell: Embedded in our end to end operations is AI, which helps speed up decision, making through access to real time data and tools.

Adrian Mitchell: As an organization, we continue to build our data, science, and AI capabilities in areas such as forecasting, inventory allocation, workload optimization, and pricing. We are also experimenting with generative AI that should help improve the customer and colleague experience. With that, let's turn to our fourth quarter results. Let's start with omnichannel sales. Net sales of $8.12 billion were down 1.7% from last year, with comparable own plus license sales down 4.2%. The 53rd Week contributed $252 million to net sales. For the quarter, OWN AUR rose 5.5%, driven primarily by changes in product and category mix.

Adrian Mitchell: As an organization, we continue to build our data science and AI capabilities in areas, such as forecasting inventory allocation workload optimization and pricing.

Adrian Mitchell: We are also experimenting with generated AI that should help improve customer and colleague experiences.

Speaker Change: With that let's turn to our fourth quarter results.

Speaker Change: Let's start with Omnichannel sales net sales of 812 billion were down one 7% to last year with comparable owned plus licensed sales down four 2%. The 50 <unk> week contributed $262 million to net sales.

Speaker Change: For the quarter, one AUR was five 5% driven primarily by changes in product and category mix or.

Adrian Mitchell: Other revenue, which is comprised of net credit card revenues and Macy's Media Network, was $255 million, down 20% from the prior year and better than expectations. Parsing that out, credit card revenues decreased 26% from the prior year to $195 million, and Macy's Media Network rose 5% to $60 million. By nameplate, Macy's net sales declined 2.5%, and comparable sales declined 4.7% on an own plus license basis.

Speaker Change: Other revenue, which is comprised of net credit card revenues and Macy's media network was $265 million down 20% from the prior year and better than expectations.

Speaker Change: Parsing that out credit card revenues decreased 26% from prior year to $195 million and Macy's media network rose, 5% to $60 million.

Speaker Change: By nameplate Macy's net sales declined two 5% and comparable sales declined four 7% on an owned plus licensed basis go forward locations owned plus licensed comparable sales outperform non pull forward by about 500 basis points.

Adrian Mitchell: GoForward Locations Owned Plus Licensed Comparable Sales outperformed non-GoForward by about 500 basis points. Both backstage store-within-stores and all-small-small formats continue to outperform full-line stores. Within private brands, INC outperformed the Macy's women's apparel segment on a year-over-year basis, and On 34th is now one of our top 10 ready-to-wear brands, and Marketplace GMV on a 13-week basis grew by 145% from last quarter. At Bloomingdale's, net sales were up 3.5%, and comparable sales were down 1.6% on an own plus license basis. Marketplace GMV on a 13-week basis grew by roughly 770% sequentially. Blue Mercury posted its 12th consecutive quarter of comparable sales growth, with net sales up 7.8% and comparable sales up 2.3%.

Speaker Change: Both backstage store within stores and off mall small formats continued to outperform full line stores.

Speaker Change: Within private brands AMC outperformed the Macy's women's apparel segment on a year over year basis and on 34th is now one of our top 10 ready to wear brands.

Speaker Change: And marketplace Dnb on a 13 week basis grew by 145% from last quarter.

Speaker Change: At Bloomingdale's net sales were up three 5% and comparable sales were down one 6% on an owned plus licensed basis.

Speaker Change: Marketplace G&P on a 13 week basis grew by roughly 770% on a sequential basis.

Blue Mercury posted its 12th consecutive quarter of comparable sales growth with net sales up seven 8% and comparable sales up two 3%.

Adrian Mitchell: Turning to gross margin, our fourth-quarter gross margin rate was well ahead of expectations, rising 340 basis points to 37.5%. Merchandise margin was up 260 basis points from last year. We were disciplined in our approach to markdowns and clearances. Delivery expense as a percent of sales improved 80 basis points as better inventory allocation led to reductions in packages per order and delivery distance.

Speaker Change: Turning to gross margin our fourth quarter gross margin was well ahead of expectations rising 340 basis points to 37, 5%.

Speaker Change: Merchandise margin was up 260 basis points to last year, we were disciplined in our approach to markdowns and clearance delivery expense as a percent of sales improved 80 basis points as better inventory allocation led to reductions in packages per order and delivery distance.

Adrian Mitchell: Now let's discuss inventory productivity. Year-end inventories were up 2% from last year and down 16% from 2019, reflecting our desire to own more seasonally appropriate transitional products. We had more open to buy than the prior quarter and comparable period last year with improved composition, freshness, and volume. Next, expense discipline. SG&E expense was $2.4 billion, down 2% from the prior year, driven by ongoing expense management, partially offset by investments in our business. As a percent of total revenue, SG&A was 28.7%, 10 basis points higher than last year, driven by the decline in total revenue. Adjusted diluted EPS was $2.45 versus $1.88 in the prior year.

Speaker Change: Now, let's discuss inventory productivity year end inventories were up 2% to last year and down 16% to 2019, reflecting our desire to own more seasonally appropriate transitional product, we had more open to buy in the prior quarter and comparable period last year with improved composition.

Speaker Change: Freshness and volume.

Speaker Change: Next expense discipline SG.

Speaker Change: SG&A expense was $2 4 billion down.

Speaker Change: Down 2% from the prior year, driven by ongoing expense management, partially offset by investments in our business as.

Speaker Change: As a percent of total revenue SG&A was 28, 7% 10 basis points higher than last year, driven by the decline in total revenue.

Speaker Change: Adjusted diluted EPS was $2 45 versus $1 88 in the prior year.

Adrian Mitchell: In the fourth quarter, we recognized approximately $1 billion of impairment, restructuring, and other costs, which were excluded from adjusted diluted EPS. Included in the $1 billion was roughly a $950 million non-cash asset impairment charge primarily related to the approximately 150 locations planned for closure over the next three years and the remaining associated with corporate assets. Turning to cash and capital allocation, we ended the year with over $1 billion of cash in our balance sheet. We generated $1.3 billion of operating cash flow, and had $993 million of capital expenditure.

Speaker Change: In the fourth quarter, we recognized approximately $1 billion of impairment restructuring and other costs, which were excluded from adjusted diluted EPS.

Speaker Change: Included in the $1 billion was roughly a $950 million noncash asset impairment charge, primarily related to the approximately 150 locations planned for closure over the next three years and the remaining associated with corporate assets.

Speaker Change: Turning to cash and capital allocation, we ended the year with over $1 billion of cash on our balance sheet. We generated $1 3 billion of operating cash flow and had $993 million of capital expenditures free cash flow inclusive of proceeds from real estate sales was.

Adrian Mitchell: Free cash flow, inclusive of proceeds from real estate sales, with an inflow of $398 million, and we paid $181 million in dividends. Now, we turn to our fiscal 2024 outlook. As a reminder, we view 2024 as a transition and investment year for Macy's Inc. The improvements in the first 50, small format, digital, and luxury are not expected to offset the anticipated deceleration in non-go-forward location performance as we limit investments in these stores. Before we get into the details of our outlook, there are several important elements to consider, including that we are renaming OWN PLUS License Sales Comp, or OPL, to OWN PLUS License PLUS Marketplace, or OPL PLUS M. Marketplace has been included in OPL Plus Our Results since its introduction, so there is no historical restatement. Going forward, we will provide relative performance of Macy's nameplate sales performance for go-forward versus non-go- In addition, Macy's nameplate has fully converted to cost accounting. We do not expect any material financial impact as a result of this transition. And lastly, the proposed credit card late fee ruling is not embedded in our outlook.

Speaker Change: An inflow of $398 million, and we paid $181 million in dividends.

Speaker Change: Now turning to our fiscal 2020 for outlook.

Speaker Change: As a reminder, we view 2024 as a transition and investment year for Macy's Inc. The improvements in first 50 small format digital and luxury are not expected to offset the anticipated deceleration and non go forward location performance as we limit investments in these stores.

Speaker Change: Before we get into the details of our outlook. There are several important elements to consider including that we are renaming owned plus licensed sales comp or <unk> L to own plus license plus marketplace or <unk>, plus <unk> plus <unk>.

Speaker Change: <unk> marketplace has been included in our results since its introduction. So there is no historical restatement.

Speaker Change: Going forward, we will provide relative to performance of macys nameplate sales performance for go forward versus non go forward stores.

Speaker Change: In addition, Macy's nameplate has fully converted to cost accounting, we do not expect any material financial impact as a result of this transition.

Speaker Change: And lastly, the proposed credit card late fee ruling is not embedded in our outlook, we will incorporate if and when the ruling is finalized and the timing of implementation and changes are known.

Adrian Mitchell: We will incorporate them if and when the ruling is finalized, and the timing of implementation and changes are known. With that, let's turn to our annual guidance for fiscal 2024. Please note that heightened clearance markdowns taken in the second quarter of last year on seasonal products are not expected to be repeated, and all asset sale gains are anticipated to occur in the fourth quarter. With that, we expect net sales of $22.2 to $22.9 billion. We are modeling a 1% to 4% decline in Macy's Inc. net sales with the disparity between the performance of go-forward and non-go-forward locations widening. We expect Macy's Inc. O plus L plus M comp sales, inclusive of non-go-forward locations and digital, to be down approximately 1.5% to up approximately 1.5%.

Speaker Change: With that let's turn to our annual guidance for fiscal 2024.

Speaker Change: Please note that heightened clearance markdowns taken in the second quarter of last year on seasonal products are not expected to be repeated and all asset sale gains are anticipated to occur in the fourth quarter.

Speaker Change: With that we expect net sales of 22 to $22 9 billion.

Speaker Change: We are modeling a 1% to 4% decline in Macy's, Inc. Net sales with the disparity between the performance of go forward and non go forward locations widening.

Speaker Change: We expect Macy's, Inc. <unk> help us M comp sales inclusive of non go forward locations and digital to be down approximately one 5% to up approximately one 5%.

Adrian Mitchell: Macy's nameplate, excluding non-go-forward locations, comparable O plus L plus M sales to be down 1% to up 2.5%, and Luxury Nameplate's comparable O plus L plus M sales to be about flat to up 2.5%. We expect total revenues of $22.9 to $23.6 billion, with other revenue at about 2.9% of net sales. We expect credit card revenues, excluding any impact of the proposed late fee ruling, to be approximately 74% of other revenue or about $475 to $490 million compared to 80% or $619 million last year.

Macy's nameplate, excluding non go forward locations comparable <unk> and sales to be down 1% to up two 5% and luxury nameplates comparable opus hour, plus and sales to be about flat to up two 5%.

Speaker Change: We expect total revenues of $22 nine to $23 6 billion with other revenue at about two 9% of net sales.

Speaker Change: We expect credit card revenues, excluding any impact for the proposed late fee ruling to be approximately 74% of other revenue or about $475 million to $490 million compared to 80% or $619 million last year.

Adrian Mitchell: We also expect gross margin as a percent of net sales to be 39.2% to 39.5%, benefiting from ongoing inventory controls, higher full-price sell-throughs, lower promotions, and private brand expansion. SG&A to be 36.6% to 36.8% of total revenue. With our heightened focus on experience, we're allocating spend to customer-facing investments designed to fuel future sales growth across the portfolio. And we expect full year adjusted EBITDA as a percent of total revenue of 8.5% to 8.9%. We're also planning a reduction in overall capital expenditure to approximately $875 million.

Speaker Change: We also expect gross margin rate as a percent of net sales to be 39, 2% to 39, 5% benefiting from ongoing inventory controls higher full price sell throughs lower promotions and private brand expansion.

Speaker Change: SG&A to be 36, 6% to 36, 8% of total revenue with our heightened focus on experience, we're allocating spend to customer facing investments designed to fuel future sales growth across the portfolio.

Speaker Change: And we expect full year adjusted EBITDA as a percent of total revenue up eight 5% to eight 9%.

Speaker Change: We're also planning a reduction in overall capital spend to approximately $875 million.

Adrian Mitchell: After interest and taxes, we expect adjusted diluted EPS of $2.45 to $2.85, which does not assume any share repurchase. Additionally, we anticipate $130 to $150 million of asset sale proceeds and $90 million to $115 million of asset sale gains, primarily reflecting the at least 50 plan closures this year. We will continue to deploy capital prudently to ensure financial flexibility and invest in long-term profitable growth. For the first quarter of 2024, we expect net sales of $4.72 to $4.87 billion. As a reminder, we are anniversarying a change in our Macy's return policy that benefited the first quarter of 2023 by approximately $80 million relative to the current quarter. Total revenues of $4.85 to $5 billion, with other revenue at about 3% of net sales. We expect credit card revenues, excluding any impact of the proposed late fee ruling, to be approximately 77% of other revenue, or about $110 million, compared to 85% or $162 million last year.

Speaker Change: After interest and taxes, we expect adjusted diluted EPS of $2 45.

Speaker Change: The $2 85.

Speaker Change: Which does not assume any share repurchases.

Speaker Change: And we anticipate $130 million to $150 million of asset sale proceeds and 90 million to $115 million of asset sale gains primarily reflecting the at least 50 plant closures this year.

Speaker Change: We will continue to deploy capital prudently to ensure financial flexibility and invest in long term profitable growth.

Speaker Change: For the first quarter of 2024, we expect net sales of $4 72 to $4 $87 billion.

Speaker Change: As a reminder, we are anniversarying a change in our macys return policy, which benefited the first quarter of 2023 by approximately $80 million relative to the current quarter.

Speaker Change: Total revenues of $4 $85 billion to $5 billion with other revenue at about 3% of net sales.

Speaker Change: We expect credit card revenues, excluding any impacts for the proposed late the ruling to be approximately 77% of other revenue or about $110 million compared to 85% or $162 million last year.

Adrian Mitchell: We expect gross margin rates to be down no more than 40 basis points compared to last year, reflecting a normalized clearance and promotional cycle compared to the first quarter of last year, when we did not have enough spring transitional products. Adjusted EPS is expected to be between $0.10 and $0.16, which assumes no asset sale gain. Please note that last year's change in return policy benefited EPS by 7 cents in the first quarter relative to the current quarter. And finally, end-of-quarter inventories are expected to be relatively flat compared to last year. Beginning in fiscal 2025, under our bold new chapter strategy, we expect Macy's Inc., inclusive of the remaining non-go-forward locations that have not yet closed, to achieve annual O plus L plus M comp sales growth in the low single-digit range and annual SG&A dollar growth below the historic rate of inflation of 2 to 3 percent.

Speaker Change: We expect gross margin rate to be down no more than 40 basis points to last year, reflecting a normalized clearance and promotional cycle compared to the first quarter of last year. When we did not have enough spring transitional product.

Speaker Change: Adjusted EPS to be between <unk> and.

Speaker Change: <unk> 16.

Speaker Change: Which assumes no asset sale gains please.

Speaker Change: Please note last year's change in return policy benefited EPS by <unk> <unk> in the first quarter relative to the current quarter.

Speaker Change: And finally end of quarter inventories to be relatively flat to last year.

Speaker Change: Beginning in fiscal 2025 under our bold new chapter strategy, We expect Macy's Inc. Inclusive of the remaining non go forward locations that had not yet closed to achieve annual <unk> am comp sales growth in the low single digit range.

Speaker Change: Annual SG&A dollar growth below the historic rate of inflation of 2% to 3%.

Adrian Mitchell: Annual Adjusted EBITDA Dollar Growth in the Mid-Single-Digit Range, Capital spend to be below 2024 levels as we remain disciplined with our use of capital, and Free Cash Flow to return to pre-pandemic levels, allowing us to provide meaningful value for our shareholders. In summary, we end fiscal 2023 with momentum and in a position of financial strength with over $1 billion of cash in our balance sheet. We enter this year committed to making the tough decisions necessary to return to sustainable and profitable sales growth. While 2024 is a transition and investment year, our plan for future value creation is clear. We have the wherewithal to invest in growth and the team to pursue the transformative actions required to strengthen Macy's Inc. We are confident this will result in top and bottom line expansion, meaningful cash flow generation, and shareholder value creation. We will keep you updated on our progress against the financial and operational goals we set out today. With that said, I would like to hand it back over to Tony.

Speaker Change: Annual adjusted EBITDA dollar growth in the mid single digit range.

Speaker Change: Capital spend to be below 2024 levels as we remain disciplined with our uses of capital.

Speaker Change: And free cash flow to return to pre pandemic levels, allowing us to provide meaningful value for our shareholders.

Speaker Change: In summary, we ended fiscal 2023 with momentum and in a position of financial strength with over $1 billion of cash on our balance sheet. We.

Speaker Change: We entered this year committed to making the tough decisions necessary to return to sustainable and profitable sales growth.

Speaker Change: While 2024 is a transition and investment year are planned for future value creation is clear.

Speaker Change: We have the wherewithal to invest in growth and the team to pursue the transformative actions required to strengthen Macy's Inc.

Speaker Change: We are confident this will result in top and bottom line expansion meaningful cash flow generation and shareholder value creation. We will keep you updated on our progress against the financial and operational goals, we set out today.

With that I would like to hand, it back over to Tony.

Tony Spring: Thanks, Adrian. Let me briefly touch on the announcement that our accounts management has nominated nine individuals to stand for election to the Macy's Inc. board of directors at our annual 2024 meeting. As we have shared, our board is evaluating these candidates and will present its recommendation in our proxy statement. These nominations follow the December 1, 2023 unsolicited non-binding proposal from our Customs Brigade, and for additional details, we refer you to the two press releases that we have already issued on this matter.

Tony: Thanks Adrian.

Tony: Let me briefly touch on the announcement that our account management has nominated nine individuals to stand for election to the Macy's Inc. Board of directors at our annual 2024 meeting as.

Tony: As we have shared our board is evaluating these candidates and we will present its recommendation in our proxy statement. These nominations followed the December one 2023 unsolicited non binding proposal from our CASM Brigade and for additional details. We refer you to the two press releases that we have already issued on this matter.

Tony Spring: As the purpose of today's call is to discuss our financial results and outlook, as well as our bold new chapter strategy, we ask that you keep your questions and comments focused on those topics. Before turning to Q&A, I'd like to end with this: evolution is in our DNA.

Tony: As the purpose of today's call is to discuss our financial results and outlook as well as our bold new chapter strategy. We ask that you keep your questions and comments focus here.

Tony: Before turning to Q&A I'd like to end with this evolution is in our DNA and $18 58, RH Macy open to dry goods store on 14th Street and six Avenue and 92, he created a new shopping district with Herald square and we have been a cultural touch point ever since we are leaders not followers.

Tony Spring: In 1858, R.H. Macy opened a dry goods store on 14th Street and 6th Avenue. In 1902, he created a new shopping district with Herald Square, and we've been a cultural touchpoint ever since. We are leaders, not followers. While we have missed the mark in some years, we are self-aware and have developed a bold strategy to deliver a better experience for our customers. As an organization, we are fully aligned on returning Macy's Inc. to top and bottom line growth, accelerating free cash flow generation, and unlocking shareholder value. We have the team in place to do it.

Tony: While we have missed the mark in some years, we're self aware and have developed a bold strategy to deliver a better experience for our customers.

Tony: As an organization we are fully aligned on returning Macy's, Inc to top and Bottomline growth accelerating free cash flow generation and unlocking shareholder value.

Tony: We have the team in place to execute our senior leaders of our powerful group recently hired external and internal talent with years of institutional knowledge. This team with their diverse backgrounds and viewpoints are emblematic of our vision for the new modern Macy's, Inc. With Adrian Eni, they are leading our people and evolving our culture.

Operator: Our senior leaders are a powerful group of recently hired external and internal talent with years of institutional knowledge. This team, with their diverse backgrounds and viewpoints, is emblematic of our vision for the new modern Macy's Inc. Together, with Adrian and I, they are leading our people and evolving our culture to bring our vision to reality. As we embark on our pivotal new chapter, we are confident that we are building a stronger Macy's Inc. that is well-positioned to thrive and create meaningful value for all of our stakeholders. With that, operator, we are ready for questions. Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.

Tony: To bring our vision to reality.

Tony: As we embark on our pivotal new chapter we are confident that we are building a stronger Macy's, Inc. That is well positioned to thrive and create meaningful value for all of our stakeholders with that operator, we are ready for questions.

Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate your line is in the question queue.

Speaker Change: You May press star two if you'd like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. Please limit yourselves to one question and one follow-up. Our first question comes from Matthew Boss with J.P. Morgan. Please proceed with your question. Great, thanks.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Please limit yourselves to one question and one follow up.

Speaker Change: Our first question comes from the line of Matthew Boss with Jpmorgan. Please proceed with your question.

Matthew Robert Boss: Great. Thanks.

Tony Spring: So, Tony, on the bold new strategy, the bold new chapter strategy, could you walk through near-term actions that you're prioritizing to strengthen the Macy's nameplate and just elaborate on the competitive advantage you see from executing your portfolio company approach over the next multi-year? And then for Adrian, could you just help speak to sales trends post-holiday, what you're seeing out there, and how best to think about comps in the first half versus the second half of the year? Thanks, Matt.

Matthew Robert Boss: So Tony on the bold new strategy at the bold New chapter strategy could you walk through near term actions that youre prioritizing to strengthen the macys nameplate and just elaborate on the competitive advantages you see from executing your portfolio company approach multi year and then for Adrian could you just helps.

Adrian: Speak to sales trends post holiday, what youre seeing out there and how best to think about comps in the first half versus back half of the year.

Speaker Change: Thanks, Matt.

Tony Spring: The focus on the Macy's nameplate is threefold. One is to address the underproductive assets within the franchise. Hopefully, that will be about 50 assets monetized this year. If you recall from the comments in the opening remarks, there's a big delta in sales performance between the go-forward fleet and the non-go-forward fleet on both comp store sales and four-wall EBITDA. In terms of actions that we're taking, we have focused ourselves on the first 50 to make sure that those stores are emblematic of what the future of Macy's brand will be, and that includes elevated merchandise assortments, more powerful visual presentations, and additional staffing in areas like women's shoes and ready-to-wear. The other piece, I would say, is ensuring that our digital experience is more consistent.

Speaker Change: The focus on the Macys nameplate is threefold one is too.

Speaker Change: Dress the under productive assets within the franchise hopefully that will be about 50 assets monetize this year. If you recall from the comments in the opening remarks, there is a big Delta in sales performance between the go forward fleet in the non go forward fleet on both comp store sales.

Speaker Change: Four wall EBITDA in terms of actions that we're taking we have focused ourselves on the first 50 to make sure that those stores are emblematic of what the future of macys brand will be and Thats elevated merchandise assortments more powerful visual presentations additional staffing in areas like women's shoes.

Speaker Change: And ready to wear.

Speaker Change: The other piece I would say is ensuring that our digital experience is more consistent it's providing product pools that allow you to have the selection and choice without fatigue, and making sure that there is a level of inspiration throughout the brand touch points with the consumer.

Tony Spring: It's providing product pools that allow you to have selection and choice without fatigue and making sure that there's a level of inspiration throughout the brand, touch points with the consumer. And finally, it's leaning into the breadth of our portfolio, so it's opening stores while we're closing stores, looking at Macy's small format opportunities, expanding the reach of Bloomingdale's, and leaning into the growth opportunity in Blue Mercury. Adria, Good morning, Matt. Thank you, Tony. Good morning, Matt.

Speaker Change: And finally, it's leaning into the breadth of our portfolio. So it's opening stores why we're closing stores looking at Macy's small format opportunities expanding the reach of bloomingdale's and leaning into the growth opportunity in blue Mercury.

Speaker Change: Adrian.

Adrian: Good morning, Matt. Thank you, Tony and good morning, Matt <unk> with you in.

Adrian Mitchell: Good to be with you. In terms of the sales trend, let me frame it this way. When we think about our performance in the fourth quarter, our sales were very much in line with our expectations. And when we think about some of the testing and investment that we did in the fourth quarter, we believe that brings us into momentum into this transition and investment year of 2024. As we think about the first quarter, there are a few things that I think are important to note. The first is that we had about an $80 million benefit last year from our return policy change from 90 days to 30 days. So we're lapping that this year in terms of the first quarter.

Adrian: In terms of the sales trends, let me frame. It this way when we think about our performance in the fourth quarter. Our sales were very much in line with our expectations.

Adrian: And when you think about some of the testing and investment that we did in the fourth quarter, we believe that brings us into momentum into this transition at.

Adrian: An investment year of 2024, as we think about the first quarter. There are few things that I think is important to note. The first is that there was about an $80 million benefit last year from our return policy changed from 90 days to 30 days. So we're lapping that this year in terms of the first quarter from a bottom line standpoint, just reiterate that there.

Adrian Mitchell: From a bottom line standpoint, just reiterate that there aren't any asset sale gains expected in the first quarter, but we had asset sale gains in the first quarter of last year. As we think about the second quarter, we do not plan to repeat the elevated levels of clearance markdowns that we had last year. So from that perspective, we will not be lapping that.

Adrian: Arent any asset sale gains expected in the first quarter, but we had asset sales gains in the first quarter of last year as we think about the second quarter, we will not we do not plan to repeat the elevated levels of clearance markdowns that we had last year. So.

Adrian: From that perspective, we will not be not be lapping that but from a sales standpoint, we're making the investments necessary for growth. We've done a number of testing coming out of last year that are being scaled as 2022, and the first 50, which gives us confidence and conviction in the traction around the topline sales that we actually have provided in our guidance.

Adrian Mitchell: But from a sales standpoint, we're making the investments necessary for growth. We've done a number of tests coming out of last year that are being scaled, as Tony pointed out in the first 50, which gives us confidence and conviction and the traction around the top line sales that we actually have provided in our guidance. The key thing to keep in mind is that as we think about 2025, we expect to get back to low single-digit comp sales growth. In the fourth quarter, when we tested our assortment changes, we saw a 350-basis-point improvement in trend in those stores.

Adrian: The key thing to keep in mind is as we think about 2025, we expect to get back to low single digit comp sales growth.

In the fourth quarter, when we tested our assortment changes we saw a 360 basis point improvement in trend in those stores are staffing changes also showed and yielded favorable results and we would expect to have more traction on our bold new strategy or a bold new chapter strategy initiatives as we progress through the year and stores.

Adrian Mitchell: Our staffing changes also showed and yielded favorable results, and we expect to have more traction on our bold new strategy or bold new chapter strategy initiatives as we progress through the year in stores, in digital, in marketing, in different parts of our business. Quarter-to-date, we're not providing any update on quarter-to-date performance because we have a lot of quarters still ahead of us.

Adrian: Digital and marketing in different parts of our business quarter to date, we're not providing any update on quarter to date performance. We have a lot of the quarters still ahead of us we're reporting a little bit earlier this year than we did last year than prior years. So we look forward to sharing with you our updated view on first quarter later of the year.

Adrian Mitchell: We're reporting a little bit earlier this year than we did last year and in prior years, so we look forward to sharing with you our updated view on the first quarter later in the year. Great. Thanks for all the color.

Speaker Change: Great. Thanks for all the color best of luck.

Tony Spring: Best of luck. Thank you. Thank you. Our next question comes from the line of Oliver Chen with TD Cowen. Please proceed with your question. Hi Tony and Adrian.

Thank you thanks, Matt.

Speaker Change: Thank you. Our next question comes from the line of Oliver Chen with TD Cowen. Please proceed with your question.

Oliver Chen: Hi, Tony and Adrian as we think about the guidance on the negative to positive comp what are key factors that could drive.

Tony Spring: As we think about the guidance on the negative to positive comp, what are the key factors that could drive upside or downside as you monitor a fairly volatile environment? And Adrian, what's incorporated for merchandise margin? You've done a very good job managing inventories tightly, and merchandise margin. I would love to know on the guidance, what you're thinking. And then, as we look forward to following up, there are a lot of things happening quite positively with the marketplace and advertising. As well as luxury, as you think about Bloomingdale's and Blue Mercury and see the momentum there, how do we dimensionalize how those factors will contribute to sales and margins and, if they can help, you know, how they'll contribute to both of those to generate more consistently positive revenue growth? Thank you. Thanks, Oliver. I'll take the first piece of it.

Oliver Chen: <unk> Kutter downside as you monitor a fairly volatile environment and Adrian what's incorporated for our merchandise margin you've done a very good job managing inventories tightly and merchandise margin with loved it now in the.

Oliver Chen: On the guidance, what you're thinking and then as we look forward to follow up I mean, there's a lot of things happening.

Oliver Chen: Positively with marketplace and advertising.

Oliver Chen: As well as luxury as you think about bloomingdale's and blue Mercury and seeing the momentum there.

Oliver Chen: How do we dimensionalize.

Oliver Chen: How those factors will contribute to sales and margins and if they can help.

Oliver Chen: How they will contribute to both of those.

Oliver Chen: Generate more consistently positive revenue growth. Thank you.

Speaker Change: Thanks, Oliver I'll take I'll take the first piece of it so I think in terms of the range on our sales forecast we have.

Tony Spring: So I think in terms of the range on our sales forecast, we have a lot of newness in the spring season, whether that be the composition of our inventory in the first quarter, more seasonally appropriate, the right mix of both newness as well as transitional product. I think it's the lapping of the expansion of Nike. So we were not up against Nike until the third quarter of this year.

Speaker Change: A lot of newness in the spring season, whether that'd be the composition of our inventory in the first quarter more seasonally appropriate the right mix of both newness as well as transitional product I think it's the lapping of the expansion of Nike. So we're not up against Nike until the third quarter.

Tony Spring: It's the introduction of Under Armour into more stores. I think it's the being up against less exiting of the private brand portfolio and the full year of On 34th and the reimagination of INC. So I think that from within the Macy's construct on both private brand and new market brands, we feel like we're entering 2024 with more upside, and the headwinds have come down a little bit. As it relates to the contribution of Bloomingdale's and Bloomergery, they're clearly smaller parts of our portfolio today. They both have ample opportunity for growth, and both are leaders within their categories.

Speaker Change: Of this year is the introduction of under armour into into more stores I think it's the being up against less <unk>.

Speaker Change: Existing of the private brand portfolio and the full year of <unk>, 34th and the re imagination of IMC.

Speaker Change: So I think that from within the Macy's construct on both private brand and new market brands, we feel like we're entering 2024 with more upside and the headwinds come down a little bit.

Speaker Change: As it relates to the contribution of Bloomingdale's and Blue Mercury. They are clearly smaller parts of our portfolio today. They have ample opportunity for growth both are leaders within their categories. The beauty market is obviously far bigger than our fair share today and bloomingdale's is coming off of several years of good performance and as the opera.

Tony Spring: The beauty market is obviously far bigger than our fair share today, and Bloomingdale's is coming off several years of good performance and has the opportunity to capitalize on the disruption in the marketplace. They are not solely a luxury brand, which means they have growth potential across a number of different categories with a very loyal multi-generational customer. Oliver, it's great to be with you this morning.

Speaker Change: <unk> to capitalize on the disruption in the marketplace. They are not solely a luxury brand, which means they have growth potential across a number of different categories with a very loyal and multi generational customer.

Speaker Change: Oliver it's great to be with you. This morning, let me speak to your comments around merchandise margin and gross margin. We've been very disciplined on inventory management over the years and that continues to serve us quite well with the 340 basis point improvement over last year in the fourth quarter merchandise margin, it's a combination of managing our.

Adrian Mitchell: Let me speak to your comments around merchandise margin and gross margin. You know, we've been very disciplined in inventory management over the years, and that continues to serve us quite well. With the 340 basis point improvement over last year in the fourth quarter on merchandise margin, it's a combination of managing our inventory well, and we've talked a lot about volume, about freshness, and about composition, but it's also about managing our gross margin expense appropriately, like delivery expense. We spoke to a number of the initiatives that we're doing as we look at our end-to-end operations, and what you see with the 80 basis point improvement in delivery expense is really around better allocation and simplifying our fulfillment processes, so we're benefiting from that.

Speaker Change: Inventory, well and we've talked a lot about volume about freshness and about composition, but also it's about managing our gross margin expense appropriately like delivery expense, we spoke to a number of the initiatives that we're doing as we look at our end to end operations and what you see with the 80 basis point improvement in delivery expense, it's really around better allocate.

Speaker Change: <unk> and simplifying our fulfillment processes. So we're benefiting from that as we continue to think about these disciplines going forward I'm really excited about what it means under cost accounting. We are now fully on cost accounting from an inventory management standpoint, we're now able to focus our energies less on markdown management, but much.

Adrian Mitchell: As we continue to think about these disciplines going forward, I'm really excited about what it means under cost accounting. We're now fully in cost accounting. From an inventory management standpoint, we're now able to focus our energies less on markdown management but much more on the demand and sales of our products than ever before. From a margin standpoint, by having SKU-level profitability, we can make really good decisions about the SKUs we keep versus the SKUs we edit, and for the SKUs we keep, where's the most profitable sub-channel to place them? Should it be owned by our network? Should it be licensed?

Speaker Change: More so on the demand and selling of our products more than ever before from a margin standpoint by having SKU level profitability. We can make really good decisions about the skus, we keep versus excuse me edits and for the Skus, we keep what's the most profitable sub channel the place it should it be owned in our network should it be licensed or <unk>.

Adrian Mitchell: Or should it be the marketplace? Then the third piece is just the cultural change that Tony and I talk a lot about, shifting away from a focus on markdown management to really selling and serving the customer well, so we're very, very pleased with that. When we think about marketplace, we're excited about it from two dimensions. One is just the customer experience, broader assortment, great styles, edited selection, but also, again, from a profit pool standpoint, being able to have that additional flexibility and that additional dimension of carrying an assortment that may be more profitable for us on marketplace versus in our own distribution channel. So merchandise margin and gross margin will continue to be a focus for us, and we're excited about the additional initiatives we plan to bring online within the operations of the organization across the portfolio over the next several years. Best regards, thanks. Thank you all.

Speaker Change: Would it be marketplace and then the third piece is just a cultural change that Tony and I talk a lot about shifting from away from a focus of markdown management to really selling and serving the customer well. So we're very very pleased with that when we think about marketplace. We're excited about it from two dimensions. One is just the customer experience broader assortment gray.

Speaker Change: Styles edited selection, but also again from a profit pool standpoint, being able to have that additional flexibility and that additional dimension of carrying assortment that may be more profitable for us on marketplace versus in our own distribution channel. So merchandise margin gross margin will continue to be a focus for us and we're excited about the.

Speaker Change: <unk> initiatives, we plan to bring online within the operations of the organization across our portfolio over the next several years.

Speaker Change: That's regards thanks.

Adrian Mitchell: Thank you. Our next question comes from the line of Brooke Roche with Goldman Sachs. Please proceed with your question. I was hoping you could provide a little bit more...

Speaker Change: Thank you I'll ask Oliver.

Oliver Chen: Thank you. Our next question comes from the line of Chris with Goldman Sachs. Please proceed with your question.

Chris: Good morning, and thank you for taking our question I was hoping you could provide a little bit more context on the plan to close the 150, Macy's stores and invest in the first 50, what actions are you taking to protect the ecommerce sales and routine customers that may be impacted by these closures and within the first 50 can you speak to how this.

Tony Spring: Thank you all for joining us today. Thank you, Brooke, for the question. First, as it relates to the decision on the closure of the 150, I really just want to underscore the dimension and difference between the go-forward fleet and the not-go-forward fleet. The 150 stores represent 25% of our gross square footage at Macy's Inc. but less than 10% of our sales.

Chris: That compares to previous top door strategy, such as the growth 50 strategy, which we saw a few years ago. Thank you.

Chris: Thank you Brook for the question.

Tony Spring: There was a 500 basis point difference in sales performance in 2023 between those stores and our go-forward stores, and over 950 basis points difference in our EBIDTA performance on a four-wall basis between the go-forward fleet and the not-go-forward fleet. So the economics obviously make sense, but what I would say is the team spent a greater part of six and a half, seven months doing a complete diagnostic on our entire portfolio, looking at demographics, psychographics, digital demand, the condition of the center, the condition of our stores, capital required to bring the stores to standard, and I think we made a decision on our go-forward fleet that was far more comprehensive than it would have been in the past So I feel good about the go-forward fleet, the decisions we've made, and the value to monetize is greater than the value to operate in these stores. So relative to the differences between the First 50 and any other focus store plan previously, this one is rooted in customer feedback. We talked to 60,000 customers to understand what they were looking for from the Macy's brand.

Speaker Change: First as it relates to the decision on the closure of the 150 I really just want to underscore the dimension and difference between the go forward fleet in the non go forward fleet.

Speaker Change: 150 stores represent 25% of our gross square footage at Macy's, Inc, but less than 10% of our sales. There was a 500 basis point difference between the sales performance in 2023 between those stores and our go forward stores and over 950 basis points difference in our EBITDA performance on a four wall basis between the go forward fleet.

Speaker Change: And the knockoff vertically so the economics, obviously makes sense, but what I would say is the team spent greater part of 657 months doing a complete diagnostic on our entire portfolio looking at demographic psychographics digital demand the condition of the center the condition of our store capital required to bring.

Speaker Change: The stores to standard and I think we made a decision on our go forward fleet that was far more comprehensive than it would have been in the past. So I feel good about the go forward fleet. The decisions, we've made and the valued us monetize is greater than the value to operate in these stores.

Speaker Change: Relative to the differences between the first 50 and any other.

Speaker Change: Focused store planned previously this one is rooted in the customer feedback we talked to 60000 customers to understand what they were looking for from the Macy's brand. It was an enjoyable shopping experience. It was clear in under easy to understand value and it was compelling product. So these first 50 stores are going to have elevated merchandise.

Tony Spring: It was an enjoyable shopping experience. It was clear and easy to understand value, and it was a compelling product. So these First 50 stores are going to have elevated merchandise assortments and better visual presentations.

Speaker Change: <unk>, they're going to have better visual presentations theyre going to have additional staffing in important areas like women's shoes, and women's ready to wear theyre going to have the kind of eventing that a local store is looking for and then finally your question about digital demand recapture.

Tony Spring: They're going to have additional staffing in important areas like women's shoes and women's ready-to-wear. They're going to have the kind of staffing that a local store is looking for. And then finally, your question about digital demand recapture. We have stores in these markets beyond the stores we're closing, not every market but most markets, so we'll be looking at neighboring stores to capture that demand as well as digital outreach to make sure that we lose as little as possible. Adria?

Speaker Change: Have stores in these markets beyond the stores were closing not every market, but most markets. So we'll be looking at neighboring stores to capture that demand as well as digital outreach to make sure that we lose as little as possible.

Tony Spring: Just to build on Tony's point, I would just add a few more things. The first thing is with regard to the monetization. We expect to close these stores as soon as possible without compromising value for our shareholders. And as you know, we have a track record over the past several years, since 2015, of over $2.4 billion of sales proceeds. We monetized real estate last year.

Speaker Change: Just to build on <unk> point I would just add a few more things. The first thing is with regards to the monetization. We expect to close these scores as soon as possible without compromising value for our shareholders and as you know we have a track record over the past several years since 2015 of over $2 4 billion of sales.

Proceeds we monetize real estate last year, we have good real estate. So we're encouraged by that the second thing just building on Tony's point is the ability to distort investments and our energy of our leadership team on the 350 go forward fleet, which we believe have the capacity to grow they are in solid locations customers are shopping them.

Adrian Mitchell: We have good real estate, so we're encouraged by that. The second thing, just building on Tony's point, is the ability to distort investments and the energy of our leadership team on the 350 go-forward fleet, which we believe have the capacity to grow. They're in solid locations.

Adrian Mitchell: Customers are shopping for them. We've done the research. But more importantly, as we think about this combination of really optimizing our fleet, which includes the omni-market, not just the stores, we believe that we can unlock value for our shareholders with this strategy. Thank you, Brett.

Speaker Change: We've done the research, but more importantly, as we think about this combination of really optimizing our fleet, which includes the omni market not just the stores. We believe that we can unlock value for our shareholders with this strategy.

Speaker Change: Okay.

Speaker Change: Great. Thanks, so much.

Speaker Change: Thank you Brett Thank you.

Adrian Mitchell: Thank you. Thank you. Our next question comes from the line of Ashley Helgens with Jeffreys. Please proceed. Hi, this is Blake Donfraschi.

Speaker Change: Thank you. Our next question comes from the line of Ashley Halligan with Jefferies. Please proceed with your question.

Ashley Halligan: Hi, Blake contrast, we thanks for taking our question I wanted to ask on the evolution of the medium term EBITDA Guide I know previously you had mentioned low double digit margin range now it's mid.

Tony Spring: Thanks for taking our question. I wanted to ask about the evolution of the medium term EFA.guide. I know previously you mentioned the low double-digit margin range; now it's mid-single-digit growth, which is above comp growth. Just wondering about that evolution, how much the store closures impact is having on it, and then talk about the factors that would still be able to get you maybe to that low double-digit range, if possible. Good morning, Blade.

Ashley Halligan: Single digit growth, which is above comp growth.

Ashley Halligan: Wondering about that evolution.

Ashley Halligan: How much the store closures impact.

Blake: Having on it and then talk about the factors that would still be able to get you maybe to that low double digit range if possible.

Speaker Change: Good morning, Blake, it's great to be with you.

Adrian Mitchell: It's great to be with you. You know, the important thing that we would say here is that we're pursuing a bold new chapter strategy, which is designed for profitable growth. That's what we expect of ourselves, and that's what our shareholders and our board expect of us. We are committed to driving EBITDA expansion under this strategy. But with this strategy, we've effectively changed how we're measuring our progress.

Speaker Change: Important thing that we would say here is that we're pursuing a bold new chapter strategy, which is designed for profitable growth. That's what we expect of ourselves and that's what our shareholders and our board expects of US we are committed to driving EBITDA expansion under the strategy, but with this strategy, we've effectively changed how we're measuring our progress with Tony and I've spoken to you.

Adrian Mitchell: What Tony and I have spoken about on this call are the financial and operating outcomes that we expect and are holding ourselves accountable to track our progress. But we remain very committed to EBITDA expansion and very committed to that growth. As we talked about, you know, starting next year, we expect EBITDA to expand in the mid-single-digit range. And that's because of a better customer experience, the cost disciplines that we're putting in place, the healthy and elevated gross margin profile that we continue to sustain because of our inventory discipline, our inventory discipline, as well as our cost accounting practices that are coming online this year. So we're very pleased with how we're approaching it, but we expect and commit to continued EBITDA expansion going forward. Thank you, that's very helpful.

Speaker Change: On this call are the financial and operating outcomes that we expect and are holding ourselves accountable to track our progress, but we remain very committed to EBITDA expansion and very committed to that growth as we talked about starting next year, we expect EBITDA to expand at the mid single digit range and that's about a better customer.

Speaker Change: Experience the cost discipline that we're putting in place the healthy and elevated gross margin profile that we continue to sustain because of our inventory discipline, our inventory inventory discipline as well as our cost accounting practices that are coming online. This year. So we are very pleased with how we're approaching it but we expect and commit to continued.

Speaker Change: EBITDA expansion going forward.

Speaker Change: Got it. Thank you that's very helpful. And then a follow up is on the increased focus on it just having a relevant merchandise assortment was wondering if you could talk about.

Tony Spring: And then our follow-up is on the increased focus on just having a relevant merchandise assortment. I was wondering if you could talk about how much you are leaning into existing brands versus adding entirely new brands versus private label and maybe just talk about any other structural or organizational changes you're making to really kind of ramp up that assortment. Sure, Blake. I think the importance of the merchandise assortment is the right combination of work on refreshing and modernizing our private brands, which I think we've spoken about a good amount over the last few quarters. We feel like we are making solid progress.

Speaker Change: How much maybe leaning into existing brands versus adding entirely new brands versus private label and maybe just talk about any other structural organizational changes youre, making to really kind of ramp up that assortment relevance.

Speaker Change: Sure Blake I think the importance.

Speaker Change: The importance of the merchandise assortment has the right combination of work on refreshing and modernizing our private brands, which I think we've spoken to a good amount over the last few quarters. We feel like we are making solid progress go forward performance of our private brand fleet is well performing to our plan and we.

Tony Spring: The go-forward performance of our private brand fleet is well-performing to our plan, and we just need to get through the remaining disposition of the private brands that are not going-forward. So, so far, I feel good about the work that we've done in private branding. I have a little more work to do to exit the remaining private brands, but that should be a growth vehicle for us in the years to come. In terms of retail brands, we're excited about Nike.

Speaker Change: It needs to get through the remaining disposition of private brands that are not go forward. So so far feel good about the work that we've done in private brands have a little more work to do to exit the remaining private brands, but that should be a growth vehicle for us in the years to come in terms of market brands. We're excited about Nike we're.

Tony Spring: We're excited about the additional launch or expansion of Under Armour. We have a number of other brands that we'll be launching over the course of the year, but this is an exercise that exists within the merchant organization now that we have a full category responsibility and are looking at both owned and licensed, inclusive of how we capitalize on the growth of the marketplace. We want to have an assortment that offers a range and variety but doesn't have a level of redundancy.

Speaker Change: About the <unk>.

Speaker Change: Additional.

Speaker Change: Launch or expansion of under armour, we have a number of other brands that we'll be launching over the course of the year, but this is an exercise that exists within the merchant organization now that we have a full category responsibility and looking at both owned and licensed inclusive of how we capitalize on the growth of marketplace. We wont.

Speaker Change: Have a.

Speaker Change: Assortment that offers a range of variety, but doesn't have the level of redundancy. There is a level of SKU rationalization that we're going through to make sure that in every category. We are offering the customer is something that we can both be in stock on the size and color basis, but offer them also compelling value and relevancy.

Tony Spring: There's a level of skew rationalization that we're going through to make sure that in every category, we are offering the customer something that we can both be in stock on, on a size and color basis, but also offer them compelling value and relevancy. So, I would say more work to come, but very pleased with the initial results in the private brand and the work we're beginning now in earnest in the market brand. Thank you both.

Speaker Change: So I would say more core work to come but very pleased with the initial results in private brands and the work we're beginning now in earnest in market brands.

Speaker Change: Understood. Thank you both.

Adrian Mitchell: Thank you, Blake. Thank you. Our next question comes from the line of Paul Lejuez with Citi. Please proceed. Hey, thanks, guys. A couple quick ones.

Speaker Change: Thank you Blake.

Speaker Change: Thank you. Our next question comes from the line of Paul Lajoie with Citi. Please proceed with your question.

Paul Lejuez: Hey, Thanks, guys.

Tony Spring: Curious about your transaction versus ticket assumptions within your comp expectations, both for this year and as you think about the longer term dynamic. Second, backstage, just curious about this new plan, this new structuring plan, what does it mean for the backstage business? And then last, Adrian, probably for you, marketplace accounting, how does that work? You know, what do you think about recording in terms of sales? How does that flow through the P&L? Thanks.

Paul Lejuez: Couple of quick ones I'm curious about your transaction versus ticket assumptions within your comp expectations for this year and I should think about the longer term dynamic.

Speaker Change: Second backstage just curious whats the.

Paul Lejuez: This new plan this new restructuring plan, what does it mean for the backstage business and then last Adrian probably few mark marketplace the accounting.

Paul Lejuez: On marketplace sales, how does that work what are you recording in terms of sales how does that flow through the P&L. Thanks.

Tony Spring: Thanks, Paul, for the questions. As it relates to the opportunity and off-price, we see backstage as being an important vehicle, not just for productivity, but also capturing the value-conscious consumer at Macy's, and obviously, Bloomingdale's off-price continues to outperform, but we see that as a growth vehicle for that brand as well. So off-price to luxury backstage remains an important ingredient in our overall value equation. In terms of transaction and ticket assumptions for 2024, we see low single-digit growth in AUR, the traffic being slightly down from a year ago, and conversion holding somewhat stable. So the consumer remains under pressure.

Speaker Change: Thanks, Paul for the questions.

Speaker Change: As it relates to.

Speaker Change: The opportunity in off price, we see backstage as being an important vehicle not just for productivity, but also capturing the value conscious consumer at Macy's and obviously bloomingdales off price continues to outperform and we see that as a growth vehicle for that brand as well so off price the law.

Speaker Change: <unk> remains an important ingredient in our overall value equation in terms of transaction and ticket assumptions for 2024, we see our LOE.

Speaker Change: Single digit growth in AUR.

Speaker Change: The traffic being slightly down to a year ago and in conversion holding somewhat stable. So the consumer remains under pressure and I'm not going to worry about what we can control, but the team is highly focused on leaning into the things that we've worked on over the last several months, which is creating a better and more compelling assortment.

Tony Spring: I'm not going to worry about what we can't control, but the team is highly focused on leaning into the things that we've worked on over the last several months, which is creating a better and more compelling assortment, making sure that we're working much harder to modernize our marketing and digital exposure, and working in-store to make sure that the presentation is better than it's been in the past. I'm excited about the visual investments we've made and, certainly, the focus we have on our first 50. Paul, just let me give you three metrics and then I'll walk through kind of how it flows through with Marketplace, comp sales growth, net sales, and EBITDA. When we look at our comp sales growth, we call it O plus L plus M. That is reflected from a Marketplace GMV standpoint in our comp sales numbers. For every dollar of GMV, we get what we call a take rate or commission rate, which we call a kind of marketplace revenue, and that is actually reflected in our net sales. The operation there operates a lot like our license sales business, so that take rate is a percentage of the GMV.

Speaker Change: Making sure that we're working much harder to modernize our marketing and digital exposure and working in store to make sure that the presentation is better than it's been in the past and excited about the visual investments we've made and certainly the focus we have on our first 50.

Speaker Change: Paul just let me give you three metrics and then I'll walk through kind of how it flows through with marketplace comp sales growth net sales and EBITDA. When we look at our comp sales growth we call. It all plus ALP us and that is reflected from a marketplace GMB standpoint in our comp sales number.

Speaker Change: For every dollar of Gmg, we get what we call a take rate or commission rate, which we call kind of marketplace revenue and that is actually reflected in our net sales. The operation. There operates a lot like our license sales business.

Speaker Change: That take rate as a percentage of the GMB the EBIT.

Adrian Mitchell: The EBITDA pretty much flows through. There are some expenses for our team and our licensing around the marketplace platform, but what's nice about the EBITDA benefit is that with the scale of the assortment on the marketplace, the rate of EBITDA increases pretty rapidly, and again, our focus on the marketplace is about the experience, but what we're seeing is a lot of opportunity for growth as we see in Q3 to Q4 and as we think about future years. I guess I would also add, Paul, that the team is highly focused on the incrementality in the marketplace, so the opportunity to pursue brands and categories where we don't have an existing assortment, and we're seeing the best build on those areas in particular. Thank you. Good luck! Thank you, Paul.

Speaker Change: Pretty much flows through there are some expenses of our team and our and our licensing around the marketplace platform, but what's nice about the EBITDA benefit as with scale up our assortment on the marketplace the rate of EBITDA increases pretty rapidly and again, our focus on market places about the experience, but what we're seeing is.

Speaker Change: A lot of opportunity for growth is to be seen Q3 to Q4 and as we think about future years.

Speaker Change: I guess I would also add I would add Paul that the team is highly focused on the incrementals and marketplace. So the opportunity to pursue brands in categories, where we don't have an existing assortment and we're seeing the best build on those areas in particular.

Speaker Change: Thank you good luck.

Speaker Change: Thank you Paul.

Tony Spring: Thank you. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question. Hi, Tony and Adrienne. As you think about the store closures that you're doing, is there any, as you think and the remaining base, what's the geographic spread? How do you think of off mall and on mall?

Speaker Change: Thank you. Our next question comes from the line of Dana Telsey with Telsey Advisor Group. Please proceed with your question.

Dana Lauren Telsey: Hi, Good morning, Tony and Adrian as you think about the store closures that you are doing is there any as you think and then remaining base.

Dana Lauren Telsey: The geographic spread how do you think of off mall and non mall, what does the portfolio look like and then on the private brand expansion and extension sauce state of days this week or last week. How are you thinking about the growth of that going forward and the potential accretion to gross margin. Thank you.

Tony Spring: What does the portfolio look like? And then on the private brand expansion and extension thought state of date, this week or last week, how are you thinking about the growth of that going forward and the potential accretion to gross margin? Thank you. Thanks, Dana, for the questions. You know, we believe in stores.

Dana Telsey: Okay.

Speaker Change: Thanks, Dana for the questions.

Speaker Change: We believe in store. So I think these are always tough conversations not only for the colleagues affected and for our brand partners, but when these stores, 25% of our gross square footage only 10% low less than 10% of our sales theyre under productive and we have to focus on making sure that we have the best stores.

Tony Spring: So I think these are always tough conversations, not only for the colleagues affected and for our brand partners, but when these stores, 25% of our gross square footage, only 10%, less than 10% of our sales, they're underproductive. And we have to focus on making sure that we have the best stores, not the largest number of stores. So, yes, we want to have both a strong on-mall presence and some of the best stores in the country. We want to also pursue off-mall to make sure that we have availability and convenience and where a lot of footsteps are going today. But we're going to remain a majority mall-based freestanding store company with the right complement of off-mall stores to make Macy's and Bloomingdale's more convenient. We're excited about the launch of State of Day. We've gotten a nice early response from the consumers. It's only two and a half weeks on the floor, so we're very pleased there.

Speaker Change: Not the largest number of stores. So yes, we want to have both strong on mall presence some of the best stores in the country. We want to also pursue off mall to make sure that we have.

Speaker Change: Vale ability inconvenience, and where a lot of footsteps are going today, but we're going to remain a majority of Lee mall based freestanding store company with the right complement of off mall stores to make Macy's and bloomingdale's more convenient.

Speaker Change: Excited about the launch its day to day, it's gotten a nice early response from the consumer to only two five weeks on the floor. So pleased there and I think as we've stated on private brand. This is our opportunity to make sure we're filling in white space make sure that we are complementing our market brands. It obviously offers greater margin and.

Tony Spring: And I think, as we've stated about the private brand, this is our opportunity to make sure we're filling in the white space, making sure that we are complementing our market brand. It obviously offers greater margin and greater profit contribution than our market brands, but we also know that our market brands are the majority of our business. So this is a healthy balance that we as merchants need to make sure that we maintain. The right relevant market brands, the right range and variety of price points, and we complement that with the missing elements in white space, price points, and value with what we do in private brands. Thank you, https://www.youtube.com.uk Thank you.

Speaker Change: Greater profit contribution than our market brands, but we also know that our market brands are the majority of our business. So this is a healthy balance that we as merchants need to make sure that we maintain the right relevant market brands, the right range and variety of price points, and we complement that with the missing elements in white space in <unk>.

Speaker Change: <unk> points in value with what we do in private brands.

Speaker Change: Thank you.

Speaker Change: Thanks Dana.

Speaker Change: Thank you. Our next question comes from the line of Michael Binetti with Evercore ISI. Please proceed with your question.

Adrian Mitchell: Our next question comes from the line of Michael Binetti with Evercore ISI. Please proceed with your question. Hey guys, Tony, Adrian, thanks for taking our question. Congratulations on a nice holiday.

Michael Binetti: Tony Adrian Thanks for taking my question Congrats on a nice holiday.

Adrian Mitchell: I just want to ask on, I guess, the gross margin for the first quarter guided down after a pretty impressive beat in the fourth quarter. Could you walk us through the puts and takes a little bit? I understand the transition from the fourth quarter to the first quarter with the return policy change. Adrian, I think you might have said there's no impact from the revenue recognition change, but then the transition from gross margins being down in the first quarter to being up for the rest of the year, and I think they are up pretty meaningfully. Maybe you could just help walk us through that transition a little. Absolutely, and it's great to be with you, Mike.

Michael Binetti: I just wanted to ask on I guess on the gross margin for first quarter guided down after a pretty impressive beat in fourth quarter could you walk us through the puts and takes a little bit I get the transition from fourth quarter to first quarter with the return policy change Adrian I think you Might've said Theres no impact from the revenue recognition change, but then the transit.

Michael Binetti: <unk> gross margins.

Michael Binetti: Being down in first quarter to being up for the rest of the year and I think up pretty meaningfully maybe you could just help walk us through that transition a little.

Adrian: Absolutely and great to be with you Mike.

Adrian Mitchell: Let me just talk a little bit about expectations for the first quarter versus the full year. First, the prior year's first quarter relative to this year included the $80 million that I referenced a little bit earlier, and that equates to about 7 cents of EPS, as I mentioned a little bit earlier in my opening comments. The second thing is our expected Q1 gross margin reflects a more normalized clearance and markdown cycle compared to the first quarter of last year, when we remember we did not have enough spring seasonal product. So that's an important dimension as we think about a little bit higher inventory coming into the quarter, but having that transitional product to drive both top and bottom lines. The third thing I would say is that look, we're investing in our customer experience.

Speaker Change: Let me just talk a little bit about expectations for the first quarter versus full year first the prior year first quarter relative to this year included the $80 million that I referenced a little bit earlier and that equates to about seven tenths of EPS as I mentioned, a little bit earlier in my opening comments. The second thing is our expected Q1 gross margin reflects.

Speaker Change: A more normalized clearance and markdowns sizable compared to the first quarter of last year. When we remember did not have enough spring seasonal products. So that's an important dimension as we think about a little bit higher inventory coming into the quarter, but having that transitional product to drive both top and bottom line. The third thing I would say is look we're investing in our customer experience.

Adrian Mitchell: So based on the research and the tests that we've run, both Tony and I have spoken to that quite a bit in our opening remarks, we believe that we have to invest in the customer experience to grow and grow profitably. And so as we think about also one last thing about asset sale gains, we don't anticipate asset sale gains in the first quarter; we expect that to be all in the fourth quarter of this year. But we did have asset sale gains in the first quarter last year.

Speaker Change: So based on the research and the test that we have Brian both Tony and I have spoken to that quite a bit in our opening remarks, we believe that we have to invest in the customer experience to grow.

Speaker Change: And grow profitably.

Speaker Change: So as we think about also one last thing about asset sale gains, we don't anticipate asset sale gains in the first quarter, we expect that to be all in the fourth quarter of this year, but we did have asset sale gains in the first quarter last year. So that's kind of the composition of how we think about kind of the margin profile in the first quarter relative to the full year.

Adrian Mitchell: So that's kind of a composition of how we think about the kind of the margin profile in the first quarter relative to the full year. Is that specific to gross margins up as much as they are in 2Q through 4Q? Well, I think what you'll see with regard to gross margins specifically, you know, we continue to expect to have a healthy level of gross margin.

Speaker Change: Is that specific to the gross margins up as much as they are in <unk>.

Speaker Change: Well I think what youll see with regards to gross margins specifically we.

Speaker Change: We continue to expect to have a healthy level of gross margin as I mentioned a bit earlier inventory disciplines are very mature within our business now the new capabilities that we're bringing online with regards to.

Adrian Mitchell: As I mentioned a bit earlier, inventory disciplines are very mature within our business now. The new capabilities that we're bringing online with regard to cost accounting, we're excited about. We have a number of process and simplification initiatives as part of our end-to-end work to manage and bring down our delivery expense. You saw some of that benefit in our early testing in Q4 when you saw an 80 basis point difference.

Speaker Change: Cost accounting, we're excited about we have a number of process and simplification initiatives as part of our end to end work to manage and bring down our delivery expense you saw some of that benefit in our early testing in Q4. When you saw 80 basis point difference so the disciplines in gross margin and the disciplines and.

Adrian Mitchell: So the disciplines in gross margin and the disciplines in delivery expense, as part of that, will continue and only continue to get better. But we do want to recognize that as we think about bottom-line margin and EBITDA, we're investing in the customer experience to grow. So we wanted to make sure that you had kind of a full view of our margin profile. Okay, if I could sneak in a second on credit income, you're guiding it down 30 for the year, which excludes the potential regulatory change on late fees, but it was down 30 in the fourth quarter. I'm trying to figure out why it would still be down as much or if that's just a conservative assumption on your part.

Speaker Change: Delivery expense as part of that that will continue and only continue to get better, but we do want to recognize that as we think about bottomline margin in EBITDA that we're investing in the customer experience to grow so want to make sure that you had kind of a full view of our margin profile.

Speaker Change: Okay, if I could sneak in a second one on the credit income Youre guiding it down 30 for the year that excludes the potential regulation change on late fees, but it was down to 30 in the fourth quarter I'm trying to figure out why it would.

Speaker Change: Still be down as much or if that's just a conservative assumption on your part.

Adrian Mitchell: Well, if you look at what's happening in the broader retail industry, what you see is a combination of things. The first thing is that the consumer remains under pressure. And as a result, what we're seeing across the industry are higher credit card balances and higher delinquencies really returning to more normalized levels. As you know, Mike, the last few years had an abnormally low or historically low level of net credit losses and delinquencies as folks were flushed with cash. But now we're back to more normal times.

Speaker Change: Well, if you look at what's happening in the broader industry in retail what you see are a combination of things. The first thing is that the consumer remains under pressure and as a result, what we're seeing across the industry are higher credit card balances and higher delinquencies really returning to more normalized levels as you know Mike the last few years.

Speaker Change: <unk> had an abnormally low or historically low level of net credit losses delinquencies as folks were flushed with cash, but now we're back to more normal times and so what's reflected in our credit card revenues, which does exclude the impact from the late fee ruling is really the increase in net credit losses as we are more in a normalized environment.

Adrian Mitchell: And so what's reflected in our credit card revenues, which does exclude the impact of the late fee ruling, is really an increase in net credit losses as we're more in a normalized environment. Okay, thanks a lot guys. Congratulations again on a nice holiday.

Speaker Change: Okay. Thanks, a lot guys. Congrats again on a nice holiday.

Tony Spring: Thank you so much, Mike. Thank you. Our next question comes from the line of Bob Drbul with Guggenheim Securities. Please proceed with your question. Hi, good morning.

Speaker Change: Thank you very much Mike.

Thank you. Our next question comes from the line of Bob <unk> with Guggenheim Securities. Please proceed with your question Hi.

Bob: Hi, good morning.

Tony Spring: If you spend a little bit more time on the inventory, I guess the plans around the inventory, and how you're thinking about, you know, inventory, you know, throughout the year, it just, I guess I'm just curious, if you think that, you know, with some of the newness that you're bringing in, will that be the plan for the full year as you think about, you know, fall and into the holiday season? especially as it relates to sales. Bob, let me take the first part of that, and I'm sure Adrienne will add more.

Bob: Could you spend a little bit more time on the inventory I guess the plans around the inventory and how youre thinking about inventory throughout the year, just I guess I'm. Just curious if you think that with some of the newness that you're bringing in will that be the.

Bob: Land for the full year as you think about fall and into holiday.

Bob: Especially as it relates to sales thanks.

Speaker Change: Bob Let me take the first part of that and I'm sure Adrian will add our plans incorporate the liquidity to buy into the newness that we've described and to be able to chase into opportunities as they occur. So we retain a inventory reserve in each of our areas of business to make sure that we both.

Tony Spring: Our plans incorporate the liquidity to buy into the newness that we've described and to be able to chase opportunities as they occur. So we retain an inventory reserve in each of our areas of business to make sure that we both have made the commitments to brands that require that and, at the same time, retain the flexibility so that, should opportunities arise or should softness occur, we can pull back as necessary. But all of that's been incorporated into our forecast, and I think that inventory should be on or around flat to last year as we begin to improve sales. Just to build on Tony's comment, there's another dimension of inventory that we're focused on this year with our data science tools, and that's really around continuing to get better on the allocation side.

Adrian: I have made the commitments to brands that require that and at the same time hold back the flexibility too should opportunities arise or should softness occur that we can pull back as necessary, but all of that's been incorporated into our forecast and I think that inventories should be on or around flat to last year as we begin to improve.

Adrian: Sales.

Adrian: Just to build on Tony's comments, there is another dimension inventory that we're focused on this year with our with our data science tools and Thats really around continuing to get better on the allocation side. So as we think about the style of the brand the color and size allocated by market allocated by channel allocated by store.

Tony Spring: So as we think about the style, the brand, the color, and size allocated by market, allocated by channel, allocated by store, we see that there are opportunities to drive the top line by actually increasing product availability and stocks by putting in some new procedures. And this is one of those places where data science and being able to scale that data science with some new capabilities is something that we're leaning into. But we believe with all the work that's being done to have the right product in the assortment, we also want to make sure it's in the right place. And that will also complement our ability to grow the top line as well. I just have a credit question as well.

Adrian: We see that there are opportunities to drive the top line by actually increasing product availability and stocks by putting in some new procedures and this is one of those places where the data science and being able to scale that data science with some new capabilities is something that we're leaning into but we believe with all the work that's being done to have the right product in the assortment. We've also.

Adrian: Want to make sure it's in the right place and that will also complement our ability to grow the top line as well.

Adrian: Great.

Adrian: Just credit credit question as well in this quarter.

Adrian Mitchell: In this quarter, there was a note around the impact of better contractual profit sharing within your partner. Can you just talk about how you're positioning, and I guess what drove the better than expected contractual profit? And then as you think about the prospects of the credit filing and the late fee filing proposal, just you know where you think there might be opportunities if something were to be. Absolutely, Bob, it's a good question. So, you know, the terms of our city agreement are, you know, pretty much predetermined.

Adrian: There was a note around the impact of sort of better <unk>.

Adrian: Actual profit sharing within your partner.

Speaker Change: Could you just talk about how youre positioning I guess, what drove the better than expected sort of contractual profit and then as you think about the prospects of the <unk>.

Speaker Change: Credit filing delay filing proposal, just where do you think there might be opportunities if something were to be implemented.

Speaker Change: Negatively.

Speaker Change: Absolutely Bob So good question. So the terms of our city agreement is pretty much the predetermined. So there's clearly a little bit of benefit in terms of how we think about the profit sharing based on the level of credit card revenues and receivables that we actually build I think the more important conversation is how do we actually increased usage of our Craig.

Adrian Mitchell: So there's clearly a little bit of benefit in terms of how we think about the profit sharing based on the level of credit card revenues and receivables that we actually build. But I think the more important conversation is, how do we actually increase usage of our credit cards? And there's a lot of work that's happening around our loyalty program, around the use of our credit card to drive engagement with our customers, and just thinking about that program more broadly. There's real opportunity there. We don't have customers that are tapping out on their spend, on average.

Speaker Change: Card and Theres a lot of work that's happening around our loyalty program around the use of our credit cards to drive engagement with our customer and just thinking about that program more broadly there is real opportunity. There. We don't have customers that are tapping out on their spend on average we actually see that our customers do have capacity to spend and do you have capacity to use our card.

Adrian Mitchell: We actually see that our customers do have the capacity to spend and do have the capacity to use our card because they're already shoppers at Macy's or Bloomingdale's. From a mitigation standpoint, we're already thinking through and partnering with the city on mitigation factors for if and when the late fee ruling is actually implemented. You know, as I mentioned a bit earlier with Mike, we have not included the late fee impact in our outlook for this year, but we're working on mitigation factors in case that were to happen.

Speaker Change: Because they are already shoppers at Macy's or bloomingdale's from a mitigation standpoint, we're already thinking through and partnering with Citi on mitigation factors for if and when the <unk> ruling is actually implemented as I mentioned a bit earlier with Mike. We have not included the late fee impact and our outlook for this year.

Speaker Change: Here, but we're working on mitigation factors in case that were to happen and so that's something that we're very thoughtful about working through and trying to get ahead of.

Adrian Mitchell: And so that's something that we're very thoughtful about working through and trying to get ahead of. Thank you, Bob. Thank you. Our next question comes from the line of Alex Stratton with Morgan Family. Please proceed with your question. Perfect. Thanks a lot for taking the questions. Just a couple from me.

Speaker Change: Great. Thank you.

Speaker Change: Thank you Bob.

Speaker Change: Thank you. Our next question comes from the line of Alex Chang with Morgan Stanley. Please proceed with your question.

Alex Chang: Perfect. Thanks, a lot for taking the question just a couple from me just first can you walk us through how maybe you factored in that 50 <unk> week reversal into your guidance. Just so we can understand how that flows through the year and then secondly, just on the long term targets can you breakdown that that low single digit comparable sales growth.

Adrian Mitchell: Just first, can you walk us through how maybe you factored in the 53rd week reversal into your guidance just so we can understand how that flows through the year? And then, secondly, on the long-term targets, can you break down that low single-digit comparable sales growth number for me in terms of kind of how you arrived at that level as comfortable? Thanks a lot.

Alex Chang: Number for me in terms of kind of how you arrived at that level as comfortable thanks a lot.

Adrian Mitchell: Let me take the second part of your question first, Alex. In terms of our low single-digit sales target, it reflects the delta that we see today between our go-forward fleet versus our non-go-forward fleet. So first, it's based on store sales. There is an opportunity in our existing Macy's and Bloomingdale's and Blue Mercury fleet to grow comp sales starting in 2025 when you exclude the non-go-forward locations. Second, it's the return of growth in digital, which is a breakdown between lower growth in our own digital business and accelerated growth in the marketplace business.

Speaker Change: Let me take the second part of the question first Alex in terms of our low single digit sales target. It reflects the delta that we see today between our go forward fleet versus our non go forward fleet. So first is based on store sales there is an opportunity in our existing Macy's.

<unk> and Bloomingdale's and Blue Mercury fleet to grow comp sales starting in 2025, when you exclude the non go forward locations second it's the return of growth in digital which is a breakdown between lower growth in our own digital business and accelerated growth in the marketplace business.

Adrian Mitchell: And then finally, you know, it's beginning to add versus delete from our private brand portfolio or making sure that all the work that we've done in analytics on our assortments with skew rationalization and the pursuit of brands that are missing from our portfolio begins to take hold. So there's ample opportunity to grow across all three nameplates by making sure that our assortments are appropriate, as Adrian talked about, making sure that our inventory is accurately allocated between the channels, and getting into a more normalized environment where we're not up against as many discontinued private brands. It's good to be with you this morning, Alex.

Speaker Change: And then finally, it's beginning to add versus delete from our private brand portfolio or making sure that all the work that we've done in analytics on our Assortments with SKU rationalization and the pursuit of brands that are missing from our portfolio begin to take hold so there is ample opportunity to grow across <unk>.

Speaker Change: Ultra nameplates by making sure that our assortments are appropriate as Adrian talked about making sure that our inventory is accurately allocated between the channels and getting into a more normalized environment, where we're not up against as many discontinued private brands.

Speaker Change: Good to be with you. This morning, Alex So the 50 <unk> week last year was about $252 million of our sales coming out of fourth quarter. As we think about 2024, we're making the adjustments with regards to the calendar and promotional shifts given that 50 <unk> week.

Adrian Mitchell: So the 53rd week last year was about $252 million of our sales coming out of the fourth quarter. As we think about 2024, you know, we're making adjustments with regard to the calendar and promotional shifts given that 53rd week. I think, you know, the way to think about it from our perspective, from a comp standpoint, is that we're focused on more full-price sell-through, getting the right combination of assortment in terms of variety, breadth, and depth, and also making sure that we're actually positioning our content on the customer cost channels in a way that allows us to have more full-price sell-through and fewer discounts. And so we're We're pleased with the traction that we're seeing, and we'll continue to keep you updated as that evolves throughout the year. Thanks a lot.

Alex Chang: The way to think about it from our perspective from a comp standpoint, as we're focused on more full price sell through getting the right combination of assortment in terms of variety breath and depth and also making sure that we're actually positioning our content to the customer cost channels in a way that allows us to have more full price sell through and less discounts and so.

Alex Chang: Navigating that throughout the year, but we are encouraged with the traction that we're seeing particularly in the test and first 50 stores. We're pleased with the traction that we're seeing and we will continue.

Alex Chang: To keep you updated as that evolves throughout the year.

Adrian Mitchell: Good luck. Thank you. Thank you. Ladies and gentlemen, our final question this morning comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question. Hey, thanks. Congratulations, Tony, on a new position again.

Speaker Change: Thanks, a lot.

Speaker Change: Thank you.

Speaker Change: Thank you ladies and gentlemen, our final question. This morning comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Chuck Grom: Hey, Thanks, Congrats Tony on your positioning on this.

Tony Spring: Just on the transaction decline in the fourth quarter, you could parse that out across your various income cohorts that you cater to. And then, Adrian, on the first quarter comp guide, is that on a shifted basis or a non-shifted basis, given the 53rd week last? Good to be with you, Chuck. I think the comment about the decline in fourth-quarter transactions was more pronounced at Macy's than at Bloomingdale's or Blue Mercury, although all segments are under pressure, and the decision is more today about buying those things that people are looking for that sometimes are a higher AUR, and then we get fewer units versus customers not shopping. So we're really trying to follow the customer in this regard, making sure that the inventory is shifted to where we see business happening.

Chuck Grom: On the transaction decline in the fourth quarter I'm wondering if you could parse that out across your various income cohorts that you cater to and then.

Chuck Grom: Adrian on the first quarter comp guide is that on a shifted basis or non shifted basis, given the 50 <unk> week last year.

Adrian: Good to be with you Chuck I think the comment about the decline in fourth quarter transactions.

Adrian: It was more pronounced at Macy's and Bloomingdale's are blue Mercury, although all segments are under pressure and the decision is more today about buying those things that people are looking for that sometimes are a higher AUR and then we get fewer units versus.

Adrian: Customers not shopping so we're really trying to follow the customer in this regard make sure that the inventories are shifted to where we see the business happening. It's always one of the advantages I think of being a multi category and multi brand retailer is that we have the opportunity to have content, where when and how the customer shops as long as we are paying attention to the MAU.

Tony Spring: It's always one of the advantages I think of being a multi-category and multi-brand retailer is that we have the opportunity to have content where, when, and how the customer shops, as long as we're paying attention to the most important signals. You know, as we think about the first quarter coming, it really just reflects the calendar shifts that we're doing with regard to our promotions and the calendar coming out of a 53rd week. You know, we're encouraged with some of the traction that we're seeing with regard to tests coming out of the fourth quarter. But, you know, from our perspective, the number of the shifts that I mentioned earlier is how we're approaching them. Okay. I'll circle back with you later, Adrian.

Adrian: Important signals.

Adrian: As we think about the first quarter comp. It really just reflects the calendar shifts that we're doing with regards to our promotions and the calendar coming out of a 50 <unk> week.

Adrian: We're encouraged with some of the traction that we're seeing with regards to tests coming out of the fourth quarter, but from our perspective the nub.

Adrian: The shifts that I mentioned earlier is how we're approaching it.

Speaker Change: Okay I'll circle back later with you and then just a bigger picture one on revitalizing the assortment in your in your comment earlier Tony on duplication.

Tony Spring: And then just a bigger picture, on revitalizing the assortment and your comment earlier, Tony, on duplication, I think it's pretty interesting. I was wondering if you could maybe size up the opportunity, what you learned at Bloomingdale's with this endeavor, how long it took to start to see some of the benefits. Look, it's a process that every merchant and every planning partner has to go through in order to have the most compelling assortment in every category. We work in multiple seasons at one time. We're obviously executing the spring season, planning the fall season, and some areas are beginning to buy the spring 25 season. So I would say it's a multi-season exercise, but it's not a multi-year exercise.

Speaker Change: Pretty interesting just wonder if you could maybe size up the opportunity what you learned at bloomingdale's with this endeavor how long it took to take to start to see some of the benefits.

Speaker Change: Look it's a process that every merchant in every planning partner has to go through in order to have the most compelling assortment in every category.

Speaker Change: We work in multiple seasons at one time, where obviously executing the spring season planning the fall season, and some areas are beginning to buy the spring 'twenty five season. So I would say, it's a multi season exercise, but it's not a multi year exercise it starts with the ability to kind of ebb and flow or shrink or grow.

Tony Spring: It starts with the ability to kind of ebb and flow or shrink or grow depending on what's happening in the particular business segment. For example, when something occurs where jackets are important or blazers are important, you want to have a more robust assortment of blazers. And when you return to a time when sweaters are more important, you need to downsize the amount of blazers you carry and increase the number of sweaters. And you don't want to have all black sweaters, and you don't want all of them to be embellished. So the ability to kind of look at your assortment as the customer will see it, make sure that you're serving a multi-generational customer with a variety of price points, understanding where brand is important, where price is important, and where style may be important. And sometimes it's all three.

Speaker Change: Depending on what's happening in that particular business segment, when something occurs where jackets are important to where lasers are important do you want to have a more robust assortment of lasers and when you return to a moment, where sweaters are more important you need to downsize the amount of lasers, you carry and augment the amount of sweaters and you don't want to have all black sweaters and you don't want.

Speaker Change: All of them to be embellish, so the ability to kind of look at your assortment as the customer will see it make sure that you are serving a multi generational customer with a variety of price points understanding where brand is important where price is important and we're style may be important and sometimes it's all three but I think in my kind of learning and Liz.

Tony Spring: But I think in my kind of learning and listening with the Macy's team over the last six to eight months, the team is really leaning into this. I think you'll see the assortments improve as we move sequentially through the quarters this year and then make meaningful improvements as we get into 2025. Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Spring for any final comments. Thank you, Operator. We look forward to updating all of you on our bold new chapter strategy progress in the coming quarters.

Speaker Change: <unk> with the Macy's team over the last six to eight months. The team has really leaning into this I think youll see the assortments improve as we move sequentially through the quarters. This year and then make meaningful improvement as we get into 2025.

Speaker Change: Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Frank <unk> for any final comments.

Frank: Thank you operator, we look forward to updating all of you on our bold new chapter strategy progress in the coming quarters.

Tony Spring: I hope everyone has a great day. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Frank: Everyone has a great day.

Speaker Change: Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.