Q2 2024 Macy's Inc Earnings Call

August 21, 2024

Greetings and welcome to Macy's Inc. second quarter 2024 earnings conference call.

Operator: Greetings and welcome to Macy's Inc. 2nd quarter, 2024 earnings conference call. At this time, all participants are in the listen-only mode.

Greetings and welcome to Macy's, Inc. Second quarter 2024 earnings Conference call. At this time, all participants are in a listen only mode.

At this time, all participants are on a listen-only mode.

Speaker Change: A question and answer session will follow the formal presentation.

A question and answer session will follow the formal presentation.

Operator: A question and answer session will follow the formal presentation. If anyone requires operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker Change: <unk> and answer session will follow the formal presentation, if anyone should require operator assistance during the call. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Pamela Quintile Yano Vice President of Investor Relations. Thank you. Please go ahead. Thank you operator good morning.

Speaker Change: If anyone should require operator assistance during the call, please press star zero on your telephone keypad.

Speaker Change: As a reminder, this conference is being recorded.

Pamela Quintiliano: It is now my pleasure to introduce your host, Pamela Quintiliano, Vice President of Investor Relations. Thank you. Please go ahead.

Speaker Change: It is now my pleasure to introduce your host, Pamela Quintiliano, Vice President of Investor Relations.

Speaker Change: Thank you.

Pamela Quintiliano: Thank you, operator.

Speaker Change: Please go ahead.

Pamela Quintiliano: Good morning, everyone. And thanks for joining us with me on the call today, our Tony Spring, our Chairman and CEO, and Adrian Mitchell, our COO and CFO, along with our second quarter 2024 press release, a presentation has been posted on the investor section of our website, macysinc.com, and is being displayed live during today's webcast. Unless otherwise noted, the comparisons we provide will be versus 2023. All references to our prior expectations, outlook, or guidance refer to information provided on our May 21st earnings call, unless otherwise noted. In addition, all references to comp sales throughout today's prepared remarks represent comparable owned plus license plus marketplace sales and owned plus license sales for our store locations, unless otherwise noted.

Speaker Change: Everyone and thanks for joining us with me on the call today are Chinese spring, our chairman and CEO and Adrian Mitchell, our CLO and CFO, along with our second quarter 2024 press release, a presentation. That's been posted on the investors section of our website Macy's, Inc. Dot com and its being displayed live during today's webcast.

Speaker Change: Thank you, operator.

Speaker Change: Yes.

Yes, otherwise noted comparisons we provide will be versus 'twenty twenty-three all references to our prior expectation outlook or guidance refer to information provided on our may 21st earnings call unless otherwise noted. In addition, all references to comp sales throughout todays prepared remarks represent comparable own plus license.

Speaker Change: Plus marketplace L and owned plus licensed sales for our store location unless otherwise noted all forward looking statements are subject to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Pamela Quintiliano: All forward-looking statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today. A detailed discussion of these factors and uncertainties is contained in our filings with the Securities and Exchange Commission.

Speaker Change: 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.

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

Pamela Quintiliano: In discussing the results of our operations, we will be providing certain non-GAAP financial measures. You can find additional information regarding these non-gas financial measures as well as others on the investor section of our website.

Speaker Change: In discussing the results of our operation, we will be providing certain non-GAAP financial measures you can find additional information regarding these non-GAAP financial measures as well as others on the investors section of our website.

Pamela Quintiliano: Today's call is being webcast on our website. A replay will be available approximately two hours after the conclusion of this call.

Speaker Change: Good morning, everyone, and thanks for joining us.

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 Tony.

Tony Spring: With that, I'll turn it over to Tony.

Tony Spring: Thanks, Pam, and good morning, everyone. I'd like to start by expressing my sincere appreciation for our stores, distribution centers, and corporate colleagues, as well as our trusted partners. You are ongoing commitment to our customer and to our long-term goals empowered us to achieve better than expected earnings results and make meaningful progress on our bold new chapter strategy. We continue to be encouraged by the performance of our first 50 stores at the Macy's nameplate. These stores, which we view as the leading indicator of our Go Forward Macy's growth and ultimately our ability to achieve comp sales growth, delivered a 1% comp sales gain for the quarter.

Tony: With me on the call today are Tony Spring, our chairman and CEO, and Adrian Mitchell, our COO and CFO.

Tony: Thank you, operator.

Tony: Thanks, Pam and good morning, everyone I'd like to start by expressing my sincere appreciation for our stores distribution centers and corporate colleagues as well as our trusted partners your ongoing commitment to our customer and to our long term goals empowered us to achieve better than expected earnings results and make meaningful progress on our bold new chapter.

Tony: Good morning, everyone, and thanks for joining us.

Tony: Along with our second quarter 2024 press release, a presentation has been posted on the investor section of our website, macysinc.com, and it's being displayed live during today's webinar.

Tony: With me on the call today are Tony Spring, our Chairman and CEO, and Adrian Mitchell, our COO and CFO.

Our strategy.

Tony: Along with our second quarter 2024 press release, a presentation has been posted on the investor section of our website, macysinc.com, and it's being displayed live during today's webcast.

Tony: We continue to be encouraged by the performance of our first 50 stores at the Macy's nameplate These stores, which we view as the leading indicator of our go forward basis growth and ultimately our ability to achieve comp sales growth delivered a 1% comp sales gain for the quarter.

Tony Spring: At our luxury name plates, Bloomingdale's and Blue Mercury, the breadth of our merchandise offering across aspirational to luxury price points continued to resonate. And we delivered strong gross margin expansion and better than expected SG&A as we continued to fund our growth investments.

Tony: At our luxury nameplates bloomingdale's at Blue Mercury, the breadth of our merchandise offering across aspirational luxury price points continue to resonate and we delivered strong gross margin expansion and better than expected SG&A as we continued to fund our growth investments.

Tony Spring: Before I share a more detailed update on each pillar of our bold new chapter strategy, I would like to briefly touch on the consumer discretionary environment. We entered the second quarter with an expectation that discretionary spend would remain stable, reflecting a resilient but choiceful consumer. As the quarter progressed, our customer became more discriminating, which we attribute to ongoing macroeconomic uncertainty and an increasingly complex news site.

Tony: Unless otherwise noted, the comparisons we provide will be versus 2023. All references to our prior expectations, outlook, or guidance refer to information provided on our May 21st earnings call unless otherwise noted.

Tony: Before I share a more detailed update on each pillar of our bold new chapter strategy I would like to briefly touch on the consumer discretionary environment.

Tony: In addition, all references to comp sales throughout today's prepared remarks represent comparable owned plus licensed plus marketplace sales and owned plus licensed sales for our store locations, unless otherwise noted.

Tony: All forward-looking statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Tony: We entered the second quarter with an expectation that discretionary spend would remain stable, reflecting a resilient, but choice for consumer as the quarter progressed, our customer became more discriminating, which we attribute to ongoing macroeconomic uncertainty and an increasingly complex news cycle.

Tony: All forward-looking statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Tony: 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.

Tony: In discussing the results of our operations, we will be providing certain non-GAAP financial measures. You can find additional information regarding these non-GAAP financial measures as well as others on the investor section of our website.

Tony Spring: Michael. As trends diverge from our expectations, we did not stand still. We took proactive steps to drive profitable sales, protect our gross margins, and further control SG&A. As a result, while second-quarter sales of 4.9 billion were slightly lower outlook, adjusted EPS to 53 cents was well above. At Macy's, which was the most impacted by the shift in consumer behavior, we lined our assortments and shifted our marketing calendar to better balance value and fashion. We enhanced our promotions and delivered more targeted personalized messages across categories and brands. And we invested in newness and proven areas of product strength while reducing our exposure to areas of software demand.

Tony: Today's call is being webcast on our website. A replay will be available approximately two hours after the conclusion of this call.

Tony: As trends diverge from our expectations, we did not standstill.

Tony: We took proactive steps to drive profitable sales protect our gross margins and further control of SG&A as a result, while second quarter sales of $4 9 billion were slightly below our outlook adjusted EPS of <unk> 53 science was well above.

Tony: At Macy's, which was the most impacted by the shift in consumer behavior, we aligned our assortments and shifted our marketing calendar to better balance value and fashion.

Tony: We enhanced our promotions and delivered more targeted personalized messages across categories and brands and.

Tony: And we invested in newness and proven areas of product strength, while reducing our exposure to areas of softer demand.

Tony Spring: These actions incrementally shifted the course of our business late in the second quarter, which is encouraging and speaks to our ability to quickly and thoughtfully analyze results and identify areas of opportunity. And while we cannot control the external environment, we are taking recent learnings and applying them. As we navigate the current landscape, our teams remain focused on the execution of our bold new chapter strategy.

Tony: These actions incrementally shifted the course of our business late in the second quarter, which is encouraging and speaks to our ability to quickly and thoughtfully analyzed results and identify areas of opportunity and while we cannot control the external environment. We are taking recent learnings and applying them.

Tony: In discussing the results of our operations, we will be providing certain non-gap financial measures. You can find additional information regarding these non-GAAP financial measures, as well as others, on the Investors section of our website.

Tony: Today's call is being webcast on our website. A replay will be available approximately two hours after the conclusion of this call.

Tony: With that, I'll turn it over to.

As we navigate the current landscape our teams remain focused on the execution of our bold new chapter strategy.

Tony: Thanks, Pam.

Tony: And good morning, everyone.

Tony: I'd like to start by expressing my sincere appreciation for our stores, distribution centers and corporate colleagues, as well as our trusted partners.

Tony Spring: Turning to the first pillar, strengthening the Macy's name plate, second-quarter net sales declined 4.4 percent, and comparable sales were down 3.6 percent. But those numbers don't tell the full story. During the quarter, Macy's experienced ongoing strength in fragrances and green shoots in women's ready-to-wear apparel, including Donna Karan, Steve Madden, Avecliffee, and French Connection to name a few. Customers also responded well to the ongoing private brand ready-wear imagination, including elevated fashion and quality in our heritage labels. As we lap last year's private brand exits, we have been introducing new market and private brands that more closely align with customer demand.

Tony: Your ongoing commitment to our customer and to our long-term goals empowered us to achieve better-than-expected earnings results and make meaningful progress on our Bold New Chapters strategy.

Tony: Turning to the first pillar strengthening the macys nameplate second quarter net sales declined four 4%.

Tony: We continue to be encouraged by the performance of our first 50 stores at the Macy's nameplate. These stores, which we view as the leading indicator of our Go Forward Macy's growth, and ultimately our ability to achieve comp sales growth, delivered a 1% comp sales gain for the quarter.

Tony: And comparable sales were down three 6%.

Tony: But those numbers don't tell the full story.

Tony: During the quarter Macy's experienced ongoing strength in fragrances, and green shoots in women's ready to wear apparel, including Donna Karan, Steve Madden Iveco fee and French connection to name a few.

Tony: Customers also responded well to the ongoing private brand ready wherever your imagination, including elevated fashion and quality in our heritage labels.

Tony: As we lapped last year's private brand exits, we have been introducing new market in private brands that more closely align with customer demand.

Tony Spring: Continuing to build on the momentum in this important category is a top priority, and we are making the appropriate investments to support growth. At the same time, we are also addressing the weaknesses in men's apparel, handbags, and home. In men's apparel, contemporary has been a bright spot, and we believe there's an opportunity for growth in this category. Earlier this month, we saw off-launch a new private brand targeting the under-party consumer to support our growth aspirations. Within handbags, we are continuing to diversify our brand portfolio. Lauren by Ralph Lauren and Carl Lagerfeld have been well-received, and we are experiencing strong demand for Coach's new product disortment.

Tony: Continuing to build on the momentum in this important category is a top priority and we are making the appropriate investments to support growth.

Tony: At the same time, we are also addressing the weaknesses in men's apparel handbags and home.

Tony: In men's apparel contemporary has been a bright spot and we believe there's an opportunity for growth in this category earlier. This month, we soft launched a new private brand targeting the under 40 consumer to support our growth aspirations.

Tony: Within handbags, we are continuing to diversify our brand portfolio.

Tony: Lauren by Ralph Lauren and Karl Lagerfeld have been well received and we are experiencing strong demand for coach's new product assortment.

Tony Spring: And in home, we are strengthening our holiday gift-giving assortment ahead of our broad private brand reimagination next year.

Tony: And in home, we are strengthening our holiday gift, giving assortment ahead of our broad private brand re imagination next year.

Tony Spring: Moving from product to stores, as previously mentioned, the first 50 achieve their second consecutive quarter of positive comps, posting a 1% gain. For the quarter, the disparity in performance between the first 50 and the total Macy's nameplate widened. With the first 50 comps outperforming the total Macy's nameplate by 460 basis points compared to 380 basis points last quarter. Initiatives at these locations continue to gain traction and include improving the customer experience through focus staffing and key departments such as shoes, handbags, ready to wear, as well as fitting room and check out. Enhancing merchandise offerings to emphasize freshness, relevance, and inspiration, with a focus on variety rather than redundancy by editing existing assortments and adding new brands.

Tony: Moving from product to stores as previously mentioned the first 50 achieved their second consecutive quarter of positive comps posting a 1% gain.

For the quarter the disparity in performance between the first 50 and the total Macy's nameplate widened with the first 50 comps outperforming the total Macy's nameplate by 460 basis points compared to 380 basis points last quarter.

Tony: Initiatives at these locations continued to gain traction and include improving the customer experience through focused staffing in key departments, such as shoes handbags ready to wear as well as fitting room at checkout.

Tony: Enhancing merchandise offerings to emphasize freshness relevance and inspiration with a focus on variety rather than redundancy by editing existing assortments and adding new brands.

Tony Spring: Modernizing our visual presentations, and offering unique store-level activations and community events. First 50 customer satisfaction is growing. Net promoter scores were 600 basis points above last year, and over 200 basis points better than other go-forward locations, with improvements in availability of salespeople, quick and easy checkout, and needing clean stores. These locations also had higher traffic and conversion relative to other go-forward locations, and all merchandise categories outperformed, with shoes, handbags, men's, and kids to peril, as well as women's ready to wear, registering the most improvement. To pause on that, two categories where we've been struggling more broadly, men's and handbags, were among the most significant relative outperformers, which is exciting and could serve as a broader unlock.

Tony: Modern nizing, our visual presentations and offering unique store level activations and community events.

Tony: First 50 customer satisfaction is growing net promoter scores, where 600 basis points above last year and over 200 basis points better than other go forward locations with improvements in availability of salespeople quick and easy checkout and neat and clean stores.

Tony: These locations also had higher traffic and conversion relative to other go forward locations and all merchandise categories outperformed with shoes, handbags, mens and kids apparel as well as women's ready to wear registering the most improvement.

Tony: To pause on that two categories, where we've been struggling more broadly men's and handbags, where I'm wrong. The most significant relative outperformers, which is exciting and could serve as a broader unlock.

Tony Spring: The first 50 were created with an eye toward the future expansion. Locations have diverse geographic and socio-economic representation, and initiatives are cross-functional and designed to be replicated. And with two consecutive quarters of meaningful compound performance, we are pleased to announce that we are implementing women's shoe and handbag staffing tests and roughly 100 additional go-forward locations this fall. These tests will provide valuable insights that will be used as we further refine our initiatives.

The first 50 were created with an eye toward the future expansion.

Speaker Change: Locations have diverse geographic and socioeconomic representation and initiatives are cross functional and designed to be replicated.

Speaker Change: And with two consecutive quarters of meaningful comp outperformance. We are pleased to announce that we are implementing women's shoe and handbag staffing tests and roughly 100. Additional go forward locations. This fall. These tests will provide valuable insights that will be used as we further refine our initiatives.

Tony Spring: Beyond the first 50, another important element of strengthening the Macy's nameplate is closing and monetizing our 150 non-go-forward locations. As a reminder, in fiscal 2023, ComSales 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 roughly 950 basis points. While non-go-forward locations are underperformers relative to the total Macy's fleet, they are valuable real estate assets. Demand for these properties has been strong. We are pleased with the pace and the quality of deal-making and now expect to close approximately 55 stores this year versus prior expectations of roughly 50.

Speaker Change: Beyond the first 50, another important element of strengthening the macys nameplate is closing and monetizing our 150 non go forward locations. As a reminder, in fiscal 2023 comp sales of Macys go forward locations outperformed non go forward locations by approximately 500 basis points and the.

Four wall adjusted EBITDA rate outperformed by roughly 950 basis points.

Speaker Change: While non go forward locations are underperformers relative to the total Macy's fleet they are valuable real estate assets to.

Speaker Change: Demand for these properties has been strong we are pleased with the pace and the quality of deal, making and now expect to close approximately 55 stores this year versus prior expectations of roughly 50, we.

Tony Spring: We will continue to thoughtfully evaluate all opportunities presented to us, but given our strong balance sheet and that we have no material debt maturities until 2027, we will not execute a deal unless it is accretive. As we think about the future of the Macy's nameplate, we are committed to reading and reacting in real time to consumer demand to offer increasingly relevant product, messaging, and experiences at a compelling value, regardless of the environment. Reflecting that mindset, we have adjusted backf-marketing and the promotional calendars and the depth and composition of buys, pulling back where business has been soft, while protecting areas where we have momentum.

Speaker Change: We will continue to thoughtfully evaluate all opportunities presented to us, but given our strong balance sheet and that we have no material debt maturities until 'twenty twenty-seven, we will not execute a deal unless it is accretive.

As we think about the future of the Macy's nameplate, we are committed to reading and reacting in real time to consumer demand to offer increasingly relevant product messaging and experiences at a compelling value regardless of the environment.

Greetings and welcome to Macy's Inc.

Operator: Greetings and welcome to Macy's Inc. 2nd quarter, 2024 earnings conference call. At this time, all participants are on the listen only mode.

2nd quarter, 2024 earnings conference call.

Speaker Change: At this time, all participants are on the listen only mode.

Speaker Change: Reflecting that mindset, we have adjusted back half marketing and the promotional calendars and the depth and composition of buys pulling back where our business has been soft while protecting areas, where we have momentum.

Speaker Change: A question and answer session will follow the formal presentation.

Operator: A question and answer session will follow the formal presentation. If anyone to require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker Change: If anyone to require operator assistance during the call, please press star zero on your telephone keypad.

Speaker Change: As a reminder, this conference is being recorded.

Tony Spring: We are evolving our product, partnering closely with our vendors to better serve our customers through our own concession, marketplace, and consignment, understanding that our customer wants to see the best style, not just an endless aisle. And in digital, we are focused on search engine optimization, site enhancements, more transparent pricing, and a better mobile experience.

Speaker Change: It is now my pleasure to introduce your host Pamela Quintiliano, vice president of investor relations.

Pamela Quintiliano: It is now my pleasure to introduce your host Pamela Quintiliano, vice president of investor relations. Thank you, please go ahead. Thank you operator.

Speaker Change: We're evolving our product partnering closely with our vendors to better serve our customers through owned concession marketplace and consignment understanding that our customer wants to see the best style not just an endless aisle and in digital we are focused on search engine optimization site enhancements more transparent pricing and a better mobile.

Speaker Change: Thank you, please go ahead.

Pamela Quintiliano: Good morning, everyone.

Speaker Change: Thank you operator.

Pamela Quintiliano: And thanks for joining us with me on the call today, our Tony spring, our chairman and CEO and Adrian Mitchell, our COO and CFO, along with our second quarter, 2024 press release, a presentation has been posted on the investor section of our website, macy's Inc.com and is being displayed live during today's webcast. Unless otherwise noted, the comparisons we provide will be versus 2023. All references to our prior expectations, outlook or guidance refer to information provided on our May 21st earnings call, unless otherwise noted.

Tony Spring: Prince. Turning to luxury, which is our second pillar of the strategy, at Bloomingdale's, net sales were down 0.2%, and calm sales were down 1.4%. Customers responded well to advanced contemporary market brands, including Veronica Beard, Allison Olivia, LaJance, and Farm Rio. The Venus Williams Aqua collaboration, which launched in mid-June, just ahead of Hamilton and the Olympics, was very well received. And for the quarter, net per motor squares improved over 250 basis points year-over-year and remained a strength of this brand.

Speaker Change: Experience.

Speaker Change: At our luxury nameplates, Bloomingdale's and Blue Mercury, the breadth of our merchandise offering across aspirational to luxury price points continued to resonate, and we delivered strong gross margin expansion and better-than-expected SG&A as we continued to fund our growth investment.

Speaker Change: Turning to luxury which is our second pillar of the strategy at Bloomingdale's net sales were down 2% and comp sales were down one 4%.

Speaker Change: Before I share a more detailed update on each pillar of our Bold New Chapter strategy, I would like to briefly touch on the Consumer Discretionary Environment. We entered the second quarter with an expectation that discretionary spend would remain stable, reflecting a resilient but choiceful consumer. As the quarter progressed, our customer became more discriminating, which we attribute to ongoing macroeconomic uncertainty and an increasingly complex news cycle.

Speaker Change: As trends diverged from our expectations, we did not stand still. We took proactive steps to drive profitable sales, protect our gross margin, and further control SG&A. As a result, while second quarter sales of $4.9 billion were slightly below our outlook, adjusted EPS of 53 cents was well above.

Speaker Change: Customers responded well to advance contemporary market brands, including Veronica Beard, Alice and Olivia the Johns and farm Rio.

Speaker Change: At Macy's, which was the most impacted by the shift in consumer behavior, we aligned our assortments and shifted our marketing calendar to better balance value and fashion. We enhanced our promotions and delivered more targeted personalized messages across categories and brands. And we invested in newness and proven areas of product strength while reducing our exposure to areas of softer demand.

Speaker Change: The Venus Williams Aqua collaboration which launched in mid June just ahead of Wimbledon and the Olympics was very well received.

Pamela Quintiliano: In addition, all references to comp sales throughout today's prepared remarks represent comparable owned plus license plus marketplace sales and owned plus license sales for our store locations, unless otherwise noted. All forward looking statements are subject to the safe harbor provisions of the private securities litigation reform act of 1995. These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today.

Speaker Change: And for the quarter net promoter scores improved over 250 basis points year over year and remained the strength of this brand.

Tony Spring: Looking ahead in the next few weeks, Bloomingdale's will kick off New York Fashion Week with a two-month-long immersive experience that brings the best of Italy to its customers through over 300 exclusive products and 30 new brands across a parallel fine jewelry, accessories, beauty, and home. All Bloomingdale's locations will host a celebration with food, art, and music, and throughout the activation, our 59th Street flagship will have shops, installations, and pop-ups on every floor. At Bloomingdale's, we achieved our 14th consecutive quarter of Constra sales growth, posting a 2% gain with net sales growing 1.7%. Customers continued to respond well to differentiated skincare offerings, including new brands like Dr. Diamond's Medicine, and we see an opportunity to expand fragrances with the recent launches of Creed and Perfume de Marley.

Looking ahead in the next few weeks Bloomingdale's will kick off New York fashion week with a two month long immersive experience that brings the best of Italy to its customers through over 300 exclusive products and 30, new brands across apparel and jewelry accessories beauty and home.

Pamela Quintiliano: 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 gas financial measures. You can find additional information regarding these non gas financial measures as well as others on the investor section of our website.

Speaker Change: All bloomingdales locations will host a celebration with food art and music and throughout the activation or 59th Street flagship will have shops installations and pop ups on every floor.

Speaker Change: At Blue Mercury, we achieved our 14th consecutive quarter of comp store sales growth posting a 2% gain with net sales growing one 7%.

Pamela Quintiliano: Today's call is being webcast on our website, a replay will be available approximately two hours after the conclusion of this call.

Speaker Change: Customers continued to respond well to differentiated skincare offerings, including new brands like Dr. Diamonds Medicine, and we see an opportunity to expand fragrances with the recent launches of create and powerful them tomorrow.

Tony Spring: With that, I'll turn it over to Tony. Thanks Pam and good morning everyone. I'd like to start by expressing my sincere appreciation for our stores, distribution centers and corporate colleagues, as well as our trusted partners.

Pamela Quintiliano: Good morning, everyone.

Speaker Change: And thanks for joining us with me on the call today, our Tony spring, our chairman and CEO and Adrian Mitchell, our COO and CFO, along with our second quarter, 2024 press release, a presentation has been posted on the investor section of our website, macy's Inc.com and is being displayed live during today's webcast.

Tony Spring: During the quarter, Bloomingdale opened one new store and remodeled another. New and remodeled locations continued to be received well and are outperforming the total fleet. With each new store, our team is elevating a service model, response integration, and product mix curation to further establish Blue Mercury as the authority in professional skincare.

Speaker Change: During the quarter Blue Mercury opened one new store and remodeled another.

Tony Spring: You are ongoing commitment to our customer and to our long-term goals empowered us to achieve better than expected earnings results and make meaningful progress on our bold new chapter strategy. We continue to be encouraged by the performance of our first 50 stores at the Macy's name plate. These stores, which we view as the leading indicator of our Go Forward Macy's growth and ultimately our ability to achieve comp sales growth, delivered a 1% comp sales gain for the quarter.

Speaker Change: New and remodeled locations continued to be received well and are outperforming the total fleet.

Speaker Change: With each new store our team is elevating its service model sponsor creation and product mix curation to further establish blue Mercury as the authority in professional skincare.

Tony Spring: In just a few weeks, Blue Mercury will kick off its 25th anniversary celebration, which will run throughout the remainder of the year. We are confident in the luxury category and its long-term potential. Although Bloomingdale's in Blue Mercury are not immune from the broader macro pressures, the variety of our market and private brand merchandise offerings provides compelling options that will allow us to capture wallet share. As the environment evolves, we will continue to leverage our strong storytelling heritage through new brands, expanded partnerships, and exciting launches and events.

Speaker Change: And in just a few weeks blue Mercury will kick off its 25th anniversary celebration, which will run throughout the remainder of the year.

Speaker Change: We are confident in the luxury category and its long term potential.

Speaker Change: Although bloomingdale's and Blue Mercury are not immune from the broader macro pressures the variety of our market and private brand merchandise offerings provides compelling options that will allow us to capture wallet share.

Speaker Change: Unless otherwise noted, the comparisons we provide will be versus 2023. All references to our prior expectations, outlook or guidance refer to information provided on our May 21st earnings call, unless otherwise noted.

Speaker Change: As the environment evolves, we will continue to leverage our strong storytelling heritage through new brands expanded partnerships and exciting launches and events.

Speaker Change: In addition, all references to comp sales throughout today's prepared remarks represent comparable owned plus license plus marketplace sales and owned plus license sales for our store locations, unless otherwise noted.

Tony Spring: Regarding the final pillar of our strategy, simplifying and modernizing end-to-end operations, we are reducing organizational complexity and generating cost savings to fund growth investments. Adrian will go into more detail shortly, but the work within this pillar, including improving our fulfillment network productivity and simplifying our technology ecosystem, is fostering an even more disciplined organization.

Speaker Change: Regarding the final pillar of our strategy simplifying and modernizing end to end operations, we are reducing organizational complexity and generating cost savings to fund growth investments.

Speaker Change: All forward looking statements are subject to the safe harbor provisions of the private securities litigation reform act of 1995.

<unk> will go into more detail shortly but the work within this pillar, including improving our fulfillment network productivity and simplifying our technology ecosystem is fostering and even more disciplined organization.

Speaker Change: 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.

Speaker Change: In discussing the results of our operations, we will be providing certain non gas financial measures. You can find additional information regarding these non gas financial measures as well as others on the investor 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.

Tony Spring: We took proactive steps to drive profitable sales, protect our gross margins, and further control SG&A. As a result, while second-quarter sales of 4.9 billion were slightly lower outlook, adjusted EPS to 53 cents was well above. At Macy's, which was the most impacted by the shift in consumer behavior, we lined our assortments and shifted our marketing calendar to better balance value and fashion. We enhanced our promotions and delivered more targeted personalized messages across categories and brands.

Tony Spring: In closing, confidence in our bold new chapter strategy is unwavering, and we are steadfast in our commitment to improving the fundamentals of our business. As I am emerging at heart, I understand that retailing is a balance of art and science. As a team, we are actively listening to our customers to improve our results across the organization. We continue to view 2024 as a transition and investment year. While we're pleased with the recent progress on our strategy and profitability profile, we are clear-eyed about the challenges yet energized by the opportunities that lie ahead. We will remain competitive to win the customer, but we will not deviate from our path to sustainable, profitable sales growth, and we are confident that the actions we are taking across all three bold new chapter pillars will benefit near- and longer-term results.

Speaker Change: In closing competence and our bold new chapter strategy is unwavering and we are steadfast in our commitment to improving the fundamentals of our business.

Speaker Change: With that, I'll turn it over to Tony.

Tony Spring: Thanks Pam and good morning everyone.

Speaker Change: As I'm a merchant at heart I understand that retailing is a balance of art and science as a team we are actively listening to our customers to improve our results across the organization.

Tony Spring: I'd like to start by expressing my sincere appreciation for our stores, distribution centers and corporate colleagues, as well as our trusted partners.

Speaker Change: We continue to view 2024, as a transition and investment year, while we're pleased with the recent progress on our strategy and profitability profile. We are cleared eyed about the challenges get energized by the opportunities that lie ahead.

Tony Spring: And we invested in newness and proven areas of product strength while reducing our exposure to areas of software demand. These actions incrementally shifted the course of our business late in the second quarter, which is encouraging and speaks to our ability to quickly and thoughtfully analyze results and identify areas of opportunity. And while we cannot control the external environment, we are taking recent learnings and applying them.

Speaker Change: We will remain competitive to win the customer, but we will not deviate from our path to sustainable profitable sales growth and we are confident that the actions. We are taking across all three bold new chapter pillars will benefit near and longer term results with that let me turn it over to Adrian for his remarks.

Adrian Mitchell: With that, let me turn it over to Adrian for his remarks. Thank you, Tony, and good morning, everyone. As we navigated the second quarter, we continued to focus on controlling what is within our reach to drive our business. We delivered strong, gross margin and better than expected SGNA, as we diligently managed our margin and expense disciplines throughout the quarter. Our teams are also making progress on our bold new chapter strategy, including our third pillar, simplifying and modernizing end-to-end operations. We are leaning into call savings programs and working capital disciplines as we make targeted investments in areas such as automation and process simplification, which should benefit day-to-day execution.

Speaker Change: With that, I'll turn it over to Tony.

Speaker Change: Thanks, Pam, and good morning, everyone.

Adrian: Thank you Tony and good morning, everyone as we navigated the second quarter, we continued to focus on controlling what is within our reach to drive our business.

Speaker Change: You are ongoing commitment to our customer and to our long-term goals empowered us to achieve better than expected earnings results and make meaningful progress on our bold new chapter strategy.

Tony Spring: As we navigate the current landscape, our teams remain focused on the execution of our bold new chapter strategy. Turning to the first pillar, strengthening the Macy's name plate, second-quarter net sales declined 4.4 percent and comparable sales were down 3.6 percent. But those numbers don't tell the full story. During the quarter, Macy's experienced ongoing strength and fragrances and green shoots in women's ready-to-wear apparel, including Donna Karen, Steve Madden, Avecliffee, and French connection to name a few.

Adrian: These actions incrementally shifted the course of our business late in the second quarter, which is encouraging and speaks to our ability to quickly and thoughtfully analyze results and identify areas of opportunity. And while we cannot control the external environment, we are taking recent learnings and applying them.

Adrian: I'd like to start by expressing my sincere appreciation for our stores, distribution centers, and corporate colleagues, as well as our trusted partners. Your ongoing commitment to our customer and to our long-term goals empowered us to achieve better-than-expected earnings results and make meaningful progress on our Bold New Chapter strategy.

Speaker Change: We continue to be encouraged by the performance of our first 50 stores at the Macy's name plate. These stores, which we view as the leading indicator of our Go Forward Macy's growth and ultimately our ability to achieve comp sales growth, delivered a 1% comp sales gain for the quarter.

Adrian: We delivered strong gross margin and better than expected SG&A as we diligently managed our margin and expense discipline throughout the quarter.

Adrian: As we navigate the current landscape, our teams remain focused on the execution of our bold new chapter strategy.

Adrian: Our teams are also making progress on our bogie chapter strategy, including our third pillar simplifying and modernizing end to end operations.

Speaker Change: At our luxury name plates, Bloomingdale's and Blue Mercury, the breadth of our merchandise offering across aspirational to luxury price points continued to resonate.

Adrian: We are leaning into cost savings programs and working capital disciplines as we make targeted investments in areas, such as automation and process simplification, which should benefit day to day execution.

Speaker Change: And we delivered strong gross margin expansion and better than expected SG&A as we continued to fund our growth investments.

Tony Spring: Customers also responded well to the ongoing private brand ready-wear imagination, including elevated fashion and quality in our heritage labels. As we lap last year's private brand exits, we have been introducing new market and private brands that more closely align with customer demand. Continuing to build on the momentum in this important category is a top priority, and we are making the appropriate investments to support growth. At the same time, we are also addressing the weaknesses in men's apparel, handbags, and home.

Adrian Mitchell: Thus far, these investments have improved the customer experience through faster online delivery and higher product in-stocks while contributing to strong bottom-line performance and cash flow generation.

Adrian: Thus far these investments have improved the customer experience through faster online delivery and higher product in stocks, while contributing to strong bottom line performance and cash flow generation.

Adrian Mitchell: Now, let's turn to our second quarter results. As a reminder, all comparisons are to the comparable year-go period unless otherwise stated. During the quarter, we focused on gross margin expansion and effective expense management. This, combined with the actions Tony described earlier, allows us to achieve adjusted EPS that was significantly above our expectations, even without the benefits of the second quarter asset sale gain. Overall, total Macy's Inc. Net sales were $4.9 billion, down 3.8%, and total enterprise comms were down 3.3%. Within that, go-forward business Macy's Inc. comms defined as Macy's, Bloomingdale's, and Blue Mercury go-forward locations plus digital declined 3%.

Adrian: Turning to the first pillar, strengthening the Macy's nameplate, second quarter net sales declined 4.4%, and Comparable Sales were down 3.6%.

Adrian: We continue to be encouraged by the performance of our first 50 stores at the Macy's nameplate. These stores, which we view as the leading indicator of our go-forward Macy's growth and ultimately our ability to achieve comp sales growth, delivered a 1% comp sales gain for the quarter.

Adrian: Now, let's turn to our second quarter results as a reminder, all comparisons are to the comparable year ago period, unless otherwise stated.

Adrian: But those numbers don't tell the full story. During the quarter, Macy's experienced ongoing strength in fragrances and green shoots in women's ready-to-wear apparel, including Donna Karan, Steve Madden, Yvette Lafey, and French Connection, to name a few.

Adrian: At our luxury nameplates, Bloomingdale's and Blue Mercury, the breadth of our merchandise offering across aspirational to luxury price points continued to resonate, and we delivered strong gross margin expansion and better-than-expected SG&A as we continued to fund our growth investments.

Adrian: Customers also responded well to the ongoing private brand ready-to-wear reimagination, including elevated fashion and quality in our Heritage label.

Adrian: Before I share a more detailed update on each pillar of our Bold New Chapter strategy, I would like to briefly touch on the consumer discretionary environment. We entered the second quarter with an expectation that discretionary spend would remain stable, reflecting a resilient but choiceful consumer. As the quarter progressed, our customer became more discriminating, which we attribute to ongoing macroeconomic uncertainty and an increasingly complex news cycle.

Adrian: As trends diverged from our expectations, we did not stand still. We took proactive steps to drive profitable sales, protect our gross margins, and further control SG&A. As a result, while second quarter sales of $4.9 billion were slightly below our outlook, adjusted EPS of 53 cents was well above.

Adrian: As we lapped last year's private brand exits, we have been introducing new market and private brands that more closely align with customer demand. Continuing to build on the momentum in this important category is a top priority and we are making the appropriate investments to support growth.

Adrian: At the same time, we are also addressing the weaknesses in men's apparel, handbags, and homes. In men's apparel, contemporary has been a bright spot, and we believe there's an opportunity for growth in this category.

Adrian: During the quarter, we focused on gross margin expansion and effective expense management.

Adrian: Earlier this month, we soft-launched a new private brand targeting the under-40 consumer to support our growth aspirations.

Tony Spring: In men's apparel, contemporary has been a bright spot, and we believe there's an opportunity for growth in this category. Earlier this month, we saw off-launch a new private brand targeting the under-party consumer to support our growth aspirations. Within handbags, we are continuing to diversify our brand portfolio. Lauren by Ralph Lauren and Carl Lagerfeld have been well-received, and we are experiencing strong demand for coach's new product disortment. And in home, we are strengthening our holiday gift-giving assortment ahead of our broad private brand reimagination next year.

Adrian: This combined with the actions Tony described earlier allows us to achieve adjusted EPS that was significantly above our expectations, even without the benefit of the second quarter asset sale gain.

Adrian: At Macy's, which was the most impacted by the shift in consumer behavior, we aligned our assortments and shifted our marketing calendar to better balance value and fashion. We enhanced our promotions and delivered more targeted personalized messages across categories and brands. And we invested in newness and proven areas of product strength while reducing our exposure to areas of softer demand.

Speaker Change: Overall total Macy's, Inc. Net sales were $4 $9 billion down three 8% and total enterprise comps were down three 3% within that go forward business Macy's, Inc. Comps defined as Macy's Bloomingdale's and Blue Mercury go forward locations plus digital declined three.

Adrian: But those numbers don't tell the full story.

Adrian: During the quarter, Macy's experienced ongoing strength in fragrances and green shoots in women's ready-to-wear apparel, including Donna Karan, Steve Madden, Yvette Lafee, and French Connection, to name a few. Customers also responded well to the ongoing private brand ready-to-wear reimagination, including elevated fashion and quality in our heritage labels.

Adrian: Within handbags, we are continuing to diversify our brand portfolio.

Adrian: Lauren by Ralph Lauren and Karl Lagerfeld have been well-received, and we are experiencing strong demand for Coach's new product assortment.

Adrian: And in home, we are strengthening our holiday gift-giving assortment ahead of our broad private brand reimagination next year.

Speaker Change: Percent.

Adrian Mitchell: By nameplate, Macy's net sales, inclusive of all Macy's locations and digital, were down 4.4%, and comms were down 3.6%. Macy's nameplate go-forward business comms, which include all 350 go-forward locations in digital, were down 3.3%. Looking just at stores, all go-forward location comms were down 2.3% with first 50 up 1%, all the go-forward locations down 3.7%, and non-go-forward locations down 6.5%. We remain encouraged by our first 50 performance. We're also excited for the rollout of additional staffing and handbags and shoes to another 100 locations this fall.

Speaker Change: By nameplate Macy's net sales inclusive of all Macy's locations and digital were down four 4% and comps were down three 6% Macy.

Speaker Change: Macy's nameplate go forward business comps, which include all 350 go forward locations in digital were down three 3%.

Adrian: Moving from product to stores, as previously mentioned, the First 50 achieved their second consecutive quarter of positive comps, posting a 1% gain. For the quarter, the disparity in performance between the First 50 and the total Macy's nameplate widened, with the First 50 comps outperforming the total Macy's nameplate by 460 basis points compared to 380 basis points last quarter. Initiatives at these locations continue to gain traction and include improving the customer experience through focused staffing in key departments, such as shoes, handbags, ready-to-wear, as well as fitting room and checkout.

Looking just at stores all go forward location comps were down two 3% with first 50 up 1% at the go forward locations down three 7% and non go forward locations down six 5%.

Adrian: Enhancing merchandise offerings to emphasize freshness, relevance, and inspiration, with, a focus on variety rather than redundancy by editing existing assortments and adding new brands.

Adrian: Modernizing our visual presentations, and offering unique store-level activations and, community events.

Adrian: First 50 customer satisfaction is growing.

Tony Spring: Enhancing merchandise offerings to emphasize freshness, relevance, and inspiration, with a focus on variety rather than redundancy by editing existing assortments and adding new brands. Modernizing our visual presentations, and offering unique store-level activations and community events. First 50 customer satisfaction is growing. Net promoter scores were 600 basis points above last year, and over 200 basis points better than other go-forward locations, with improvements in availability of salespeople, quick and easy checkout, and needing clean stores.

Speaker Change: We remain encouraged by our first 50 performance. We're also excited for the rollout of additional staffing in handbags and shoes to another 100 locations. This fall.

Speaker Change: Within handbags, we are continuing to diversify our brand portfolio.

Speaker Change: Lauren by Ralph Lauren and Karl Lagerfeld have been well received and we are experiencing strong demand for Coach's new product to sort.

Speaker Change: And in home, we are strengthening our holiday gift giving assortment ahead of our broad private brand reimagination next year.

Adrian Mitchell: The impact of these changes are reflected in our current outlook, which I will discuss in a moment. Turning to luxury, Bloomingdale's net sales were down 0.2%, and comms were down 1.4%, while Blue Mercury net sales and comms rose 1.7% and 2%, respectively. We're confident in the future of these two nameplates and believe our initiatives set us up well to take additional luxury markets.

Speaker Change: Net promoter scores were 600 basis points above last year, and over 200 basis points, better than other go-forward locations. With improvements in availability of salespeople, quick and easy checkout, and neat and clean, stores. These locations also had higher traffic and conversion relative to other go-forward locations, and all merchandise categories outperformed with shoes, handbags, men's, and kids' apparel, as well as women's ready-to-wear, registering the most improvement.

Speaker Change: The impact of these changes are reflected in our current outlook, which I will discuss in a moment.

Speaker Change: To pause on that, two categories where we've been struggling more broadly, men's and handbags, were among the most significant relative outperformers, which is exciting and could serve as a broader unlock.

Speaker Change: Turning to luxury Bloomingdale's net sales were down 0.2% and comps were down one 4%, while blue Mercury net sales and comps rose one, 7% and 2% respectively. We're confident in the future of these two nameplates and believe our initiatives sets us up well to take additional.

Speaker Change: <unk> luxury market share.

Adrian Mitchell: Chair. Moving to other revenues, which rose 6% to $159 million, net credit card revenues were up $5 million, or 4.2%, to $125 million. Net credit losses were in line with our expectations. As a reminder, in the second quarter of 2023, credit card revenues were negatively impacted by a change in net credit loss trends. Our priority remains to strengthen card usage among current holders, while acquiring new card holders, and we are pleased to have achieved three consecutive quarters of year-over-year new credit card application growth. Macy's Media Network revenue rose $4 million, or 13.3%, to $34 million, driven by higher advertiser and campaign counts.

Tony Spring: These locations also had higher traffic and conversion relative to other go-forward locations, and all merchandise categories outperformed with shoes, handbags, men's, and kids to peril, as well as women's ready to wear, registering the most improvement. To pause on that, two categories where we've been struggling more broadly, men's and handbags, were among the most significant relative outperformers, which is exciting and could serve as a broader unlock.

Speaker Change: Moving from product to stores, as previously mentioned, the First 50 achieved their second consecutive quarter of positive comps, boasting a 1% gain. For the quarter, the disparity in performance between the first 50 and the total Macy's nameplate widened, with the first 50 comps outperforming the total Macy's nameplate by 460 basis points compared to 380 basis points last quarter. Initiatives at these locations continue to gain traction and include, Improving the customer experience through focused staffing in key departments, such as shoes, handbags, ready-to-wear, as well as fitting room and checkout.

Moving to other revenues, which rose 6% to $159 million net credit card revenues were up $5 million or four 2% to $125 million net credit losses were in line with our expectations. As a reminder, in the second quarter of 2023 credit card revenue.

Speaker Change: Enhancing Merchandise Offerings to Emphasize Freshness, Relevance, and Inspiration With a Focus on Variety Rather Than Redundancy by Editing Existing Assortments and Adding New Brands, Modernizing Our Visual Presentation, and offering unique store-level activations and community events.

Speaker Change: First 50 customer satisfaction is growing.

Speaker Change: These were negatively impacted by a change in net credit loss trends.

Speaker Change: Net promoter scores were 600 basis points above last year and over 200 basis points better than other go-forward locations. With improvements in availability of salespeople, quick and easy checkout, and neat and clean stores.

Speaker Change: Our priority remains to strengthen card usage among current holders, while acquiring new card holders and we are pleased to have achieved three consecutive quarters of year over year, New credit card application growth.

Speaker Change: These locations also had higher traffic and conversion relative to other go-forward locations, and all merchandise categories outperformed with shoes, handbags, men's, and kids' apparel, as well as women's ready-to-wear registering the most improvement. And to pause on that, two categories where we've been struggling more broadly, men's and handbags, were among the most significant relative outperformers, which is exciting and could serve as a broader unlock.

Speaker Change: Macy's Media network revenue rose $4 million or 13, 3% to $34 million driven by higher Advertiser and campaign counts.

Speaker Change: The first 50 were created with an eye toward the future expansion.

Speaker Change: Locations have diverse geographic and socioeconomic representation, and initiatives are cross-functional and designed to be replicated. And with two consecutive quarters of meaningful comp-out performance, we are pleased to announce that we are implementing women's shoe and handbag staffing tests in roughly 100 additional Go Forward locations this fall. These tests will provide valuable insights that will be used as we further refine our initiative.

Speaker Change: Beyond the first 50, another important element of strengthening the Macy's nameplate is closing and monetizing our 150 non-go-forward locations.

Adrian Mitchell: Before discussing gross margin in inventory, it is important to note that both are not directly comparable to the prior year given the recent conversion to cost accounting. Second quarter gross margin rate was 40.5%, 240 basis points higher than last year, and better than our expectation. Merchandise margin improvements were driven by lower year-over-year discounting, favorable shortage due to the company's asset protection work, and partially by the company's shift to cost accounting. In addition, improved delivery expense benefited from lower-ship sales volume and ongoing expense control, reflecting cost savings and process re-engineering initiatives. End of quarter inventories were up 6% year-over-year, which was above our expectations due to second quarter sales results and the decision to invest in areas of product strength for the back half of the year.

Speaker Change: As a reminder, 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 roughly 950 basis points. While non-go-forward locations are underperformers relative to the total Macy's fleet, they are valuable real estate assets. Demand for these properties has been strong.

Speaker Change: Before discussing gross margin and inventory. It is important to note that both are not directly comparable to the prior year given the recent conversion to cost accounting.

Speaker Change: We are pleased with the pace and the quality of dealmaking and now expect to close approximately 55 stores this year versus prior expectations of roughly 50.

Speaker Change: We will continue to thoughtfully evaluate all opportunities presented to us, but given our strong balance sheet and that we have no material debt maturities until 2027, we will not execute a deal unless it is accretive.

Tony Spring: Beyond the first 50, another important element of strengthening the Macy's nameplate is closing and monetizing our 150 non-go-forward locations. As a reminder, in fiscal 2023, ComSales 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 roughly 950 basis points. While non-go-forward locations are underperformers relative to the total Macy's fleet, they are valuable real estate assets. Demand for these properties has been strong.

Speaker Change: Second quarter gross margin rate was 45% 240 basis points higher than last year and better than our expectation.

Merchandise margin improvements were driven by lower year over year discounting favorable shortage due to the Companys asset protection work and partially by the company's shift to cost accounting.

Speaker Change: In addition, improved delivery expense benefited from lower ship sales volume and ongoing expense control, reflecting cost savings and process reengineering initiatives.

End of quarter inventories were up 6% year over year, which was above our expectations due to second quarter sales results and the decision to invest in areas of product strength for the back half of the year.

Tony Spring: We are pleased with the pace and the quality of deal-making and now expect to close approximately 55 stores this year versus prior expectations of roughly 50. We will continue to thoughtfully evaluate all opportunities presented to us, but given our strong balance sheet and that we have no material debt maturities until 2027, we will not execute a deal unless it is accretive.

Adrian Mitchell: We estimate that approximately half of the increase is due to the shift to cost accounting. Looking ahead, we will continue to remain disciplined about the quantity and composition of our inventory. SG&A expense dollars of $2 billion, or 38.7% as a percent of total revenue, were better than our expectations. Our teams pursued cost controls while protecting customer-facing investments where we're seeing tangible returns, particularly in the first 50 locations. Compared to last year, SG&A expense was $7 million lower and up 120 basis points as a percent of total revenue due to lower sales volume. For the second quarter, we delivered adjusted EPS of 53 cents, well above our outlook of 25 cents to 33 cents, and compared to 26 cents last year, reflecting an improved year-to-year gross margin rate and strong expense controls.

Speaker Change: We estimate that approximately half of the increase is due to the shift to cost accounting.

Speaker Change: Looking ahead, we will continue to remain disciplined about the quantity and composition of our inventory.

Speaker Change: Before I share a more detailed update on each pillar of our bold new chapter strategy, I would like to briefly touch on the consumer discretionary environment. We entered the second quarter with an expectation that discretionary spend would remain stable, reflecting a resilient but choiceful consumer. As the quarter progressed, our customer became more discriminating, which we attribute to ongoing macroeconomic uncertainty and an increasingly complex news site.

Tony Spring: As we think about the future of the Macy's nameplate, we are committed to reading and reacting in real time to consumer demand to offer increasingly relevant product, messaging, and experiences at a compelling value regardless of the environment. Reflecting that mindset, we have adjusted backf-marketing and the promotional calendars and the depth and composition of buys, pulling back where business has been soft, while protecting areas where we have momentum. We are evolving our product, partnering closely with our vendors to better serve our customers through our own concession, marketplace, and consignment, understanding that our customer wants to see the best style, not just an endless aisle.

Speaker Change: Yeah.

Speaker Change: SG&A expense dollars or $2 billion or 38, 7% as a percent of total revenue were better than our expectations. Our team's pursuit cost controls, while protecting customer facing investments where were seeing tangible returns, particularly in first 50 locations.

Speaker Change: The first 50 were created with an eye toward the future expansion.

Speaker Change: Locations have diverse geographic and socioeconomic representation, and initiatives are cross-functional, and designed to be replicated. And with two consecutive quarters of meaningful comp-out performance, we are pleased to announce, that we are implementing women's shoe and handbag staffing tests in roughly 100 additional go-forward locations this fall. These tests will provide valuable insights that will be used as we further refine our, initiatives.

Speaker Change: Michael.

Speaker Change: Compared to last year, SG&A expense was $7 million lower and up 120 basis points as a percent of total revenue due to lower sales volume.

Speaker Change: For the second quarter, we delivered adjusted EPS of <unk> 53.

Tony Spring: And in digital, we are focused on search engine optimization, site enhancements, more transparent pricing, and a better mobile experience. Prince. Turning to luxury, which is our second pillar of the strategy, at Bloomingdale's, net sales were down, 0.2% and calm sales were down 1.4%. Customers responded well to advanced contemporary market brands, including Veronica Beard, Allison Olivia, LaJance, and Farm Rio. The Venus Williams Aqua collaboration, which launched in mid-June, just ahead of Hamilton and the Olympics, was very well received.

Speaker Change: Well above our outlook of 25 to 33 cents and compared to 26 cents last year, reflecting an improved year over year gross margin rate and strong expense controls. In addition, and earlier than expected non go forward asset sale gain benefited EPS by 10 cents.

Adrian Mitchell: In addition, an earlier-than-expected non-go-forward asset sale gain benefited EPS by 10 cents. Cash from operating activities was $137 million, while capital expenditures totaled $432 million. Free cash flow was an outflow of $244 million, and we paid $96 million in cash dividends.

Speaker Change: Cash from operating activities was $137 million, while capital expenditures totaled $432 million free cash flow was an outflow of $244 million and we paid $96 million in cash dividends.

Adrian Mitchell: We believe our healthy liquidity, including our asset-based credit facility, supports our ability to navigate any potential uncertainty that may arise as we head into the back half of the year. Regarding real estate monetization, we are pleased with the traction we've experienced to date with landlords and developers. We're committed to monetizing these assets in certain distribution centers, but only at the right value. We are encouraged by the progress that our season real estate team is making.

Speaker Change: We believe our healthy liquidity, including our asset based credit facility support our ability to navigate any potential uncertainty that may arise as we head into the back half of the year.

Tony Spring: And for the quarter, net per motor squares improved over 250 basis points year-over-year and remained a strength of this brand. Looking ahead in the next few weeks, Bloomingdale's will kick off New York Fashion Week with a two-month-long immersive experience that brings the best of Italy to its customers through over 300 exclusive products and 30 new brands across a parallel fine jewelry accessories beauty and home. All Bloomingdale's locations will host a celebration with food, art, and music, and throughout the activation, our 59th Street flagship will have shops, installations, and pop-ups on every floor.

Speaker Change: Beyond the first 50, another important element of strengthening the Macy's nameplate is closing, and monetizing our 150 non-go-forward locations. As a reminder, 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 roughly 950 basis points. While non-go-forward locations are underperformers relative to the total Macy's fleet, they are, valuable real estate assets. Demand for these properties has been strong.

Speaker Change: Regarding real estate monetization, we are pleased with the traction we've experienced to date with landlords and developers we're committed to monetizing these assets and certain distribution centers, but only at the right value. We are encouraged by the progress that our seasoned real estate team is making as noted earlier we are.

Speaker Change: We are pleased with the pace and the quality of dealmaking, and now expect to close approximately, 55 stores this year versus prior expectations of roughly 50.

Adrian Mitchell: As noted earlier, we have increased our expected number of store closures this year to approximately 55 locations from roughly 50.

Speaker Change: Our expected number of store closures this year to approximately 55 locations from roughly 50.

Adrian Mitchell: To conclude the conversation on recent results, I am proud of our teams. As the environment became more challenging, we executed with discipline. We found opportunities and efficiencies that supported our bottom line performance while continuing to make progress on our bold new chapter strategy.

Speaker Change: As we think about the future of the Macy's nameplate, we are committed to reading and reacting in real time to consumer demand, to offer increasingly relevant product, messaging, and experiences at a compelling value, regardless of the environment.

To conclude the conversation on recent results I am proud of our teams as the environment became more challenging we executed with discipline, we found opportunities and efficiencies that supported our bottom line performance, while continuing to make progress on our bold new chapter strategy.

Tony Spring: At Bloomingdale's, we achieved our 14th consecutive quarter of Constra sales growth, posting a 2% gain with net sales growing 1.7%. Customers continued to respond well to differentiated skincare offerings, including new brands like Dr. Diamond's Medicine, and we see an opportunity to expand fragrances with the recent launches of Creed and perfume de Marley. During the quarter of Bloomingdale opened one new store and remodeled another. New and remodeled locations continued to be received well and are outperforming the total fleet.

Speaker Change: Reflecting that mindset, we have adjusted back half marketing and the promotional calendars and the depth and composition of buys, pulling back where business has been soft while protecting areas where we have momentum.

Speaker Change: We're evolving our product, partnering closely with our vendors to better serve our customers through owned, concession, marketplace, and consignment, understanding that our customer wants to see the best aisle, not just an endless aisle.

Speaker Change: And in digital, we are focused on search engine optimization, site enhancements, more transparent pricing, and a better mobile experience.

Speaker Change: Turning to luxury, which is our second pillar of the strategy, at Bloomingdale's, net sales were down 0.2% and comm sales were down 1.4%.

Adrian Mitchell: Our full year and third quarter outlooks reflect everything we know about the consumer, our operations, and our goals as of today. As we navigate the remainder of the year, we will leverage our operational agility and execution disciplines to protect our profitability.

Our full year and third quarter outlooks reflect everything we know about the consumer our operations and our goals as of today.

Speaker Change: As we navigate the remainder of the year, we will leverage our operational agility and execution disciplines to protect our profitability.

Tony Spring: With each new store, our team is elevating a service model, response integration, and product mix curation to further establish Blue Mercury as the authority in professional skincare. In just a few weeks, Blue Mercury will kick off its 25th anniversary celebration, which will run throughout the remainder of the year.

Speaker Change: We will continue to thoughtfully evaluate all opportunities presented to us, but given, our strong balance sheet and that we have no material debt maturities until 2027, we will not execute a deal unless it is accretive.

Adrian Mitchell: Before discussing our full year and third quarter assumptions, a few reminders. First, our outlook assumes a more discriminating consumer and heightened promotional environment relative to our prior expectations. We believe our range gives us room to address the ongoing uncertainty in the discretionary consumer market. Second, we have not included any impact from the potential CFPB Lake V regulation. Third, the outlook for gross margin and inventory continues to reflect the conversion to cost accounting earlier this year and, as previously noted, are not directly comparable to prior year balances. And lastly, 2024 continues to be a transition and investment year for Macy's Inc.

Speaker Change: Okay.

Speaker Change: Customers responded well to advanced contemporary market brands, including Veronica Beard, Allison Olivia, L'Agence, and FarmRio.

Speaker Change: Before discussing our full year and third quarter assumptions a few reminders.

Speaker Change: The Venus Williams-Aqua collaboration, which launched in mid-June just ahead of Wimbledon and the Olympics, was very well received.

Speaker Change: As we think about the future of the Macy's nameplate, we are committed to reading and, reacting in real time to consumer demand to offer increasingly relevant product, messaging, and experiences at a compelling value regardless of the environment.

Speaker Change: And for the quarter, Net Promoter Scores improved over 250 basis points year-over-year and remain the strength of this brand.

Speaker Change: First our outlook assumes a more discriminating consumer and heightened promotional environment relative to our prior expectations. We believe our range gives us room to address the ongoing uncertainty in the discretionary consumer market.

Speaker Change: All Bloomingdale's locations will host a celebration with food, art, and music.

Speaker Change: Throughout the activation, our 59th Street flagship will have shops, installations and pop-ups on every floor.

Speaker Change: At Blue Mercury we achieved our 14th consecutive quarter of ComStor sales growth, posting a 2% gain with net sales growing 1.7%.

Speaker Change: Customers continue to respond well to differentiated skincare offerings, including new brands like Dr. Diamond's Medecine.

Speaker Change: And we see an opportunity to expand fragrances with the recent launches of Creed and Parfum de Marley.

Speaker Change: During the quarter, Blue Mercury opened one new store and remodeled another. New and remodeled locations continue to be received well and are outperforming the total fleet. With each new store, our team is elevating its service model, spa integration, and Product Mix Curation to further establish Blue Mercury as the authority in professional skin care.

Speaker Change: Reflecting that mindset, we have adjusted back-half marketing and the promotional calendars, and the depth and composition of buys, pulling back where business has been soft while protecting areas where we have momentum.

Speaker Change: And in just a few weeks, Blue Mercury will kick off its 25th anniversary celebration, which will run throughout the remainder of the year.

Speaker Change: We are evolving our products, partnering closely with our vendors to better serve our customers, through owned, concession, marketplace, and consignment, understanding that our customer wants to see the best aisle, not just an endless aisle.

Speaker Change: And in digital, we are focused on search engine optimization, site enhancements, more transparent, pricing, and a better mobile experience.

Speaker Change: Turning to luxury, which is our second pillar of the strategy, at Bloomingdale's, net sales, were down 0.2% and comm sales were down 1.4%.

Speaker Change: Customers responded well to advanced contemporary market brands including Veronica Beard, Alice and Olivia, L'Agence, and FarmRio.

Tony Spring: We are confident in the luxury category and its long-term potential. Although Bloomingdale's in Blue Mercury are not immune from the broader macro pressures, the variety of our market and private brand merchandise offerings provides compelling options that will allow us to capture wallet share. As the environment evolves, we will continue to leverage our strong storytelling heritage through new brands, expanded partnerships, and exciting launches and events.

Speaker Change: The Venus Williams Aqua collaboration, which launched in mid-June just ahead of Wimbledon and the, Olympics, was very well received.

Speaker Change: And for the quarter, net promoter scores improved over 250 basis points year-over-year and remained the strength of this brand.

Speaker Change: All Bloomingdale's locations will host a celebration with food, art, and music.

Speaker Change: Second we have not included any impact from the potential CFPB late fee regulation.

Speaker Change: As trends diverge from our expectations, we did not stand still. We took proactive steps to drive profitable sales, protect our gross margins, and further control SG&A.

Speaker Change: Third the outlook for gross margin and inventory continues to reflect the conversion to cost accounting earlier this year and as previously noted are not directly comparable to prior year balances.

And lastly, 2024 continues to be a transition and investment year for Macy's, Inc. We will continue to evaluate pilots and iterate new ideas not everything will work, but as we find what does we will scale as appropriate.

Adrian Mitchell: We will continue to evaluate, pilot, and iterate new ideas. Not everything will work, but as we find what does, we will scale as appropriate.

Tony Spring: Regarding the final pillar of our strategy, simplifying and modernizing end-to-end operations, we are reducing organizational complexity and generating cost-savings to fund growth investments. Adrian will go into more detail shortly, but the work within this pillar, including improving our fulfillment network productivity, and simplifying our technology ecosystem is fostering an even more disciplined organization.

Adrian Mitchell: With that, for fiscal 2024, we now expect net sales of approximately 22.1 to 22.4 billion dollars. The primary drivers of our reduced sales outlook relative to prior expectations are second quarter sales results and the more challenging environment. For the full year, we now assume Macy's Inc. comps inclusive of non-go-forward locations and digital to be down 2% to down 0.5% with Macy's name plate go-forward locations and digital to be down 1.5% to flat and our luxury name plates to collectively be up 0.5% to up 2%. Other revenue of 670 to 685 million dollars, including credit card revenues of 490 to 585 million dollars.

Speaker Change: With that for fiscal 2024, we now expect net sales of approximately $22 one to $22 $4 billion. The primary drivers of our reduced sales outlook relative to prior expectations, our second quarter sales results and a more challenging environment.

Speaker Change: For the full year, we now assume Macy's, Inc. Comps inclusive of non go forward locations and digital to be down 2% to down <unk>, 5% with macys nameplate go forward locations and digital to be down one 5% to flat and our luxury nameplates to collectively be.

Speaker Change: We are confident in the luxury category and its long-term potential.

Speaker Change: Although Bloomingdale's and Blue Mercury are not immune from the broader macro pressures, the variety of our market and private brand merchandise offerings provides compelling options that will allow us to capture wallet change.

Speaker Change: The Environment Evolves.

Tony Spring: We continue to view 2024 as a transition and investment year. While we're pleased with the recent progress on our strategy and profitability profile, we are clear-died about the challenges yet energized by the opportunities that lie ahead. We will remain competitive to win the customer, but we will not deviate from our path to sustainable profitable sales growth, and we are confident that the actions we are taking across all three bold new chapter pillars will benefit near and longer-term results.

Speaker Change: Up <unk>, 5% to up 2%.

Speaker Change: Other revenue of $670 million to $685 million, including credit card revenues of $490 million to $505 million.

Adrian Mitchell: Gross margin as a percent of net sales of 39% to 39.2%, primarily reflecting our expectation for a heightened promotional landscape, partially offset by sales mix and second quarter shortage benefit. SG&A is a percent of total revenue of 36.3% to 36.6% 10%. We will continue to invest in near-term sales-driving efforts and longer-term, bull-new chapter strategy initiatives while prioritizing efficiency and effectiveness in non-customer-facing areas.

Speaker Change: Gross margin as a percent of net sales of 39% to 39, 2%, primarily reflecting our expectation for a heightened promotional landscape, partially offset by sales mix and second quarter shortage benefit.

SG&A as a percent of total revenue of 36, 3% to 36, 6%. We will continue to invest in near term sales driving efforts and longer term bold new chapter strategy initiatives, while prioritizing efficiency and effectiveness and non customer facing areas.

Speaker Change: We will continue to leverage our strong storytelling heritage through new brands, expanded partnerships, and exciting launches and events.

Speaker Change: Regarding the final pillar of our strategy, simplifying and modernizing end-to-end operations, we are reducing organizational complexity and generating cost savings to fund growth investment. Adrian will go into more detail shortly, but the work within this pillar, including improving our fulfillment network productivity and simplifying our technology ecosystem, is fostering an even more disciplined organization.

Speaker Change: Asset sale gains of approximately $115 million with related sales proceeds of roughly $150 million.

Adrian Mitchell: We are leaning into call savings programs and working capital disciplines as we make targeted investments in areas such as automation and process simplification, which should benefit day-to-day execution. Thus far, these investments have improved the customer experience through faster online delivery and higher-product in-stocks while contributing to strong bottom-line performance and cash flow generation.

Speaker Change: We have updated our annual outlook based on the progress, we're making on dealmaking, including the second quarter monetization and our upwardly revised monetization expectation for the third quarter.

Adrian Mitchell: Our monetization and our upwardly revised monetization expectation for the third quarter. Adjusted EBITDA as a percent of total revenue of 8.6% to 9%; interest expense of $120 million due to higher expected interest income. We are maintaining our annual adjusted diluted EPS outlook of $2.55 to $2.90, reflecting our commitment to enhancing gross margin and exercising expense controls. Our second quarter beat and favorable interest expense assumptions are expected to be offset by headwinds from lower sales volume and a heightened promotional landscape. Capital spend of about 875 to $890 million, slightly higher than our prior outlook, as we pursue additional growth investments.

Adjusted EBITDA as a percent of total revenue up eight 6% to 9%.

Speaker Change: Interest expense of $120 million due to higher expected interest income.

Speaker Change: As a result, while second-quarter sales of 4.9 billion were slightly lower outlook, adjusted EPS to 53 cents was well above.

Adrian Mitchell: Now, let's turn to our second quarter results. As a reminder, all comparisons are to the comparable year-go period unless otherwise stated. During the quarter, we focused on gross margin expansion and effective expense management. This, combined with the actions Tony described earlier, allows us to achieve adjusted EPS that was significantly above our expectations, even without the benefits of the second quarter asset sale gain. Overall, total Macy's Inc, net sales were $4.9 billion, down 3.8% and total enterprise comms were down 3.3%.

Speaker Change: We are maintaining our annual adjusted diluted EPS outlook of $2 55.

Speaker Change: The $2.90 rift.

Speaker Change: At Macy's, which was the most impacted by the shift in consumer behavior, we lined our assortments and shifted our marketing calendar to better balance value and fashion. We enhanced our promotions and delivered more targeted personalized messages across categories and brands.

Speaker Change: Reflecting our commitment to enhancing gross margin and exercising expense controls.

Speaker Change: Our second quarter beat and favorable interest expense assumptions are expected to be offset by headwinds from lower sales volume and a heightened promotional landscape.

Speaker Change: Capital spend of about $875 million to $890 million slightly higher than our prior outlook as we pursue additional growth investments.

Adrian Mitchell: For the third quarter, net sales are expected to be $4.7 to $4.82 billion. Other revenues are projected to be roughly $152 million, including credit card revenues of approximately $110 million. Gross margin rate to be approximately 40.3% to 40.5%, and end of quarter inventories versus last year up mid-single digits on a reported basis. Entering the third quarter, the quantity and composition of our inventory is well-positioned. Age inventories are under control, and we are pleased with the level of newness. We're also seeing healthy inventory flows and have ongoing mitigation strategies in place to offset elevated ocean transit times and constrained container capacity.

Adrian Mitchell: Within that, go-forward business Macy's Inc, comms defined as Macy's, Bloomingdale's, and Blue Mercury go-forward locations plus digital declined 3%. By nameplate, Macy's net sales, inclusive of all Macy's locations and digital, were down 4.4% and comms were down 3.6%. Macy's nameplate go-forward business comms, which include all 350 go-forward locations in digital, were down 3.3%. Looking just at stores, all go-forward location comms were down 2.3% with first 50 up 1%, all the go-forward locations down 3.7% and non-go-forward locations down 6.5%.

Speaker Change: For the third quarter net sales are expected to be four $7 billion to $482 billion. Other revenues are projected to be roughly $162 million, including credit card revenues of approximately $110 million.

Speaker Change: Gross margin rate to be approximately 43% to 45% and end of quarter inventories versus last year up mid single digits on a reported basis.

Speaker Change: Entering the third quarter, the quantity and composition of our inventory is well positioned.

Speaker Change: Aged inventories are under control and we are pleased with the level of newness. We're also seeing healthy inventory flows and have ongoing mitigation strategies in place to offset elevated Ocean transit times and constrained container capacity.

Adrian Mitchell: We remain encouraged by our first 50 performance. We're also excited for the rollout of additional staffing and handbags and shoes to another 100 locations this fall. The impact of these changes are reflected in our current outlook, which I will discuss in a moment. Turning to luxury, Bloomingdale's net sales were down 0.2% and comms were down 1.4%, while Blue Mercury net sales and comms rose 1.7% and 2% respectively. We're confident in the future of these two nameplates and believe our initiatives sets us up well to take additional luxury markets.

Adrian Mitchell: We expect to end the third quarter and ultimately the fall season without any meaningful inventory liabilities.

Speaker Change: We expect to end the third quarter and ultimately the fall season without any meaningful inventory liabilities.

Adrian Mitchell: Finally, we expect adjusted diluted EPS of the loss of 4 cents to earnings of 1 cent, including a roughly $30 million asset sale gain assumption for the monetization of non-go-forward assets.

Speaker Change: Finally, we expect adjusted diluted EPS of a loss of four cents to earnings of <unk>, including a roughly $30 million asset sale gain assumption for the monetization of non go forward assets.

Adrian Mitchell: In closing, we remain relentlessly focused on executing our boldly-chapter strategy and controlling what we can control. This includes cost savings initiatives, inventory discipline, cash management, and strong operational execution.

Speaker Change: In closing, confidence in our Bold New Chapter strategy is unwavering, and we are steadfast in our commitment to improving the fundamentals of our business.

Speaker Change: In closing we remain relentlessly focused on executing our bogie chapter strategy and controlling what we can control. This includes cost savings initiatives inventory disciplined cash management and strong operational execution with that I'll now pass it back to Tony.

Adrian Mitchell: Chair. Moving to other revenues, which rose 6% to $159 million, net credit card revenues were up $5 million, or 4.2% to $125 million. Net credit losses were in line with our expectations. As a reminder, in the second quarter of 2023, credit card revenues were negatively impacted by a change in net credit loss trends. Our priority remains to strengthen card usage among current holders, while acquiring new card holders, and we are pleased to have achieved three consecutive quarters of year-over-year, new credit card application growth. Macy's media network revenue rose $4 million, or 13.3% to $34 million, driven by higher advertiser and campaign counts.

Tony Spring: With that, I'll now pass it back to Tony. Thank you, Adrian. I'm pleased with the progress we're making on our bold new chapter strategy. My team and I share a passion for finding new and innovative ways to serve and excite the customer, and we have a unique advantage through our iconic events as well as our everyday interactions. We understand that being in the business of retail is being in the business of people. We're listening to our customers, finding that balance between art and science, and are committed to delivering improved product and a better, more connected customer experience while returning the company to long-term profitable sales.

Tony: As I am a merchant at heart, I understand that retailing is a balance of art and science.

Tony: Thank you Adrian.

Tony: And throughout the activation, our 59th Street flagship will have shops, installations, and, pop-ups on every floor.

Tony: I'm pleased with the progress, we're making on our bold new chapter strategy My team and I share a passion for finding new and innovative ways to serve and excite the customer and we have a unique advantage through our iconic events as well as our everyday interactions we understand that being in the business of retail is being in the business of people who are listening to.

Tony: At Blue Mercury, we achieved our 14th consecutive quarter of comm store sales growth, posting a 2% gain with net sales growing 1.7%. Customers continued to respond well to differentiated skincare offerings, including new brands like Dr. Diamond's Medicine.

Tony: And we see an opportunity to expand fragrances with the recent launches, of Creed and Parfum de Marly.

Tony: During the quarter, Blue Mercury opened one new store and remodeled another. New and remodeled locations continue to be received well and are outperforming the total fleet. With each new store, our team is elevating its service model, spa integration, and product mix curation to further establish Blue Mercury as the authority in professional skincare.

Tony: And in just a few weeks, Blue Mercury will kick off its 25th anniversary celebration, which will run throughout the remainder of the year.

Tony: In closing, confidence in our bold new chapter strategy is unwavering, and we are steadfast, in our commitment to improving the fundamentals of our business.

Tony: We are confident in the luxury category and its long-term potential.

Tony: Although Bloomingdale's and Blue Mercury are not immune from the broader macro pressures, the variety of our market and private brand merchandise offerings provides compelling options that will allow us to capture wallet share.

Tony: As the environment evolves, we will continue to leverage our strong storytelling heritage through new brands, expanded partnerships, and exciting launches and events.

Tony: Regarding the final pillar of our strategy, simplifying and modernizing end-to-end operations, we are reducing organizational complexity and generating cost savings to fund growth investments.

Tony: Adriaan will go into more detail shortly, but the work within this pillar, including improving our fulfillment network productivity and simplifying our technology ecosystem, is fostering an even more disciplined organization.

Tony: As I am a merchant at heart, I understand that retailing is a balance of art and science.

Tony: As a team, we are actively listening to our customers to improve our results across the organization.

Tony: As a team, we are actively, listening to our customers to improve our results across the organization.

Tony: We continue to view 2024 as a transition and investment year.

Tony: Customers finding that balance between art and science and are committed to delivering improved product and a better more connected customer experience, while returning the company to long term profitable sales growth with that operator, we are ready for questions.

Tony: While we're pleased with the recent progress on our strategy and profitability profile, we are clear-eyed about the challenges, yet energized by the opportunities that lie ahead.

Tony: While we are pleased with the recent progress on our strategy and profitability profile, we are clear-eyed about the challenges, yet energized by the opportunities that lie ahead.

Tony: We will remain competitive to win the customer, but we will not deviate from our path.

Tony: We will remain competitive to win the customer, but we will not deviate from our path to sustainable, profitable sales growth, and we are confident that the actions we are taking across all three Bold New Chapter pillars will benefit near and longer term results.

Tony: Sustainable Profitable Sales Growth, and we are confident that the actions we are taking across all three Bold New Chapter pillars will benefit near and longer term results.

Tony Spring: Road.

Operator: With that operator, we are ready for questions. Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. If you may press star two, if you would like to remove your question from the queue for participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We do ask that you please limit yourself to one question and one follow-up. Again, that's star one to register a question at this time.

Tony: With that, let me turn it over to Adrian for his remarks.

Speaker Change: Thank you, Tony, and good morning, everyone.

Speaker Change: Thank you the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad at this time a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment, it may be necessary to pick up the handset before.

Speaker Change: As we navigated the second quarter, we continued to focus on controlling what is within our reach to drive our business. We delivered strong gross margin and better-than-expected SG&A as we diligently managed our margin and expense disciplines throughout the quarter.

Speaker Change: Our teams are also making progress on our bold new chapter strategy, including our third pillar, simplifying and modernizing end-to-end operations. We are leaning into cost savings programs and working capital disciplines as we make targeted investments in areas such as automation and process simplification, which should benefit day-to-day expertise.

Speaker Change: Thus far, these investments have improved the customer experience through faster online delivery and higher product in stocks while contributing to strong bottom line performance and cash flow generation.

Adrian Mitchell: Before discussing gross margin in inventory, it is important to note that both are not directly comparable to the prior year given the recent conversion to cost accounting. Second quarter gross margin rate was 40.5%, 240 basis points higher than last year, and better than our expectation. Merchandise margin improvements were driven by lower year-over-year discounting, favorable shortage due to the company's asset protection work, and partially by the company's shift to cost accounting. In addition, improved delivery expense benefited from lower-ship sales volume and ongoing expense control reflecting cost savings and process re-engineering initiatives.

Speaker Change: Pressing the star Keys, we do ask that you. Please limit yourself to one question and one follow up.

Speaker Change: Again, Thats Star one to register a question at this time.

Speaker Change: With that, let me turn it over to Adrian for his remarks.

Matthew Boss: Today's first question is coming from Matthew Boss of JP Morgan.

Speaker Change: Now let's turn to our second quarter results.

Today's first question is coming from Matthew boss of Jpmorgan. Please go ahead.

Matthew Boss: Please go ahead. Great. Thanks.

Matthew Boss: As a reminder, all comparisons are to the comparable year-ago period, unless otherwise stated.

Great. Thanks.

Matthew Boss: Thank you, Tony, and good morning, everyone.

Matthew Boss: So Tony, could you speak to the cadence of comps as the second quarter progressed, elaborate on changes that you cited in the consumer backdrop and just what you've seen with early back to school or August trends, maybe relative to the second quarter comp performance.

Matthew Boss: So Tony could you speak to the cadence of comps as the second quarter progressed elaborate on changes that you cited in the consumer backdrop in and just what you've seen with early back to school or August trends, maybe relative to the second quarter comp performance and then Adrian if you could just walk through the drivers of <unk>.

Speaker Change: And we invested in newness and proven areas of product strength while reducing our exposure to areas of software demand. These actions incrementally shifted the course of our business late in the second quarter, which is encouraging and speaks to our ability to quickly and thoughtfully analyze results and identify areas of opportunity.

Adrian Mitchell: End of quarter inventories were up 6% year-over-year, which was above our expectations due to second quarter sales results and the decision to invest in areas of product strength for the back half of the year. We estimate that approximately half of the increase is due to the shift to cost accounting. Looking ahead, we will continue to remain disciplined about the quantity and composition of our inventory. SG&A expense dollars of $2 billion, or 38.7% as a percent of total revenue, were better than our expectations.

Adrian Mitchell: And then Adrian, if you could just walk through drivers of back half gross margin expansion, despite embedding the heightened promotional backdrop, I think that would be great.

Adrian: Back half gross margin expansion. Despite embedding the heightened promotional backdrop I think that would be great.

Matthew Boss: Yeah.

Tony Spring: Thanks, Matt. Good to talk to you.

Matthew Boss: During the quarter, we focused on gross margin expansion and effective expense management. This, combined with the actions Tony described earlier, allows us to achieve adjusted EPS that was significantly above our expectations, even without the benefits of the second quarter asset sale gain.

Thanks, Matt good to talk to you.

Speaker Change: Overall, total Macy's Inc. net sales were $4.9 billion, down 3.8%, and total enterprise comps were down 3.3%.

Speaker Change: As we navigated the second quarter, we continued to focus on controlling what is within our, reach to drive our business. We delivered strong gross margin and better than expected SG&A as we diligently managed, our margin and expense disciplines throughout the quarter.

Tony Spring: The quarter played out obviously softer than we expected. It started to get softer in the middle of the quarter. And the team immediately took action, strengthening marketing, improving the quality of the products we're focused on, making sure that we were cutting back on receipts that were no longer necessary and flowing back into things that we're working. We saw an immediate impact.

Speaker Change: Our teams are also making progress on our Bold New Chapter strategy, including our third, pillar, simplifying and modernizing end-to-end operations. We are leaning into cost savings programs and working capital disciplines as we make, targeted investments in areas such as automation and process simplification, which should benefit day-to-day execution. Thus far, these investments have improved the customer experience through faster online, delivery and higher product end stocks while contributing to strong bottom-line performance and cash flow generation.

Speaker Change: The quarter played out obviously softer than we expected.

Speaker Change: Now let's turn to our second quarter results.

Speaker Change: It.

Speaker Change: Started to get softer.

Speaker Change: In the middle of the quarter and the team immediately took action.

Speaker Change: Strengthening marketing improving the quality of the products, we're focused on making sure that we were cutting back on receipts that were no longer necessary and flowing back into things that we're working we saw an immediate impact and while I'm not going to comment on third quarter sales you know I will say.

Speaker Change: As a reminder, all comparisons are to the comparable year-ago period unless otherwise, stated.

Adrian Mitchell: Our teams pursued cost controls while protecting customer-facing investments where we're seeing tangible returns, particularly in first 50 locations. Compared to last year, SG&A expense was $7 million lower and up 120 basis points as a percent of total revenue due to lower sales volume. For the second quarter, we delivered adjusted EPS of 53 cents, well above our outlook of 25 cents to 33 cents, and compared to 26 cents last year, reflecting an improved year-to-year gross margin rate and strong expense controls.

Speaker Change: Within that, GoForward Business Macy's Inc. comps, defined as Macy's, Bloomingdale's, and Blue Mercury GoForward locations, plus digital, declined 3%. By nameplate, Macy's net sales, inclusive of all Macy's locations and digital, were down 4.4% and comps were down 3.6%. Macy's nameplate go-forward business comps, which include all 350 go-forward locations in digital, were down 3.3%.

Tony Spring: And while I'm not going to comment on third quarter sales, I will say that the changes we made in the second quarter are showing in the third quarter as well. And our guidance, I think, gives us that conservative outlook for the remainder of the year that is both prudent and appropriate, allowing us to reaffirm our EPS guidance for the year and, at the same time, acknowledge the fact that the consumer is more discriminating.

Speaker Change: The changes we made in the second quarter are showing in the third quarter as well and our guidance I think it gives us that conservative outlook for the remainder of the year that is both prudent and appropriate you know, allowing us to reaffirm our EPS guidance for the year and at the same time acknowledged the fact that the consumer is more discriminating.

Speaker Change: Looking just at stores, all go-forward location comps were down 2.3%, with first 50 up 1%, all the go-forward locations down 3.7%, and non-go-forward locations down 6.5%.

Adrian Mitchell: I do think that the changes that we're making in the first 50 serve is a great parameter and opportunity for us to continue to learn and apply to more stores going forward. We did announce a hundred stores that were adding staffing tests to in both handbags and shoes. The fact that in the first 50, all categories outperformed the rest of the name plate; the fact that we're seeing it on the top line, we're seeing it on the customer service scores, we're seeing it in better traffic and conversion. So we think we have a model that we just need a little longer to learn from, but we're prepared to use that as the go-forward strategy for the Macy's brand.

Speaker Change: I do think that the changes that we're making in the first of these serve as a great barometer and opportunity for us to continue to learn and apply to more stores going forward. We did announce the 100 stores that we're adding staffing test to in both handbags and shoes are the fact that in the first 50 or.

Adrian Mitchell: In addition, an earlier than expected non-go-forward asset sale gain benefited EPS by 10 cents. Cash from operating activities was $137 million while capital expenditures totaled $432 million. Free cash flow was an outflow of $244 million, and we paid $96 million in cash dividends. We believe our healthy liquidity, including our asset-based credit facility, support our ability to navigate any potential uncertainty that may arise as we head into the back half of the- here.

Speaker Change: We remain encouraged by our first 50 performance. We're also excited for the rollout of additional staffing in handbags and shoes to another 100 locations this fall.

Speaker Change: All categories outperformed the rest of the nameplate. The fact that we're seeing on the top line, we're seeing it on the customer service scores, we're seeing it in better traffic and conversion. So we think we have a model that we just need a little longer to learn from but were prepared to use that as the go forward strategy for the Macy's brand.

Adrian Mitchell: Regarding real estate monetization, we are pleased with the traction we've experienced to date with landlords and developers. We're committed to monetizing these assets in certain distribution centers, but only at the right value. We are encouraged by the progress that our season real estate team is making.

Adrian Mitchell: Adrian?

Adrian: Adrian Good morning, Matt, Let me speak a little bit to gross margin. So as you know that we are quite pleased with our Q2 gross margin results and we're certainly confident in our outlook for the year as we spoke about a few moments ago. The range that we have for the year of 39% to 39, 2%. We believe just gives us sufficient flex.

Adrian Mitchell: Good morning, Matt. Let me speak a little bit to Gross Margin. So, as you know, that we're quite pleased with our Q2 gross margin results. And we're certainly confident in our outlook for the years we spoke about a few moments ago. The range that we have for the year of 39% to 39.2% we believe just gives us sufficient flexibility to respond to the uncertainty that may be on the horizon.

Speaker Change: During the quarter, we focused on gross margin expansion and effective expense management. This, combined with the actions Tony described earlier, allows us to achieve adjusted EPS, that was significantly above our expectations, even without the benefits of the second quarter asset sale gain.

Speaker Change: Overall, total Macy's Inc. net sales were $4.9 billion, down 3.8%, and total enterprise, comps were down 3.3%.

Speaker Change: Within that, GoForward Business Macy's Inc. comps, defined as Macy's, Bloomingdale's, and Blue Mercury GoForward locations, plus digital, declined 3%. By nameplate, Macy's net sales, inclusive of all Macy's locations and digital, were, down 4.4%, and comps were down 3.6%. Macy's nameplate GoForward business comps, which include all 350 GoForward locations, and digital, were down 3.3%.

Speaker Change: We remain encouraged by our first 50 performance. We're also excited for the rollout of additional staffing in handbags and shoes to another, 100 locations this fall.

Adrian: The impact of these changes are reflected in our current outlook, which I will discuss in a moment.

Adrian: Looking just at stores, all GoForward location comps were down 2.3%, with first 50 up 1%, all the GoForward locations down 3.7%, and non-GoForward locations down 6.5%.

Adrian: Turning to luxury, Bloomingdale's net sales were down 0.2% and comps were down 1.4%, while Blue Mercury net sales and comps rose 1.7% and 2% respectively.

Adrian: We're confident in the future of these two nameplates and believe our initiative sets us up well to take additional luxury market share.

Adrian: Moving to other revenues, which rose 6% to $159 million, net credit card revenues were up $5 million, or 4.2% to $125 million.

Adrian Mitchell: As noted earlier, we have increased our expected number of store closures this year to approximately 55 locations from roughly 50. To conclude the conversation on recent results, I am proud of our teams. As the environment became more challenging, we executed with discipline. We found opportunities and efficiencies that supported our bottom line performance while continuing to make progress on our bold new chapter strategy.

Adrian: The ability to respond to the uncertainty that may be on the horizon now as we plan.

Adrian: The impact of these changes are reflected in our current outlook, which I will discuss, in a moment.

Adrian Mitchell: Now, as we plan, as we think about our gross margin outlook for the balance of the year in the fall season, there are really three things that we're focused on. The first is around inventories. And we feel at this point that we do have inventories under control. We took some actions coming out of the second quarter, given we had softer sales on the quarter. And we've already made the appropriate adjustments for Q3 and Q4. And the kinds of things that we're leaning into are the things that you're familiar with. We have good disciplines and good controls already in place.

Adrian: Turning to luxury, Bloomingdale's net sales were down 0.2%, and comps were down 1.4%, while Blue Mercury net sales and comps rose 1.7% and 2% respectively.

Adrian: As we think about our gross margin outlook for the balance of the year in the fall season. There are really three things that we're focused on the first is around inventories and we feel at this point that we do have inventories under control. We took some actions coming out of the second quarter, given we had softer sales in the quarter and we've already made the appropriate adjustments for Q3 and Q4.

Speaker Change: And while we cannot control the external environment, we are taking recent learnings and applying them.

Adrian: We're confident in the future of these two nameplates, and believe our initiative sets, us up well to take additional luxury market share.

Adrian: Moving to other revenues, which rose 6% to $159 million, net credit card revenues were up $5 million, or 4.2% to $125 million.

Adrian: Net credit losses were in line with our expectations.

Adrian: Before discussing gross margin and inventory, it is important to note that both are not directly comparable to the prior year, given the recent conversion to cost accounting.

Adrian: As a reminder, in the second quarter of 2023, credit card revenues were negatively impacted by a change in net credit loss trends.

Adrian: Our priority remains to strengthen card usage among current holders while acquiring new card holders, and we are pleased to have achieved three consecutive quarters of year-over-year new credit card application growth.

Adrian: Macy's media network revenue rose $4 million, or 13.3%, to $34 million, driven by higher advertiser and campaign counts.

Speaker Change: As we navigate the current landscape, our teams remain focused on the execution of our bold new chapter strategy.

Adrian Mitchell: Our full year and third quarter outlooks reflect everything we know about the consumer, our operations and our goals as of today. As we navigate the remainder of the year, we will leverage our operational agility and execution disciplines to protect our profitability.

Adrian: And the kinds of things that we're leaning into are the things that you are familiar with we have a good disciplines and good controls already in place at this moment in time, our aged inventories are well under control. We're pleased with the level of newness because were now approaching the holiday season, and we have a healthy flow given some of the constraints I mentioned a bit earlier around container availability.

Adrian Mitchell: At this moment in time, our age inventories are well on the control. We're pleased with the level of units because we're now approaching the holiday season. And we have a healthy flow given some of the constraints I mentioned a bit earlier around container availability and supply chain delays.

Adrian Mitchell: Before discussing our full year and third quarter assumptions, a few reminders. First, our outlook assumes a more discriminating consumer and heightened promotional environment relative to our prior expectations. We believe our range gives us room to address the ongoing uncertainty in the discretionary consumer market. Second, we have not included any impact from the potential CFPB Lake V regulation. Third, the outlook for gross margin and inventory continues to reflect the conversion to cost accounting earlier this year and as previously noted, are not directly comparable to prior year balances.

Adrian: And supply chain delays, but there are a couple of other things that are important for us as well the second one being shortage trends we benefited in the second quarter from lower shortage that'd be expected as we've made investments at the end of last year into the beginning of this year with our asset protection team and the initiatives that they are pursuing seem to be working so we're very pleased with that.

Adrian Mitchell: But there are a couple of other things that are important for us as well. The second one being shortage trends. We've benefited in the second quarter from lower shortage than we expected. As we've made investments that the end of last year into the beginning of this year with our asset protection team. And the initiatives that they're pursuing seem to be working. So we're very pleased with that.

Adrian: Second quarter gross margin rate was 40.5%, 240 basis points higher than last year, and better than our expectation. Merchandise margin improvements were driven by lower year-over-year discounting, favorable shortage due to the company's asset protection work, and partially by the company's shift to cost accounting.

Adrian Mitchell: The last piece is lower delivery costs. You know, we continue to diversify our carriers who have lower rates without actually compromising service levels. We also recognize that it's important to have the right balance of upstream versus downstream fulfillment, which has enabled us to minimize split shipments, which can be quite costly for us. So as we think about inventory discipline, shortage trends, and lower delivery costs. We're encouraged by our outlook for the balance of the year and also encouraged by what we expect to deliver in the third quarter.

Adrian: The last piece is Lori delivery costs, we continued to diversify our carriers, who have lower rates without actually compromising service levels. We also recognize that it's important to have the right balance of upstream versus downstream fulfillment, which has enabled us to minimize split shipments, which can be quite costly for us. So as we think.

Adrian: In addition, improved delivery expense benefited from lower shift sales volume and ongoing expense control, reflecting cost savings and process reengineering initiatives.

Adrian: End of quarter inventories were up 6% year-over-year, which was above our expectations due to second quarter sales results and the decision to invest in areas of product strength for the back half of the year. We estimate that approximately half of the increase is due to the shift to cost accounting.

Adrian Mitchell: And lastly, 2024 continues to be a transition and investment year for Macy's Inc. We will continue to evaluate, pilot and iterate new ideas. Not everything will work, but as we find what does, we will scale as appropriate. With that, for fiscal 2024, we now expect net sales of approximately 22.1 to 22.4 billion dollars. The primary drivers of our reduced sales outlook relative to prior expectations are second quarter sales results and the more challenging environment.

Adrian: Inventory discipline shortage trends and lower delivery costs, we are encouraged by our outlook for the balance of the year and also encouraged by what we expect to deliver in the third quarter.

Speaker Change: That's great color best of luck.

Matthew Boss: Thanks, Matt. Thank you.

Matt: Thanks, Matt.

Brooke Roach: The next question is coming from Brooke Roach of Goldman Sachs. Please go ahead. Good morning, and thank you for taking our question.

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

Speaker Change: Turning to the first pillar, strengthening the Macy's name plate, second-quarter net sales declined 4.4 percent and comparable sales were down 3.6 percent.

Brooke Roach: Good morning, and thank you for taking our question Tony I was hoping you could help frame the magnitude of the potential tailwind do you see from the rollout of these select first 50 staffing test.

Brooke Roach: Tony, I was hoping you could help frame the magnitude of the potential tailwinds you see from the rollout of these select first 50 staffing tests to locations this fall. And then broader, bigger picture, the key factor that you're looking for that will allow you to more aggressively expand these first 50 initiatives to the rest of the fleet.

Speaker Change: But those numbers don't tell the full story.

Adrian Mitchell: For the full year, we now assume Macy's Inc, comps inclusive of non-go-forward locations and digital to be down 2% to down 0.5% with Macy's name plate go-forward locations and digital to be down 1.5% to flat and our luxury name plates to collectively be up 0.5% to up 2%. Other revenue of 670 to 685 million dollars, including credit card revenues of 490 to 585 million dollars. Gross margin as a percent of net sales of 39% to 39.2%, primarily reflecting our expectation for a heightened promotional landscape partially offset by sales mix and second quarter shortage benefit.

Tony: Locations. This fall and then broader bigger picture the key factors that youre looking for that will allow you to more aggressively expand these first 50 initiatives to the rest of the fleet.

Speaker Change: During the quarter, Macy's experienced ongoing strength and fragrances and green shoots in women's ready-to-wear apparel, including Donna Karen, Steve Madden, Avecliffee, and French connection to name a few.

Adrian Mitchell: And then perhaps for Adrian, can you elaborate on the adjustments that Macy's is making to its promotion and marketing calendar for the balance of the year?

Adrian: And then perhaps for Adrian can you elaborate on the adjustments that macys is making towards promotion and marketing calendar for the balance of the year. Thank you.

Adrian: Looking ahead, we will continue to remain disciplined about the quantity and composition of our inventory.

Adrian: SG&A expense dollars of $2 billion, or 38.7% as a percent of total revenue, were better than our expectations.

Brooke Roach: Thank you. Thanks, Brooke. Good to talk to you.

Adrian: Thanks Brook and good to talk to you.

Tony Spring: We are excited about the first 50. You know, if we haven't made that clear enough, it's two consecutive quarters of Com Store growth. It's 600 basis points of improvement in NPS, 460 basis points of improvement versus the rest of Macy's. And I want to make clear we will expand F 50 or first 50. It's a question of when, not if. And I think we said before on the fourth quarter call, we will elaborate further on how many stores next year. But I think you can view it as a positive sign that we went ahead and did the hundred store tests on handbags and shoes, as the confidence that we have on those particular families of business on what it can mean to provide the ample level of staffing in a service oriented business.

Adrian: Our teams pursued cost controls while protecting customer-facing investments where we're seeing tangible returns, particularly in first 50 locations.

We are excited about the first 50, if we haven't made that clear enough. Its two consecutive quarters of comp store growth. It's a 600 basis points of improvement in NPS 460 basis points of improvement versus the rest of Macy's and I want to make clearly we will expand F.

Adrian: Compared to last year, SG&A expense was $7 million lower and up 120 basis points as a percent of total revenue due to lower sales volume.

Adrian: For the second quarter, we delivered adjusted EPS of $0.53, well above our outlook of $0.25 to $0.33 and compared to $0.26 last year, reflecting an improved year-over-year gross margin rate and strong expense controls. In addition, an earlier-than-expected non-go-forward asset sale gain benefited EPS by $0.10.

Adrian: Cash from operating activities was $137 million, while capital expenditures totaled $432 million.

Adrian: Free cash flow was an outflow of $244 million, and we paid $96 million in cash dividends.

Adrian: <unk> or first 50, it's a question of when not if and I I think we've said before on the fourth quarter call. We.

Adrian Mitchell: SG&A is a percent of total revenue of 36.3% to 36.6% 10%. We will continue to invest in near-term sales-driving efforts and longer-term, bull-new chapter strategy initiatives while prioritizing efficiency and effectiveness in non-customer-facing areas. Our monetization and our upwardly revised monetization expectation for the third quarter. Adjusted EBITDA as a percent of total revenue of 8.6% to 9%, interest expense of $120 million due to higher expected interest income. We are maintaining our annual adjusted diluted EPS outlook of $2.55 to $2.90 reflecting our commitment to enhancing gross margin and exercising expense controls.

We will elaborate further on how many stores next year, but I think you can view it as a positive sign that we went ahead and did the 100 store test on handbags and shoes as the confidence that we have on those particular families of business and what it can mean to provide the ample level of staffing and a service oriented.

Tony Spring: In terms of the magnitude, it's incorporated into our guidance. I think our guidance gives us the range to be able to use those levers to improve our performance. But I look at the first 50 as continuing to be the best example of what Macy's can be in the future. And please know we are going to move as fast as we possibly can without tripping on our way to success. So I'm just careful about making sure that there are not false positives. We got a lot of noise in the public environment right now. Let's make sure we understand what's causation versus correlation.

Adrian: That business in <unk>.

Adrian: We believe our healthy liquidity, including our asset-based credit facility, support our ability to navigate any potential uncertainty that may arise as we head into the back half of the year.

Adrian: Regarding real estate monetization, we are pleased with the traction we've experienced to date with landlords and developers.

Adrian: Terms of the magnitude it's incorporated into our guidance I think our guidance gives us the range to be able to use those levers to.

Adrian: Improve our performance.

Adrian: But I I look at the first 50 as continuing to be the Best example of what Macy's can be in the future and please know we are going to move as fast as we possibly can without tripping on our way to success. So I'm just careful about making sure that they're not false positives, we got a lot of noise in the public environment right now.

Speaker Change: Let's make sure we understand what's causation versus correlation adra.

Adrian Mitchell: Adrian. Good morning, Brooke. You know, to your question about the adjustments on promotions and marketing into the context that we are operating under as a consumer that's really oriented on value. And so some of the things that we've been doing is experimenting with our media marketing mix, which we're very encouraged by the experiments that we're seeing on the business as Tony referenced since we've made those changes from Q2. We're being very clear on value in our promotional calendar and our communicated messages, but we also recognize that there are other dimensions when the customer shows up on our website or in our stores that matter around value as well.

Adrian: We are committed to monetizing these assets and certain distribution centers, but only at the right value.

Speaker Change: Yeah.

Brook: Good morning Brook to your question about the adjustments on promotions and marketing.

Adrian: We are encouraged by the progress that our seasoned real estate team is making.

Adrian: As noted earlier, we have increased our expected number of store closures this year to approximately 55 locations from roughly 50.

Brook: The context that we are operating under as a consumer that's really oriented on value and so some of the things that we've been doing is experimenting with our media marketing mix, which we're very encouraged by the experiments that we're seeing on the business as Tony referenced since we've made those changes from Q2, we've been very clear on value and our promotional <unk>.

Adrian Mitchell: Our second quarter beat and favorable interest expense assumptions are expected to be offset by headwinds from lower sales volume and a heightened promotional landscape. Capital spend of about 875 to $890 million slightly higher than our prior outlook as we pursue additional growth investments.

Adrian: To conclude the conversation on recent results, I am proud of our teams.

Adrian: As the environment became more challenging, we executed with discipline.

Adrian: We found opportunities and efficiencies that supported our bottom line performance while continuing to make progress on our bold new chapter strategy.

Adrian: Our full year and third quarter outlooks reflect everything we know about the consumer, our operations, and our goals as of today.

Adrian: As we navigate the remainder of the year, we will leverage our operational agility and execution disciplines to protect our profitability.

Adrian: Before discussing our full year and third quarter assumptions, a few reminders.

Adrian: First, our outlook assumes a more discriminating consumer and heightened promotional environment relative to our prior expectations.

Speaker Change: Under not communicated messages, but we also recognize that there are other dimensions when the customer shows up on our website or in our stores that matter around value as well and that's having colleagues available having a good experience within our stores, making sure that we have strong visual presentation that re amplifying the value that's available to the customer when they visit us.

Adrian: We believe our range gives us room to address the ongoing uncertainty in the discretionary consumer market.

Adrian Mitchell: For the third quarter, net sales are expected to be $4.7 to $4.82 billion. Other revenues are projected to be roughly $152 million including credit card revenues of approximately $110 million. Gross margin rate to be approximately 40.3% to 40.5% and end of quarter inventories versus last year up mid-single digits on a reported basis. Entering the third quarter, the quantity and composition of our inventory is well-positioned. Age inventories are under control and we are pleased with the level of newness.

Adrian: Second, we have not included any impact from the potential CFPB late fee regulation.

Adrian: Third, the outlook for gross margin and inventory continues to reflect the conversion to cost accounting earlier this year, and as previously noted, are not directly comparable to prior year balances.

Adrian: And lastly, 2024 continues to be a transition and investment year for Macy's, Inc.

Adrian: We will continue to evaluate, pilot, and iterate new ideas. Not everything will work, but as we find what does, we will scale as appropriate.

Adrian: With that, for fiscal 2024, we now expect net sales of approximately $22.1 to $22.4 billion. The primary drivers of our reduced sales outlook relative to prior expectations are second quarter sales results and the more challenging environment.

Adrian Mitchell: And that's having colleagues available, having a good experience within our stores, making sure that we have strong visual presentation that we amplifying the value that's available to the customer when they visit us. So those are the kinds of adjustments that we're making, but really all centered around sharper on the value messaging to the consumer every day that they're actually visiting with us.

Adrian: For the full year, we now assume Macy's, Inc. comps, inclusive of non-go-forward locations and digital, to be down 2% to down 0.5%, with Macy's nameplate go-forward locations and digital to be down 1.5% to flat, and our luxury nameplates to collectively be up 0.5% to up 2%.

Adrian: Other revenue of $670 to $685 million, including credit card revenues of $490 to $505 million.

Adrian: Gross margin as a percent of net sales of 39% to 39.2%, primarily reflecting our expectation for a heightened promotional landscape partially offset by sales mix and second quarter shortage benefit.

Adrian: SG&A as a percent of total revenue of 36.3% to 36.6%.

Adrian: Entering the third quarter, the quantity and composition of our inventory is well-positioned. Aged inventories are under control, and we are pleased with the level of newness. We're also seeing healthy inventory flows and have ongoing mitigation strategies in, place to offset elevated ocean transit times and constrained container capacity.

Adrian: We will continue to invest in near-term sales-driving efforts and longer-term BONU chapter strategy, initiatives, while prioritizing efficiency and effectiveness in non-customer-facing areas.

Adrian: We expect to end the third quarter, and ultimately the fall season, without any meaningful inventory, liabilities. Finally, we expect adjusted diluted EPS of a loss of $0.04 to earnings of $0.01, including, a roughly $30 million asset sale gain assumption for the monetization of non-go-forward assets.

Adrian: Asset sale gains of approximately $115 million, with related sales proceeds of roughly $150, million.

Adrian: In closing, we remain relentlessly focused on executing our bold new chapter strategy, and controlling what we can control. This includes cost savings initiatives, inventory discipline, cash management, and strong operational, execution.

Adrian: We have updated our annual outlook based on the progress we are making on dealmaking, including the second quarter monetization and our upwardly revised monetization expectation for the third quarter. Adjusted EBITDA as a percent of total revenue of 8.6% to 9%.

Adrian: Interest expense of $120 million due to higher expected interest income.

Adrian: We are maintaining our annual adjusted diluted EPS outlook of $2.55 to $2.90, reflecting, our commitment to enhancing gross margin and exercising expense controls.

Adrian: With that, I'll now pass it back to Tony.

Adrian: Our second quarter beat and favorable interest expense assumptions are expected to be offset, by headwinds from lower sales volume and a heightened promotional landscape.

Adrian: Capital spend of about $875 to $890 million, slightly higher than our prior outlook as, we pursue additional growth investments.

Adrian: For the third quarter, net sales are expected to be $4.7 to $4.82 billion. Other revenues are projected to be roughly $152 million, including credit card revenues, of approximately $110 million. Gross margin rate to be approximately 40.3% to 40.5%, and end-of-quarter inventories versus, last year up mid-single digits on a reported basis.

Speaker Change: So those are the kinds of adjustments that we're making but really all centered around sharper on the value messaging to the consumer every day that they are actually visiting with us.

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

Adrian Mitchell: We're also seeing healthy inventory flows and have ongoing mitigation strategies in place to offset elevated ocean transit times and constrained container capacity. We expect to end the third quarter and ultimately the fall season without any meaningful inventory liabilities.

Speaker Change: Great. Thanks, so much I'll pass it on.

Brooke Roach: Thanks, Brooke. Thank you.

Brett: Thanks, Brett.

Adrian: Thank you, Adrian.

Ashley Hulgens: The next question is coming from Ashley Hulgens of Jeffries. Please go ahead.

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

Adrian: I'm pleased with the progress we're making on our bold new chapter strategy. My team and I share a passion for finding new and innovative ways to serve and excite, the customer, and we have a unique advantage through our iconic events, as well as our everyday interactions.

Adrian: We understand that being in the business of retail is being in the business of people.

Operator: Ashley, you may be on mute. Would you like me to move on to the next question?

Speaker Change: Actually it may be on mute.

Speaker Change: Would you like me to move on to the next question.

Operator: Yes. Thank you.

Yes.

Robert Drbul: The next question is coming from Bob Durable of Fuggenheim. Please go ahead. Hi, good morning. Just a couple of questions for me. On the merchandising side, just what you're saying. Seeing in handbags and shoes, you know, to really lead that acceleration, just wondering if you could comment. I think that's been a tougher category. So, you know, some of the changes that you're saying would be helpful. And a similar question, just on women's. You know, when you look at what's happening in women's and some of the brands that you caught up, any of the trends, you know, that you see in sort of the legs to those trends in the back half of the year?

Adrian: We're listening to our customers, finding that balance between art and science, and, are committed to delivering improved product and a better, more connected customer experience while returning the company to long-term profitable sales results.

Speaker Change: Thank you. The next question is coming from Bob durable of Guggenheim. Please go ahead.

Adrian: With that operator, we are ready for questions.

Adrian Mitchell: Finally, we expect adjusted diluted EPS of the loss of 4 cents to earnings of 1 cent including a roughly $30 million asset sale gain assumption for the monetization of non-go-forward assets. In closing, we remain relentlessly focused on executing our boldly-chapter strategy and controlling what we can control. This includes cost savings initiatives, inventory discipline, cash management and strong operational execution.

Adrian: Thank you.

Adrian: The floor is now open for questions.

Bob Durable: Hi, good morning.

Adrian: If you would like to ask a question, please press star 1 on your telephone keypad at this time.

Bob Durable: Just a couple of questions from me on the merchandising side, just what youre seeing in handbags and shoes.

Bob Durable: To really lead that acceleration just wondering if you could comment I think that's been a tougher category. So some of the changes that you're seeing would be helpful and a similar question just on womens.

Speaker Change: When you look at what's happening in womens and some of the brands that you called out any of the trends that you see in sort of the lakes to those trends in the back half of the year.

Tony Spring: With that, I'll now pass it back to Tony. Thank you, Adrian. I'm pleased with the progress we're making on our bold new chapter strategy. My team and I share a passion for finding new and innovative ways to serve and excite the customer and we have a unique advantage through our iconic events as well as our everyday interactions. We understand that being in the business of retail is being in the business of people. We're listening to our customers, finding that balance between art and science and are committed to delivering improved product and a better, more connected customer experience while returning the company to long-term profitable sales. Road.

Tony Spring: Sure.

Tony Spring: Thanks, Bob, for the question. We are seeing green shoots in the redded wear.

Speaker Change: Sure. Thanks, Bob for the question.

Operator: With that operator, we are ready for questions.

Speaker Change: We are seeing green shoots in our ready to wear so that's why we're citing are those examples in terms of Donna Karan or of eckler fee or Karl lagerfeld, or at Bloomingdale's, and la Johns or an Alice and Olivia or Veronica beard.

Speaker Change: Customers also responded well to the ongoing private brand ready-wear imagination, including elevated fashion and quality in our heritage labels.

Operator: Thank you.

Tony Spring: So that's why we're, you know, citing those examples in terms of Donna Karan or a Veck Lafay or Karl Lagerfeld or Bloomingdale's in Lijance or in Ellison, Olivia or Veronica Beard. We are taking advantage of the fact that we are in an apparel cycle. And whether that's wide bottom, denim, or change in silhouette or improve fabrications, we want to go after the business at both brands.

Speaker Change: As we lap last year's private brand exits, we have been introducing new market and private brands that more closely align with customer demand. Continuing to build on the momentum in this important category is a top priority, and we are making the appropriate investments to support growth.

Speaker Change: At the same time, we are also addressing the weaknesses in men's apparel, handbags, and home. In men's apparel, contemporary has been a bright spot, and we believe there's an opportunity for growth in this category.

Speaker Change: Where we are taking advantage of the fact that we are in an apparel cycle and whether that's wide bottom denim or a change in silhouette or improved fabrications. We wanted to go after the business that at both brands in terms of handbags and shoes, we were pleased to see the disparate or the magnitude of the.

Speaker Change: Earlier this month, we saw off-launch a new private brand targeting the under-party consumer to support our growth aspirations.

Tony Spring: In terms of handbags and shoes, we were pleased to see the disparate or the magnitude of the difference in our F50 stores in those two categories, which have been tougher for us. And I would say we know staffing is an ingredient; we know merchandise is an ingredient. So we're pleased to go after a hundred more stores in those two categories. And we think that the assortment in shoes is very conducive to a department store environment, where a customer wants selection and variety of price points and brands. Doesn't always know their size by brand. And it's a chance for us to lean into something that we're particularly good at.

Speaker Change: Within handbags, we are continuing to diversify our brand portfolio.

Speaker Change: Lauren by Ralph Lauren and Carl Lagerfeld have been well-received, and we are experiencing strong demand for coach's new product disortment.

Speaker Change: The difference in our F 50 stores in those two categories, which have been tougher for us and I would say, we know staffing as an ingredient we know merchandize as an ingredient. So we're pleased to go after 100 more stores in those two categories and we think that the assortment and shoes is.

Operator: The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. If you may press star two, if you would like to remove your question from the queue for participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We do ask that you please limit yourself to one question and one follow up. Again, that's star one to register a question at this time.

Speaker Change: Very conducive to a department store environment, where a customer wants selection of variety of price points and brands doesn't always know their size by brand and it's a chance for us to lean into something that we're particularly good at and in the case of handbags I think we cited the fact that we're starting to see some light at the end of the tunnel on brands like Laura in Bahrain.

Matthew Boss: Today's first question is coming from Matthew Boss of JP Morgan. Please go ahead. Great. Thanks.

Tony Spring: In the case of handbags, I think we cited the fact that we're starting to see some light at the end of the tunnel on brands like Lauren by Ralph Lauren and Karl Lagerfeld. And the coach business has been particularly good lately. So cautiously optimistic that those tests are going to help improve the quality of our business in the fall.

Tony Spring: So Tony, could you speak to the cadence of comps as the second quarter progressed, elaborate on changes that you cited in the consumer backdrop and just what you've seen with early back to school or August trends, maybe relative to the second quarter comp performance. And then Adrian, if you could just walk through drivers of back half gross margin expansion, despite embedding the heightened promotional backdrop, I think that would be great. Thanks, Matt.

Speaker Change: Ralph Lauren and Karl Lagerfeld, and the coach business has been particularly good lately. So.

Speaker Change: Cautiously optimistic that those tests are going to help improve the quality of our business in the fall.

Adrian Mitchell: And if I could just ask a follow-up, Adrian, on the credit card business, could you expand a bit more sort of, you know, on some of the trends that you're seeing within, you know, the card holders and delinquencies. You know, I think you said, as expected, but can you put a little more color on that for us?

Speaker Change: And if I could just ask a follow up.

Adrian: Adrian on the credit card business can you expand a bit more sort of you know in some of the trends that youre seeing within the cardholders in delinquencies.

Tony Spring: Good to talk to you. The quarter played out obviously softer than we expected. It started to get softer in the middle of the quarter. And the team immediately took action, strengthening marketing, improving the quality of the products we're focused on, making sure that we were cutting back on receipts that were no longer necessary and flowing back into things that we're working. We saw an immediate impact. And while I'm not going to comment on third quarter sales, I will say that the changes we made in the second quarter are showing in the third quarter as well.

Speaker Change: As expected, but can you put a little more color on that for us.

Adrian Mitchell: Absolutely, Bob, and good morning. So our net credit losses and delinquencies, as I mentioned earlier, were very much in line with our expectations. What we are seeing is that there are slightly lower payment rates, which is not necessary and is not necessarily translating into bad debt. So what's been happening is that we're seeing the customer sit on revolving balances a little bit longer, but certainly paying off their paying their bills in a cycle that effectively has allowed us to have revenue a little bit better than our expectations. And that revenue is really driven by higher balances with, you know, delinquencies and that credit losses in line with what we expected in our fort.

Adrian: Net credit losses were in line with our expectations.

Adrian: Absolutely Bob and good morning, So our net credit losses and delinquencies as I mentioned earlier, we're very much in line with our expectations, where we are seeing is that there are slightly lower payment rates, which does not necessarily is not necessarily translating into bad debt. So what's been happening is that we're seeing the customer set.

Speaker Change: And in home, we are strengthening our holiday gift-giving assortment ahead of our broad private brand reimagination next year.

Adrian: On revolving balances a little bit longer, but certainly paying off their pain paying their bills in a cycle that effectively has allowed us to have revenue a little bit better than our expectations and that revenue is really driven by higher balances with delinquencies and net credit losses.

Adrian: As a reminder, in the second quarter of 2023, credit card revenues were negatively impacted by a change in net credit loss trend.

Tony Spring: And our guidance, I think, gives us that conservative outlook for the remainder of the year that is both prudent and appropriate, allowing us to reaffirm our EPS guidance for the year and at the same time acknowledge the fact that the consumer is more discriminating. I do think that the changes that we're making in the first 50 serve is a great parameter and opportunity for us to continue to learn and apply to more stores going forward.

In line with what we expected in our forecast.

Adrian: A confirmation tone will indicate your line is in the question queue.

Adrian Mitchell: Gast.

Adrian Mitchell: Thank you very much.

Adrian: Thank you very much no problem Bob.

Adrian Mitchell: No problem, Bob. Thank you.

Dana Telsey: The next question is coming from Dana Telsey of Telsey Advisory Group. Please go ahead. Hi, good morning everyone.

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

Adrian: You may press star 2 if you would like to remove your question from the queue.

Speaker Change: Moving from product to stores, as previously mentioned, the first 50 achieve their second consecutive quarter of positive comps, posting a 1% gain.

Dana Telsey: Our priority remains to strengthen card usage among current holders while acquiring new card holders and we are pleased to have achieved three consecutive quarters of year-over-year new credit card application, Macy's media network revenue rose $4 million, or 13.3%, to $34 million, driven by higher advertiser and campaign count.

Dana Telsey: Hi, good morning, everyone.

Dana Telsey: Before discussing gross margin and inventory, it is important to note that both are not directly comparable to the prior year, given the recent conversion to cost accounting.

Dana Telsey: If you think about some of your other formats, whether it's the smaller format, Macy's Backstage, outlets and digital, how did they perform relative to the core and how you're thinking about them for the back half, and then just following up on AUR, which I think was up 4% in the first quarter of 3.6% in a second, drivers of AUR gains and how you're thinking about it going forward.

Dana Telsey: Second quarter gross margin rate was 40.5%, 240 basis points higher than last year and better than our expectations. Merchandise margin improvements were driven by lower year over year discounting, favorable shortage due to the company's asset protection work, and partially by the company's shift to cost accounting.

Dana Telsey: Do you think about some of your other formats, whether it's a smaller format Macy's backstage outlets in digital how did they perform relative to the core and how you're thinking about them for the back half and then just following up on AUR, which I think was up 4% in the first quarter up three 6% in the second drivers of AUR gains and how you're thinking.

Dana Telsey: In addition, improved delivery expense benefited from lower ship sales volume and ongoing expense control reflecting cost savings and process reengineering initiatives.

Dana Telsey: End-of-quarter inventories were up 6% year-over-year, which was above our expectations due to second-quarter sales results and the decision to invest in areas of product strength for the back half of the year. We estimate that approximately half of the increase is due to the shift to cost accounting.

Tony Spring: We did announce a hundred stores that were adding staffing tests to in both handbags and shoes. The fact that in the first 50, all categories outperformed the rest of the name plate, the fact that we're seeing it on the top line, we're seeing it on the customer service scores, we're seeing it in better traffic and conversion. So we think we have a model that we just need a little longer to learn from, but we're prepared to use that as the go forward strategy for the Macy's brand.

Speaker Change: For the quarter, the disparity in performance between the first 50 and the total Macy's nameplate widened. With the first 50 comps outperforming the total Macy's nameplate by 460 basis points compared to 380 basis points last quarter. Initiatives at these locations continue to gain traction and include improving the customer experience through focus staffing and key departments such as shoes, handbags, ready to wear, as well as fitting room and check out.

Speaker Change: Nevada going forward and just lastly, you tweaked up the investment in Capex.

Adrian Mitchell: And just lastly, you tweaked up the investment in CAP-X. What are those growth initiatives, is some of it by Italy for balloon sales that's coming up, or how you're thinking about it. Thank you.

Speaker Change: Enhancing merchandise offerings to emphasize freshness, relevance, and inspiration, with a focus on variety rather than redundancy by editing existing assortments and adding new brands.

Speaker Change: What are those growth initiatives, there's some of it by the by Italy for Bloomingdale's, that's coming up or how you're thinking about it. Thank you.

Dana Telsey: Thanks, Dana. Good to talk to you.

Speaker Change: Looking ahead, we will continue to remain disciplined about the quantity and composition of our inventory.

Speaker Change: Stay in a good to talk to you, let's first talk about the portfolios because I think it's a big part of what we're trying to accomplish with our opening Macy's small format. We opened six in the spring we have six more that we're opening in the fall, which brings us to 24 stores. We obviously have the first 50 initiative and we <unk>.

Speaker Change: SG&A expense dollars of $2 billion, or 38.7% as a percent of total revenue, were better than our expectations.

Tony Spring: Let's first talk about portfolios because I think it's a big part of what we're trying to accomplish with opening Macy's small format. We open six in the spring. We have six more that we're opening in the fall, which brings us to 24 stores. We obviously have the first 50 initiative, and we have our digital business. And what we have focused on is trying to win by market. And what you'll see us talking more about is what is the right complement of small format stores, great on mall stores, and the digital business by geography to be able to win the customer and succeed market by market.

Speaker Change: Modernizing our visual presentations, and offering unique store-level activations and community events.

Adrian Mitchell: Adrian? Good morning, Matt. Let me speak a little bit to Gross Margin. So as you know that we're quite pleased with our Q2 Gross Margin results. And we're certainly confident in our outlook for the years we spoke about a few moments ago. The range that we have for the year of 39% to 39.2%, we believe just gives us sufficient flexibility to respond to the uncertainty that may be on the horizon. Now as we plan, as we think about our Gross Margin outlook for the balance of the year in the fall season, there are really three things that we're focused on.

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

Speaker Change: We do ask that you please limit yourself to one question and one follow-up.

Speaker Change: Again, that's star 1 to register a question at this time.

Speaker Change: Today's first question is coming from Matthew Boss of J.P. Morgan.

Speaker Change: Our digital business and what we have focused on is trying to win by market and while you'll see us talking more about is what is the right complement of small format stores, great on mall stores and the digital business by geography to be able to win the customer and succeed market market by market. So it's it's.

Speaker Change: Please go ahead.

Speaker Change: Great, thanks.

Adrian Mitchell: The first is around inventories. And we feel at this point that we do have inventories on the control. We took some actions coming out of the second quarter given we had softer sales on the quarter. And we've already made the appropriate adjustments for Q3 and Q4. And the kinds of things that we're leaning into are the things that you're familiar with. We have good disciplines and good controls already in place. At this moment in time, our age inventories are well on the control.

Speaker Change: So, Tony, could you speak to the cadence of comps as the second quarter progressed?

Tony Spring: So it's not like choosing your favorite child. These all fit into our ecosystem. We have to have the best off-mall stores and best on-mall stores and a healthy digital business. The AUR increase is consistent with what we've seen by improving the quality of our product, not charging more, not pulling back from promotion. So I would continue to expect to see low single-digit AUR growth as we continue to try to improve the traffic and conversion in our stores and on our site.

You know like choosing your favorite child. These all fit into our ecosystem. We have to have the best off mall stores and best on mall stores and a healthy digital business.

Speaker Change: The AUR increase is consistent with what we've seen by improving the quality of our product not charging more not pulling back from a promotion. So I would continue to expect to see low single digit AUR growth as we continue to try to improve the traffic and conversion on our store in our stores.

Adrian Mitchell: We're pleased with the level of units because we're now approaching the holiday season. And we have a healthy flow given some of the constraints I mentioned a bit earlier around container availability and supply chain delays. But there are a couple of other things that are important for us as well. The second one being shortage trends. We've benefited in the second quarter from lower shortage than we expected. As we've made investments that the end of last year into the beginning of this year with our asset protection team.

And on our site that the single biggest area that we have been challenged with is on conversion and we're doing everything we can on both the site and the presentation in our stores to improve the quality of conversion I think Adrian mentioned on the call both traffic and conversion were stronger in our first 50. So I think we know what we have to do we just need.

Tony Spring: The single biggest area that we have been challenged with is on conversion. And we're doing everything we can on both the site and the presentation in our stores to improve the quality conversion. I think Adrian mentioned on the call that both traffic and conversion were stronger in our first 50. So I think we know what we have to do. We just need to react appropriately and make sure that we're managing both the top line and the bottom line.

Speaker Change: Elaborate on changes that you cited in the consumer backdrop and just what you've seen with early back-to-school or August trends, maybe relative to the second quarter comp performance.

Speaker Change: Our teams pursued cost controls while protecting customer-facing investments where we're seeing tangible returns, particularly in first 50 locations.

Adrian Mitchell: And the initiatives that they're pursuing seem to be working. So we're very pleased with that. The last piece is lower delivery costs. You know, we continue to diversify our carriers who have lower rates without actually compromising service levels. We also recognize that it's important to have the right balance of upstream versus downstream fulfillment, which is enabled us to minimize split shipments, which can be quite costly for us. So as we think about inventory discipline, shortage trends and lower delivery costs. We're encouraged by our outlook for the balance of the year and also encouraged by what we expect to deliver in the third quarter. Thanks, Matt.

Operator: Thank you.

Adrian: React appropriately and make sure that we're managing both the topline and the Bottomline.

Speaker Change: And then, Adrian, if you could just walk through drivers of back-half gross margin expansion, despite embedding the heightened promotional backdrop, I think that would be great.

Adrian Mitchell: Adrian, anything you've had? Yes, good morning, Dana. To your question on capital investment, you know that we're very disciplined on capital allocation. We're very focused on maintaining a healthy balance sheet, returning excess cash value to our investors.

Adrian: Adrian anything you Ed Yes, good morning, Dan add to your question on capital investment.

Speaker Change: Thanks, Matt.

Adrian: Compared to last year, SG&A expense was $7 million lower and up 120 basis points as a percent of total revenue due to lower sales volume.

Adrian: As noted earlier, we have increased our expected number of store closures this year to approximately 55 locations from roughly 50.

Adrian: In addition, an earlier-than-expected non-go-forward asset sale gain benefited EPS by $0.10.

Adrian: To conclude the conversation on recent results, I am proud of our team. As the environment became more challenging, we executed with discipline. We found opportunities and efficiencies that supported our bottom line performance while continuing to make progress on our bold new chapter strategy.

Adrian: Cash from operating activities was $137 million, while capital expenditures totaled $432 million.

Adrian: Free cash flow was an outflow of $244 million and we paid $96 million in cash dividends.

Adrian: You know that we're very disciplined on capital allocation, we're very focused on maintaining a healthy balance sheet.

Adrian: Our full year and third quarter outlooks reflect everything we know about the consumer, our operations, and our goals as of today.

Adrian: Regarding real estate monetization, we are pleased with the traction we've experienced to date with landlords and developers.

Adrian: As we navigate the remainder of the year, we will leverage our operational agility and execution disciplines to protect our profitability.

Adrian: Before discussing our full year and third quarter assumptions, a few reminders.

Adrian: We're committed to monetizing these assets and certain distribution centers, but only at the right value.

Adrian: First, our outlook assumes a more discriminating consumer and heightened promotional environment relative to our prior expectations.

Adrian: We are encouraged by the progress that our seasoned real estate team is making.

Adrian: Returning excess cash value to our investors, but the second dimension of our capital allocation is really what you're experiencing with a slight increase in capital spend for this year, we're going to be investing in high return investments in the business. For example, what we're seeing in our 50 stores is that some of the visual enhancements in areas like our private brands.

Adrian Mitchell: But the second dimension of our capital allocation is really what you're experiencing with a slight increase in capital spend for this year. We're going to be investing in high return investments in the business. For example, what we're seeing in our 50 stores is that some of the visual enhancements in areas like our private brands seem to be working. So we want to lean into that. Some of the biggest improvement in our stores around 50 stores as well as a broader network is around need and clean. But we want to make sure that in these stores, we're making the changes that the general upkeep of the store and the maintenance of the store is actually appropriately invested in so that there's a good experience for the customer.

Brooke Roach: The next question is coming from Brooke Roach of Goldman Sachs. Please go ahead. Good morning and thank you for taking our question.

Adrian: Seem to be working so we want to lean into that some of the biggest improvement in our scores around at 50 stores as well as the broader network is around neat and clean, but we want to make sure that in these stores, where we're making the changes that the general upkeep of the store and the maintenance of the stores actually appropriately invested in so that there's a good experience for the customer.

Tony Spring: Tony, I was hoping you could help frame the magnitude of the potential tailwinds you see from the rollout of these select first 50 staffing tests to locations this fall. And then broader, bigger picture, the key factor that you're looking for that will allow you to more aggressively expand these first 50 initiatives to the rest of the fleet.

Adrian Mitchell: We see some opportunities around digital. And so we've been leaning into that into that piece as well. So really being very thoughtful and surgical about those investments that will help us deliver a better experience and also deliver growth. And so we're really, you know, taking the opportunity to lean into some of those investments. this year.

Adrian: We see some opportunities around digital and so we've been leaning into that into that piece as well, so really being very thoughtful and surgical about those investments that will help us deliver a better experience and also deliver growth and so we've really taken the opportunity to lean into some of those investments this year.

Adrian Mitchell: And then perhaps for Adrian, can you elaborate on the adjustments that Macy's is making to its promotion and marketing calendar for the balance of the year? Thank you. Thanks, Brooke. Good to talk to you. We are excited about the first 50. You know, if we haven't made that clear enough, it's two consecutive quarters of Com Store growth. It's 600 basis points of improvement in NPS, 460 basis points of improvement versus the rest of Macy's.

Adrian: Okay.

Dana Telsey: Thank you. Thank you, Dana.

Speaker Change: First 50 customer satisfaction is growing. Net promoter scores were 600 basis points above last year, and over 200 basis points better than other go-forward locations, with improvements in availability of salespeople, quick and easy checkout, and needing clean stores. These locations also had higher traffic and conversion relative to other go-forward locations, and all merchandise categories outperformed with shoes, handbags, men's, and kids to peril, as well as women's ready to wear, registering the most improvement.

Adrian: Thank you.

Adrian: Yeah.

Dana Telsey: Thank you Dana.

Dana Telsey: Thank you.

Ashley Helgans: The next question is coming from Ashley Helgans of Jeffries. Please go ahead.

Speaker Change: Thank you. The next question is coming from Ashley Hogan with Jefferies. Please go ahead.

Blake Anderson: Hey guys, apologies about earlier. This is Blake on for Ashley. Wanted to ask on the applied sales guide for the second half in terms of kind of your consumer assumptions are used to mean the consumer is more stable or becomes increasingly challenged. How is that reflected in the guide and also on the color and Q3 sales.

Ashley Hogan: Hey, guys apologies about earlier.

Ashley Hogan: This is Blake on for actually wanted to ask on the implied sales guidance for the second half.

Speaker Change: The first 50 were created with an eye toward the future expansion.

Adrian Mitchell: And I want to make clearly we will expand F 50 or first 50. It's a question of when not if. And I think we said before on the fourth quarter call, we will elaborate further on how many stores next year. But I think you can view it as a positive sign that we went ahead and did the hundred store tests on handbags and shoes as the confidence that we have on those particular families of business on what it can mean to provide the ample level of staffing in a service oriented business.

Blake: In terms of kind of your consumer assumptions are you assuming that consumer is more stable or it becomes increasingly challenged how is that reflected in the guide.

Adrian: Also on the on the color on Q3 sales Adrian did you provide a comp at all for that and then last one for US was also for Adrian on cost accounting, how much is embedded in that.

Adrian Mitchell: Adrian, did you provide a comp at all for that?

Adrian Mitchell: And then the last one for us was also for Adrian on cost accounting. How much is embedded in that for the full year gross margin? Thanks so much. Absolutely.

Speaker Change: For the full year gross margin. Thanks, so much.

Adrian: We believe our range gives us room to address the ongoing uncertainty in the discretionary consumer market.

Adrian: Absolutely.

Adrian Mitchell: So Blake, great to be with you. Let me talk a little bit about sales to get started. You know, when you think about our sales range for both Q3 and for the year, it just gives us an opportunity to address the uncertainty in the discretionary spending categories that we operate in. And so, as Tony mentioned a bit earlier, we've been very thoughtful and cautious about what we're seeing in the back half. At the same time, we expect our S50 Macy's locations to outperform the broader fleet. We're encouraged enough in terms of the performance that Tony just spoke to, to expand a couple of changes around handbags and shoes that we're seeing real gains in the first 50 locations to an additional 100 locations this fall.

So Blake great to be with you, let me talk a little bit about sales to get started when you think about our sales range for both Q3 and for the year. It just gives us an opportunity to address the uncertainty in the discretionary spending categories that we operate in and so as Tony mentioned a bit earlier, we are being very thoughtful and cautious about what.

Adrian: Second, we have not included any impact from the potential CFPB late fee regulation.

Adrian Mitchell: In terms of the magnitude, it's incorporated into our guidance. I think our guidance gives us the range to be able to use those levers to improve our performance. But I look at the first 50 as continuing to be the best example of what Macy's can be in the future. And please know we are going to move as fast as we possibly can without tripping on our way to success. So I'm just careful about making sure that there are not false positives. We got a lot of noise in the public environment right now. Let's make sure we understand what's causation versus correlation.

Speaker Change: We're seeing in the back half at the same time, we expect our S 50, Macy's locations to outperform the broader fleet were encouraged enough in terms of the performance that don't need just spoke to to expand a couple of changes around handbags and shoes that we're seeing real gains in the first 50 locations to an additional 100 locations. This fall.

Adrian Mitchell: Adrian. Good morning, Brooke. You know, to your question about the adjustments on promotions and marketing into the context that we are operating under as a consumer that's really oriented on value. And so some of the things that we've been doing is experimenting with our media marketing mix, which were very encouraged by the experiments that we're seeing on the business as Tony referenced since we've made those changes from Q2. We're being very clear on value in our promotional calendar and our communicated messages, but we also recognize that there are other dimensions when the customer shows up on our website or in our stores that matter around value as well.

Adrian Mitchell: We're continuing to make investments in our digital business around site enhancements, search engine optimization, and a better mobile mix. So again, we have a number of things that we see green shoes that we're leaning into, but we also recognize that we're in a context of uncertainty with regards to discretionary spend.

We're continuing to make investments in our digital business around site enhancements search engine optimization, a better mobile mix. So again, we have a number of things that we see green shoots that we're leaning into but we also recognize that we're in a context of uncertainty with regards to discretionary spend.

Speaker Change: Locations have diverse geographic and socio-economic representation, and initiatives are cross-functional and designed to be replicated.

Speaker Change: And with two consecutive quarters of meaningful compound performance, we are pleased to announce that we are implementing women's shoe and handbag staffing tests and roughly 100 additional go-forward locations this fall. These tests will provide valuable insights that will be used as we further refine our initiatives.

Adrian Mitchell: As we think about cost accounting, you know, the way I would think about it is that the best way to track our performance this year is to look at our outlook for the year. That's really going to be the best way. On an annual basis, some of the adjustments that you would expect from the transition from retail accounting to cost accounting are not material for the year. We provided a little bit more detail in Q2, but it's a bit chunky as you go throughout the year. But again, not material for the overall year. And with regards to how we're thinking about gross margin in the third quarter, you know, we're looking at about 40.3% to 40.5%.

Speaker Change: Third, the outlook for gross margin and inventory continues to reflect the conversion to cost accounting earlier this year, and as previously noted, are not directly comparable to prior year balance.

Speaker Change: And lastly, 2024 continues to be a transition and investment year for Macy's Inc. We will continue to evaluate, pilot, and iterate new ideas. Not everything will work, but as we find what does, we will scale as appropriate.

Speaker Change: We think about cost accounting.

Speaker Change: With that, for fiscal 2024, we now expect net sales of approximately $22.1 to $22.4 billion. The primary drivers of our reduced sales outlook relative to prior expectations are second quarter sales results and the more challenging environment.

Speaker Change: For the full year, we now assume Macy's Inc. comps, inclusive of non-go-forward locations and digital, to be down 2% to down 0.5%, with Macy's nameplate go-forward locations and digital to be down 1.5% to flat, and our luxury nameplates to collectively be up 0.5% to up 2%.

Speaker Change: The way I would think about it is that the best way to track. Our performance. This year is to look at our outlook for the year, that's really going to be the best way on an annual basis. Some of the adjustments that you would expect from the transition from retail accounting to cost accounting or not material for the year, we provided a little bit more detail in Q2.

Speaker Change: Other revenue of $670 to $685 million, including credit card revenues of $490 to $505 million.

Speaker Change: Beyond the first 50, another important element of strengthening the Macy's nameplate is closing and monetizing our 150 non-go-forward locations.

Speaker Change: As a reminder, in fiscal 2023, ComSales 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 roughly 950 basis points.

Speaker Change: But it's a bit chunky as we go throughout the year, but again not material for the overall year and with regards to how are we thinking about gross margin in the third quarter, we're looking at about 43% to 40 points.

Speaker Change: Gross margin as a percent of net sales of 39% to 39.2%, primarily reflecting our expectation for a heightened promotional landscape partially offset by sales mix and second quarter shortage benefits.

Speaker Change: While non-go-forward locations are underperformers relative to the total Macy's fleet, they are valuable real estate assets. Demand for these properties has been strong.

Speaker Change: SG&A as a percent of total revenue of 36.3% to 36.6% We will continue to invest in near-term sales-driving efforts and longer-term bold new chapter strategy initiatives while prioritizing efficiency and effectiveness in non-customer-facing areas.

Speaker Change: Asset sale gains of approximately $115 million, with related sales proceeds of roughly $150 million.

Speaker Change: We have updated our annual outlook based on the progress we are making on deal-making, including the second quarter monetization and our upwardly revised monetization expectation for the third quarter, adjusted EBITDA as a percent of total revenue of 8.6% to 9.5%, interest expense of $120 million due to higher expected interest, We are maintaining our annual adjusted diluted EPS outlook of $2.55 to $2.90, reflecting our commitment to enhancing gross margin and exercising expense control.

Speaker Change: For the third quarter, net sales are expected to be $4.7 to $4.82 billion. Other revenues are projected to be roughly $152 million, including credit card revenues of approximately $110 million. Gross Margin Rate to be approximately 40.3% to 40.5% and End-of-Quarter Inventories versus last year up mid-single digits on a reported basis.

Speaker Change: Our second quarter beat and favorable interest expense assumptions are expected to be offset by headwinds from lower sales volume and a heightened promotional landscape.

Speaker Change: Entering the third quarter, the quantity and composition of our inventory is well positioned. Aged inventories are under control and we are pleased with the level of new inventories. We're also seeing healthy inventory flows and have ongoing mitigation strategies in place to offset elevated ocean transit times and constrained container capacity. We expect to end the third quarter, and ultimately the fall season, without any meaningful inventory liability.

Speaker Change: Capital spend of about $875 million to $890 million, slightly higher than our prior outlook as we pursue additional growth investments.

Speaker Change: Finally, we expect adjusted diluted EPS of a loss of $0.04 to earnings of $0.01, including a roughly $30 million asset sale gain assumption for the monetization of non-go-forward assets.

Speaker Change: In closing, we remain relentlessly focused on executing our bold new chapter strategy and controlling what we can control. This includes cost savings initiatives, inventory discipline, cash management, and strong operational execution.

Speaker Change: 5% and we feel that given the ranges on top line on gross margin on the bottom line, we should be able to navigate through those outcomes.

Adrian Mitchell: And we feel that, given the ranges on top line on gross margin on the bottom line, we should be able to navigate to those outcomes.

Speaker Change: We are pleased with the pace and the quality of deal-making and now expect to close approximately 55 stores this year versus prior expectations of roughly 50.

Operator: Great. Thanks so much. I'll pass it on. Thanks, Brooke. Thank you.

Speaker Change: We will continue to thoughtfully evaluate all opportunities presented to us, but given our strong balance sheet and that we have no material debt maturities until 2027, we will not execute a deal unless it is accretive.

Ashley Hulgens: The next question is coming from Ashley Hulgens of Jeffries. Please go ahead.

Blake Anderson: Great.

Blake Anderson: Thank you.

Speaker Change: Great. Thank you best of luck.

Blake Anderson: Best of luck. Thank you, Blake.

Speaker Change: With that, I'll now pass it back to, Thank you, Adrian.

Blake: Thank you Blake.

Tracy Kogan: Thank you. The next question is coming from Polish way of city. Please go ahead. Thanks.

Speaker Change: Thank you. The next question is coming from Paul Lajoie with Citi. Please go ahead.

Operator: Ashley, you may be on mute. Would you like me to move on to the next question? Yes. Thank you.

Tony Spring: It's Tracy Cogan filling in for Paul. I was wondering if you could talk about performance by income demographic, particularly as the quarter played out and we saw that weakness overall. Was wondering if you saw any differences by the different income cohorts. Thanks. Thanks for the question, Tracy. Yeah, I think that there was a pretty consistent reaction across all of our name plates in terms of the second quarter being softer than the first quarter. So yeah, you have to believe that everybody is being a little more cautious as they kind of watch what's going on in the macro environment and are just being more judicious in the purchases they make.

Tracy Kogan: Thanks, It's Tracy Kogan filling in for Paul I was wondering if you could talk about performance by income demographic, particularly as the quarter played out and we saw that weakness overall I was wondering if you saw any differences by the different income pulpwood. Thanks.

Robert Drbul: The next question is coming from Bob Durable of Fuggenheim. Please go ahead. Hi, good morning. Just a couple of questions for me. On the merchandising side, just what you're saying. Seeing in handbags and shoes, you know, to really lead that acceleration, just wondering if you could comment. I think that's been a tougher category. So, you know, some of the changes that you're saying would be helpful. And a similar question, just on women's, you know, when, when you look at what's happening in women's and some of the brands that you caught up, any of the trends, you know, that you see in sort of the legs to those trends in the back half of the year? Sure.

Speaker Change: As we think about the future of the Macy's nameplate, we are committed to reading and reacting in real time to consumer demand to offer increasingly relevant product, messaging, and experiences at a compelling value regardless of the environment.

Speaker Change: Thanks for the question Tracy.

Speaker Change: Reflecting that mindset, we have adjusted backf-marketing and the promotional calendars and the depth and composition of buys, pulling back where business has been soft, while protecting areas where we have momentum.

Yeah, I think that there was a pretty consistent a reaction across our all of our nameplates in terms of the second quarter being softer than the first quarter. So yeah. You have to believe that everybody is being a little more cautious as they kind of watch what's going on in the macro environment and are just being more judicious in the purchase.

Speaker Change: We are evolving our product, partnering closely with our vendors to better serve our customers through our own concession, marketplace, and consignment, understanding that our customer wants to see the best style, not just an endless aisle.

Speaker Change: And in digital, we are focused on search engine optimization, site enhancements, more transparent pricing, and a better mobile experience.

Speaker Change: Prince.

Tony Spring: I am really pleased with, you know, if I look at the first 50 or I look at Bloomingdale's performance or I look at Blue Mercury, those were all essentially in the flat to positive range. I didn't get an environment where the customer is looking for why should I buy. And I've said to our team, our challenge is not just to have the lowest price. Our challenge is to create a compelling reason for the customer to buy at Macy's, Bloomingdale's, Blue Mercury. And we have that in our inventory composition. We have that in the amount of newness that we flow to our stores and to our site.

Speaker Change: They make I am really pleased with if I look at the first 50 or I look at Bloomingdale's performance, where I look at Blue Mercury those were all essentially in the flat to positive range I think in an environment, where the customer is looking for why should I buy and I've said to our team. Our challenge is not just to have the lowest price.

Speaker Change: Turning to luxury, which is our second pillar of the strategy, at Bloomingdale's, net sales were down, 0.2% and calm sales were down 1.4%.

Tony Spring: Thanks, Bob, for the question. We are seeing green shoots in the redded wear. So that's why we're you know, citing those examples in terms of Donna Karen or a veck Lafay or Carl Lagerfeld or Bloomingdale's in Lijance or in Ellison, Olivia or Veronica Beard. We are taking advantage of the fact that we are in an apparel cycle. And whether that's wide bottom, denim or change in silhouette or improve fabrications, we want to go after the business at both brands.

Speaker Change: Customers responded well to advanced contemporary market brands, including Veronica Beard, Allison Olivia, LaJance, and Farm Rio.

Speaker Change: The Venus Williams Aqua collaboration, which launched in mid-June, just ahead of Hamilton and the Olympics, was very well received.

Our challenge is to create a compelling reason for the customer to buy at Macy's bloomingdale's or blue Mercury and we have that in our inventory composition, we have that in the amount of newness that we flow to our stores and to our site. We have that in the exclusivity that we offer with private brands and I think as we mentioned we have the celebration of Italy, a bloomingdale's, which.

Tony Spring: We have that in the exclusivity that we offer with private brands. And I think, as we mentioned, we have the celebration of Italy at Bloomingdale's, which begins in September, and the 25th anniversary campaign from Blue Mercury, which begins in September. So those are all other ways that we get all economic income levels of consumers to shop and buy at our three name plates. Page. Thank you.

Tony Spring: In terms of handbags and shoes, we were pleased to see the disparate or the magnitude of the difference in our F50 stores in those two categories, which have been tougher for us. And I would say we know staffing is an ingredient, we know merchandises an ingredient. So we're pleased to go after a hundred more stores in those two categories. And we think that the assortment in shoes is very conducive to a department store environment, where a customer wants selection and variety of price points and brands doesn't always know their size by brand.

Speaker Change: Begins in September and the 25th anniversary campaign from Blue Mercury, which begins in September. So those are all other ways that we get all economic income levels of consumers to shop and buy at our three nameplates.

Speaker Change: Thank you.

Alex Straton: The next question is coming from Alex Straton. If more can, Stanley, please go ahead. Perfect. Thanks for taking the question.

Speaker Change: Thank you. The next question is coming from Alex <unk> of Morgan Stanley. Please go ahead.

Speaker Change: Yeah.

Speaker Change: Perfect. Thanks, all for taking the question.

Tony Spring: First, and maybe for Tony, is just on your holiday fourth quarter approach. You've got election, compressed shopping period. We're lapping 53rd week. Just wondering if you guys have, you know, a different strategy this year with that backdrop.

Alex: First one maybe for Tony is is just on your holiday fourth quarter approaching that lacks and compressed shopping period, we're lapping a 50 <unk> week just wondering if you guys have.

Tony Spring: And it's a chance for us to lean into something that we're particularly good at. In the case of handbags, I think we cited the fact that we're starting to see some light at the end of the tunnel on brands like Lauren by Ralph Lauren and Carl Lagerfeld. And the coach business has been particularly good lately. So cautiously optimistic that those tests are going to help improve the quality of our business in the fall.

Adrienne: A different strategy this year with that backdrop, and then for Adrienne with the back half comp acceleration from the front half trend I'm looking at that compared to our back half comp that's getting harder or I'm, just trying to understand how things get better or what exactly you are assuming there that that results in that outcome. Thanks, a lot guys.

Adrian Mitchell: And then for Adrian, with the back half comp acceleration from the front half trend, I'm looking at that compared to a back half comp that's getting harder. So I'm just trying to understand how things get better or what exactly you're assuming there that results in that outcome. Thanks a lot, guys.

Speaker Change: And for the quarter, net per motor squares improved over 250 basis points year-over-year and remained a strength of this brand.

Adrian Mitchell: And if I could just ask a follow-up, Adrian, on the credit card business, you expand a bit more sort of, you know, in some of the trends that you're seeing within, you know, the card holders and delinquencies. You know, I think you said as expected, but can you put a little more color on that for us? Absolutely, Bob, and good morning. So our net credit losses and delinquencies, as I mentioned earlier, were very much in line with our expectations.

Speaker Change: Good to talk to you.

Tony Spring: Thanks, Alex. Good to talk to you.

Speaker Change: Thanks, Alex good to talk to you, let me start with holiday and Adrian I'll cover the comp progression I, just actually did the holiday style out with the team about a month ago and I feel really good about our assortments at both Macy's Bloomingdale's and Blue Mercury, we have more newness than we had a year ago, we have some.

Tony Spring: Let me start with holiday and Adrian; I'll cover the comp progression. I just actually did the holiday style out with the team about a month ago. And I feel really good about our assortment that both Macy's, Bloomingdale's, and Blue Mercury. We have more newness than we had a year ago.

Speaker Change: The quarter played out, obviously, softer than we expected. It started to get softer in the middle of the quarter, and the team immediately took action, strengthening marketing, improving the quality of the products we were focused on, making sure that we were cutting back on receipts that were no longer necessary and flowing back into things that were working.

Speaker Change: We saw an immediate impact, and while I'm not going to comment on third quarter sales, I will say that the changes we made in the second quarter are showing in the third quarter as well.

Speaker Change: And our guidance, I think, gives us that conservative outlook for the remainder of the year that is both prudent and appropriate, allowing us to reaffirm our EPS guidance for the year and, at the same time, acknowledge the fact that the consumer is more discriminating.

Tony Spring: We have some exclusive partnerships at both Macy's and Bloomingdale's that I'll wait till the next call to share in more detail. But I would tell you, the teams are really leaning into. We don't want to have last year's assortment. We don't want to have the same old things that we've had in our mix of holiday gifting. We're being highly sensitive to the change in weather trends. So we have a broader range of product ideas than just cold weather categories. We're obviously leaning into the strength that we have at fragrance across the three brands. So yes, we've got five less shopping days between Thanksgiving and Christmas.

Speaker Change: Exclusive partnerships at both Macy's and Bloomingdale's that I'll wait till the next call to share in more detail, but I would tell you. The teams are really leaning into we don't want to have last year's assortment. We don't want to have the same old things that we've had in our mix of our holiday gifting we're being.

Adrian Mitchell: What we are seeing is that there are slightly lower payment rates, which is not necessary and is not necessarily translating into bad debt. So what's been happening is that we're seeing the customer sit on revolving balances a little bit longer, but certainly paying off their paying their bills in a cycle that effectively has allowed us to have revenue a little bit better than our expectations. And that revenue is really driven by higher balances with, you know, delinquencies and that credit losses in line with what we expected in our fort. Gast. Thank you very much. No problem Bob.

Speaker Change: Highly sensitive to the change in weather trends. So we have a broader range of product ideas than just cold weather categories.

Speaker Change: We're obviously leaning into the strength that we have at fragrances across the three brands. So yes, we got five less shopping days between Thanksgiving and Christmas, we certainly have an election in there, but I think remember retail and our three brands provide a form of escapism in entertainment and our job is to make sure that we're capitalizing on.

Tony Spring: We certainly have an election in there. But I think remember retail and our three brands provide a form of escapism and entertainment. And our job is to make sure that we're capitalizing at an opportunity to have a larger share of wallet in the fourth quarter because of the range of prices and brands and categories that we sell.

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

Dana Telsey: Hi, good morning everyone. If you think about some of your other formats, whether it's the smaller format, Macy's backstage, outlets and digital, how did they perform relative to the core and how you're thinking about them for the back half, and then just following up on AUR, which I think was up 4% in the first quarter of 3.6% in a second, drivers of AUR gains and how you're thinking about it going forward.

Speaker Change: The opportunity to have a larger share of wallet in the fourth quarter because of the range of prices and brands and categories that we sell.

Adrian Mitchell: Adrian.

Speaker Change: Adrian Good morning, Alex look.

Adrian Mitchell: Good morning, Alex. Look, you know, the punch line is, we're not standing still. You know, we're two quarters into a bowl new chapter strategy. And there's not only changes that we've implemented with that we're tracking and iterating and deploying where we have energy and confidence. But they're also more changes on the way. You know, we're continuing to make changes in stores, as we both Tony and I spoke about earlier. We're making changes, and digital that's coming online as we speak. We're making adjustments with our media mix and marketing spend mix that seems to be giving us some good results.

Adrian: The punch line is we're not standing still.

Adrian: I'm pleased with the progress we're making on our bold new chapter strategy. My team and I share a passion for finding new and innovative ways to serve and excite the customer, and we have a unique advantage through our iconic events as well as our everyday interaction.

Adrian: We're two quarters into a bold new chapter strategy endures not only changes that we've implemented with that we're tracking and iterating and deploying where we have energy and confidence but there are also more changes underway, we're continuing to make changes in stores as we both Tony and I spoke about earlier, we're making changes in digital that's coming online as we speak.

Adrian: We understand that being in the business of retail is being in the business of people.

Dana Telsey: And just lastly, you tweaked up the investment in CAP-X. What are those growth initiatives, is some of it by Italy for balloon sales that's coming up, or how you're thinking about it. Thank you. Thanks, Dana. Good to talk to you.

Adrian: We're listening to our customers, finding that balance between art and science, and are committed to delivering improved product and a better, more connected customer experience while returning the company to long-term profitable sales results.

Speaker Change: Looking ahead in the next few weeks, Bloomingdale's will kick off New York Fashion Week with a two-month-long immersive experience that brings the best of Italy to its customers through over 300 exclusive products and 30 new brands across a parallel fine jewelry accessories beauty and home. All Bloomingdale's locations will host a celebration with food, art, and music, and throughout the activation, our 59th Street flagship will have shops, installations, and pop-ups on every floor.

Adrian: With that operator, we are ready for questions.

Adrian: I do think that the changes that we're making in the first 50 serve as a great barometer and opportunity for us to continue to learn, and apply to more stores going forward.

Adrian: Thank you.

Adrian: We did announce 100 stores that we're adding staffing tests to in both handbags and shoes.

Adrian: We're making adjustments with our media mix and marketing spend mix that seems to be giving us. Some good results. We're very encouraged with what we're seeing there as I spoke about earlier, we're leading them to the value orientation of today's consumer being very clear on value not just the price for the quality of the products that we offer but also the total value equation.

Speaker Change: At Bloomingdale's, we achieved our 14th consecutive quarter of Constra sales growth, posting a 2% gain with net sales growing 1.7%.

Adrian Mitchell: Let's first talk about Portfolios because I think it's a big part of what we're trying to accomplish with opening Macy's small format. We open six in the spring. We have six more that we're opening in the fall, which brings us to 24 stores. We obviously have the first 50 initiative, and we have our digital business. And what we have focused on is trying to win by market. And what you'll see us talking more about is what is the right complement of small format stores, great on mall stores, and the digital business by geography to be able to win the customer and succeed market by market.

Adrian: So we think we have a model that we just need a little longer to learn from, but we're prepared to use that as the go-forward strategy for the Macy's brand.

Adrian Mitchell: We're very encouraged with what we're seeing there. As I spoke about earlier, we're leaning into the value orientation of today's consumer, being very clear on value. Not just the price for the quality of products that we offer, but also the total value equation. We're flowing goods better. We have better and stocks this year than we did last year. We have faster digital deliveries for our digital orders that we did last year. So there are a number of things across the business that's just getting better. We're more disciplined; better execution.

Speaker Change: Customers continued to respond well to differentiated skincare offerings, including new brands like Dr. Diamond's Medicine, and we see an opportunity to expand fragrances with the recent launches of Creed and perfume de Marley.

Adrian: We're flowing goods better we have better in stocks. This year than we did last year, we have faster digital deliveries for our digital orders that we did last year. So there are a number of things across the business. That's just getting better with more discipline better execution and that gives us confidence that these building blocks are going to build into sequential improvement in top line as we get it.

Speaker Change: During the quarter of Bloomingdale opened one new store and remodeled another. New and remodeled locations continued to be received well and are outperforming the total fleet.

Adrian Mitchell: And that gives us confidence that these building blocks are going to build into sequential improvement and top line as we get into the back half of the year.

Speaker Change: With each new store, our team is elevating a service model, response integration, and product mix curation to further establish Blue Mercury as the authority in professional skincare.

Adrian Mitchell: So it's not like choosing your favorite child. These all fit into our ecosystem. We have to have the best off mall stores and best on mall stores and a healthy digital business. The AUR increase is consistent with what we've seen by improving the quality of our product, not charging more, not pulling back from promotion. So I would continue to expect to see low single digit AUR growth as we continue to try to improve the traffic and conversion in our stores and on our site.

Speaker Change: In just a few weeks, Blue Mercury will kick off its 25th anniversary celebration, which will run throughout the remainder of the year.

Adrian: The back half of the year.

Speaker Change: We are confident in the luxury category and its long-term potential.

Alex Straton: Thanks a lot, good luck. Thank you, Alex.

Håkan: Thanks Hakan.

Håkan: Thank you Alex.

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

Speaker Change: The floor is now open for questions.

Speaker Change: Thank you. The next question is coming from Oliver Chen of TD Cowen. Please go ahead.

Speaker Change: Although Bloomingdale's in Blue Mercury are not immune from the broader macro pressures, the variety of our market and private brand merchandise offerings provides compelling options that will allow us to capture wallet share.

Speaker Change: Adrian?

Neil Goh: Hi, good morning. This is Neil Goh on for this morning. I just want to touch more on the promotional cadence as it pertains to the 2024 guidance. How much of the heightened promotional environment that you expect in the back half is driven from the competitive landscape, both from, you know, legacy players and new digital concepts versus, you know, what's more reflective of Macy's current inventory position. And then just more broadly, just any key puts in takes that you're watching as it pertains to the health and consumer that you see currently. Thanks.

Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad at this time.

Speaker Change: Hi, Good morning. This is Neil go on for Oliver This morning.

Speaker Change: As the environment evolves, we will continue to leverage our strong storytelling heritage through new brands, expanded partnerships, and exciting launches and events.

Neil: I wanted to touch more on the promotional cadence as it pertains to the 224 guidance how much of the heightened promotional environment that you expect in the back half is driven from the competitive landscape both from legacy players and new digital concepts versus what's more reflective of Macy's current inventory position.

Adrian Mitchell: The single biggest area that we have been challenged with is on conversion. And we're doing everything we can on both the site and the presentation in our stores to improve the quality conversion. I think Adrian mentioned on the call, both traffic and conversion were stronger in our first 50. So I think we know what we have to do. We just need to react appropriately and make sure that we're managing both the top line and the bottom line. Adrian, anything you've had?

Speaker Change: Adrian will go into more detail shortly, but the work within this pillar, including improving our fulfillment network productivity, and simplifying our technology ecosystem is fostering an even more disciplined organization.

Speaker Change: And then just more broadly just any key puts and takes that you're watching as it pertains to the health of consumer that you see currently thanks.

Speaker Change: In closing, confidence in our bold new chapter strategy is unwavering, and we are steadfast in our commitment to improving the fundamentals of our business.

Speaker Change: Good morning, Matt.

Speaker Change: As I am emerging at heart, I understand that retailing is a balance of art and science.

Tony Spring: Thanks, Neil. Let me take the first part, and Adrian can add his commentary. You know, I think we're looking at all the indicators that each of you are looking at. We're looking at inflation coming down. We're excited about potential rate cuts. We're looking at jobless claims. We're looking at the discretionary spending, consumer optimism. But I'm also focused predominantly on the health of our inventory levels, the compelling nature of our marketing campaigns. I think that we look well positioned from an inventory composition level, from an age of inventory level, from a percent of newness. And I would add in where we haven't always got it right: the balance of transitional product, the balance of clearance, the balance of newness.

Speaker Change: Thanks, Neil let me take the first part and Adrian can add his commentary yeah. I think we're looking at all the indicators that each of you are looking at we're looking at inflation coming down we're excited about the potential of rate cuts. We're looking at the jobless claims were looking at the discretionary spending consumer.

Speaker Change: As a team, we are actively listening to our customers to improve our results across the organization.

Speaker Change: We continue to view 2024 as a transition and investment year. While we're pleased with the recent progress on our strategy and profitability profile, we are clear-died about the challenges yet energized by the opportunities that lie ahead.

Speaker Change: We will remain competitive to win the customer, but we will not deviate from our path to sustainable profitable sales growth, and we are confident that the actions we are taking across all three bold new chapter pillars will benefit near and longer-term results.

Adrian Mitchell: Yes, good morning, Dana. To your question on capital investment, you know that we're very disciplined on capital allocation. We're very focused on maintaining a healthy balance sheet, returning excess cash value to our investors. But the second dimension of our capital allocation is really what you're experiencing with a slight increase in capital spend for this year. We're going to be investing in high return investments in the business. For example, what we're seeing in our 50 stores is that some of the visual enhancements in areas like our private brands seem to be working.

Speaker Change: With that, let me turn it over to Adrian for his remarks.

Speaker Change: Thank you, Tony, and good morning, everyone.

Adrian: Optimism, but I'm also focused predominantly on our health of our inventory levels the <unk>.

Speaker Change: Let me speak a little bit to gross margin. So as you know, we're quite pleased with our Q2 gross margin results, and we're certainly confident in our outlook for the year, as we spoke about a few moments ago. The range that we have for the year of 39% to 39.2%, we believe, just gives us sufficient flexibility to respond to the uncertainty that may be on the horizon.

Adrian Mitchell: As we navigated the second quarter, we continued to focus on controlling what is within our reach to drive our business. We delivered strong, gross margin and better than expected SGNA, as we diligently managed our margin and expense disciplines throughout the quarter.

Adrian: Compelling nature of our marketing campaigns, I think that we look well.

Adrian Mitchell: Our teams are also making progress on our bold new chapter strategy, including our third pillar, simplifying and modernizing end-to-end operations.

Positioned from an inventory composition level from an age of inventory level from a percent of newness and I would add and where we haven't always got it right the balance of transitional product the balance of clearance the balance of newness and I think that's why the trends that we saw in the second quarter.

Speaker Change: We are leaning into call savings programs and working capital disciplines as we make targeted investments in areas such as automation and process simplification, which should benefit day-to-day execution. Thus far, these investments have improved the customer experience through faster online delivery and higher-product in-stocks while contributing to strong bottom-line performance and cash flow generation.

Speaker Change: Now, let's turn to our second quarter results. As a reminder, all comparisons are to the comparable year-go period unless otherwise stated.

Adrian Mitchell: So we want to lean into that. Some of the biggest improvement in our stores around 50 stores as well as a broader network is around need and clean. But we want to make sure that in these stores, we're making the changes that the general upkeep of the store and the maintenance of the store is actually appropriately invested in so that there's a good experience for the customer. We see some opportunities around digital.

Speaker Change: During the quarter, we focused on gross margin expansion and effective expense management. This, combined with the actions Tony described earlier, allows us to achieve adjusted EPS that was significantly above our expectations, even without the benefits of the second quarter asset sale gain.

Speaker Change: Now, as we plan, as we think about our gross margin outlook for the balance of the year and the fall season, there are really three things that we're focused on. The first is around inventories, and we feel at this point that we do have inventories under control. We took some actions coming out of the second quarter, given we had softer sales in the quarter, and we've already made the appropriate adjustments for Q3 and Q4.

Speaker Change: And the kinds of things that we're leaning into are the things that you're familiar with.

Tony Spring: And I think that's why the trends that we saw in the second quarter, after we started to take some action, are continuing into the third quarter. So this is always a game of making sure that you have the right balance of growing after the consumer and where she is, here she is shopping, and at the same time that you are protecting the bottom line. I think the team is doing a really good job of that. And we're obviously not sitting on where we are today. We're aggressively pursuing opportunities to enhance and improve the business going forward.

Adrian: After we started to take some action are continuing into the third quarter. So this.

Adrian: This is always a game of making sure that you have the right balance of going after the consumer and where she is he or she is shopping and at the same time that you're protecting the bottom line I think the team is doing a really good job of that and we're obviously not sitting on where we are today, we're aggressively pursuing opportunities to enhance it.

Adrian Mitchell: And so we've been leaning into that into that piece as well. So really being very thoughtful and surgical about those investments that will help us deliver a better experience and also deliver growth. And so we're really, you know, taking the opportunity to lean into some of those investments, this year. Thank you. Thank you, Dana. Thank you.

Adrian: Improve the business going forward.

Speaker Change: We have good disciplines and good controls already in place.

Adrian Mitchell: Neil, Tony summed it up quite well. The only thing I would add is that we're controlling what we can control. We have a lot of opportunities that we see ahead within the business to provide a better experience. We see the green shoots on growth. And so we're just being very thoughtful as we enter the biggest time of year for us, which is the holiday season.

Neil Tony summed it up quite well the only thing I would add is that we're controlling what we can control.

Speaker Change: At this moment in time, our H inventories are well under control. We're pleased with the level of newness because we're now approaching the holiday season, and we have a healthy flow given some of the constraints I mentioned a bit earlier around container availability and supply chain delays.

Speaker Change: But there are a couple of other things that are important for us as well.

Speaker Change: The second one being shortage trends. We benefited in the second quarter from lower shortage than we expected, as we've made investments at the end of last year into the beginning of this year with our asset protection team, and the initiatives that they're pursuing seem to be working.

Blake Anderson: The next question is coming from Ashley Helgans of Jeffries. Please go ahead. Hey guys, apologies about earlier. This is Blake on for Ashley. Wanted to ask on the applied sales guide for the second half in terms of kind of your consumer assumptions are used to mean the consumer is more stable or becomes increasingly challenged. How is that reflected in the guide and also on the on the color and Q3 sales. Adrian, did you provide a comp at all for that? And then last one for us was also for Adrian on cost accounting. How much is embedded in that for the full year gross margin? Thanks so much.

Speaker Change: We have a lot of opportunities that we see ahead within the business to provide a better experience we see the green shoots on growth and so we're just being very thoughtful as we enter the biggest time of year for us which is the holiday season.

Speaker Change: So we're very pleased with that.

Speaker Change: The last piece is lower delivery costs.

Speaker Change: We continue to diversify our carriers who have lower rates without actually compromising service levels.

Speaker Change: We also recognize that it's important to have the right balance of upstream versus downstream fulfillment, which has enabled us to minimize split shipments, which can be quite costly for us.

Speaker Change: So as we think about inventory discipline, shortage trends, and lower delivery costs, we're encouraged by our outlook for the balance of the year and also encouraged by what we expect to deliver in the third quarter.

Speaker Change: Thank you.

Neil Goh: Great. Thank you both.

Bob Durable: Great. Thank you Bob.

Michael Bonetti: Thank you, Neil. Thank you.

Bob Durable: Thank you Neil Thank you.

Speaker Change: A confirmation tone will indicate your line is in the question queue.

Speaker Change: The next question is coming from Brooke Roach of Goldman Sachs.

Adrian Mitchell: The next question is coming from Michael Bonetti of Evercore ISI. Please go ahead. Thanks for taking our questions here. I guess, Adrian, maybe just any thought on your assumption for the second half, same-store sale guidance you just gave us between the go-forward stores and the non-go-forward stores. Any thought on how to think about maybe the spread between the two? Any way to help triangulate our model. And then I know you don't usually guide on forward-quarter comps on a quarterly basis, but we usually model it off of the spread of comps to total sales. Is there any reason that spread changes in 3Q relative to 2Q just to be aware of?

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

Speaker Change: Please go ahead.

Speaker Change: Good morning, and thank you for taking our question.

Michael Binetti: You may press star 2 if you would like to remove your question from the queue.

Michael Binetti: Hey, guys. Thanks for taking our questions here.

Michael Binetti: I guess, maybe just any any thought on your assumption for the second half same store sales guidance. You just gave us between the go forward stores and the non go forward stores or any thought on how to think about maybe the spread between the two any way to help triangulate. Your model and then I know you don't usually guide on fourth quarter comps on a quarterly basis, but we usually model it off of the <unk>.

Adrian Mitchell: Absolutely. So Blake, great to be with you. Let me talk a little bit about sales to get started. You know, when you think about our sales range for both Q3 and for the year, it just gives us an opportunity to address the uncertainty in the discretionary spending categories that we operate in. And so as Tony mentioned a bit earlier, we've been very thoughtful and cautious about what we're seeing in the back half.

Speaker Change: Overall, total Macy's Inc, net sales were $4.9 billion, down 3.8% and total enterprise comms were down 3.3%. Within that, go-forward business Macy's Inc, comms defined as Macy's, Bloomingdale's, and Blue Mercury go-forward locations plus digital declined 3%.

Speaker Change: By nameplate, Macy's net sales, inclusive of all Macy's locations and digital, were down 4.4% and comms were down 3.6%.

Speaker Change: Spread comps to total sales is there any reason that spread changes in <unk> relative to Q2, just to be aware of I know that the calendar add some noise, maybe just remind us how that impacted <unk> if theres a difference.

Adrian Mitchell: I know the calendar adds and noise. Maybe just remind us how that impacted 2Q and 3Q. If there's a difference?

Speaker Change: Macy's nameplate go-forward business comms, which include all 350 go-forward locations in digital, were down 3.3%. Looking just at stores, all go-forward location comms were down 2.3% with first 50 up 1%, all the go-forward locations down 3.7% and non-go-forward locations down 6.5%.

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

Adrian Mitchell: Absolutely. So I'll comment against anything to add. Please do, Tony.

Speaker Change: Tony, I was hoping you could help, frame the magnitude of the potential tailwinds you see from the rollout of these Select First 50 staffing tests to locations this fall.

Speaker Change: Absolutely so I'll comment on anything to add please do Tony So one of the things we expected on the non go forward stores is that they would actually perform worse than then we then effectively performed better than what we would actually plan.

Speaker Change: We do ask that you please limit yourself to one question and one follow-up.

Adrian Mitchell: At the same time, we expect our S50 Macy's locations to outperform the broader fleet. We're encouraged enough in terms of the performance that Tony just spoke to to expand a couple of changes around handbags and shoes that we're seeing real gains in the first 50 locations to an additional 100 locations this fall. We're continuing to make investments in our digital business around site enhancements, search engine optimization, a better mobile mix. So again, we have a number of things that we see green shoes that we're leaning into, but we also recognize that we're in a context of uncertainty with regards to discretionary spend.

Adrian Mitchell: So one of the things we expected on the non-go-forward stores is that they would actually perform worse than we then effectively perform better than what we'd actually plan. So customers are still shopping those stores. So when we think about the year-over-year performance, they're slightly better. So we've made some of that adjustment overall in our outlook and guidance for the back half of the year. As we think about cons, it's really getting the fundamentals better and better every day, every week, every month. And as we think about the trajectory for the back half of the year, third quarter and fourth quarter, it's a lot of the adjustments that Tony and I have been speaking about on this call.

Speaker Change: We remain encouraged by our first 50 performance. We're also excited for the rollout of additional staffing and handbags and shoes to another 100 locations this fall.

Speaker Change: So customers are still shopping those stores. So when we think about the year over year performance Theres slightly better. So we've made some of that adjustment overall in our outlook and guidance for the back half of the year as we think about comps, it's really getting the fundamentals better and better every day every week every month and as we think about the trajectory for the back half of the year.

Speaker Change: The impact of these changes are reflected in our current outlook, which I will discuss in a moment.

Third quarter and fourth quarter, it's a lot of the adjustments that Tony and I have been speaking about on this call and so as we think about those investments we actually believe that it's going to improve the business sequentially as we get into the back half of the year as we think about the performance of for example, the Macy's first 50 other go forward stores within the fleet and the non go forward.

Adrian Mitchell: And so, as we think about those investments, we actually believe that it's going to improve the business sequentially as we get into the back half of the year.

Tony Spring: As we think about the performance of, for example, the Macy's first 50, other go-forward stores within the fleet and the non-go-forward, we continue to see, for example, with our first 50 stores, the sequential trends continuing to improve relative to the balance. So it just gives us confidence that as we introduce changes into these stores, whether it's visual changes, whether it's some of the staffing changes and the 100 additional stores and handbag and shoes, that we'll be able to actually put in more of those building blocks to really get the relative comp sales go-through every year to groove.

Speaker Change: We continue to see for example, with our first 50 stores the sequential trends continuing to improve relative to the balance. So it just gives us confidence that as we introduce changes into these stores, whether its visual changes whether it's some of the staffing changes and the 100 additional stores in handbags and shoes that we'll be able to actually put in more of those building.

Adrian Mitchell: And with regards to how we're thinking about gross margin in the third quarter, you know, we're looking at about 40.3 to 40.5%. And we feel that given the ranges on top line on gross margin on the bottom line, we should be able to navigate to those outcomes. Great. Thank you. Best of luck. Thank you, Blake. Thank you.

Operator: The next question is coming from Polish way of city. Please go ahead. Thanks.

Speaker Change: Blocks to really get the relative comp sales growth year over year to improve.

Speaker Change: And then, broader, bigger picture, the key, factors that you're looking for that will allow you to more aggressively expand these First 50 initiatives to the rest of the fleet.

Speaker Change: And then, perhaps for Adrian, can you elaborate, on the adjustments that Macy's is making to its promotion and marketing calendar for the balance of the year?

Adrian Mitchell: Okay. And then, if I could sneak one more in, can you just talk to us about how you're thinking about inventory investment specifically in the go forward stores. We're kind of watching out; the inventory is pacing a little bit ahead of sales now, thinking about how you've made some changes to your buying operations a couple of years ago.

Okay, and then if I could sneak one more in.

Speaker Change: Can you just talk to us about how youre thinking about inventory investments specifically in the go forward stores, we're kind of watching out of the inventories pacing a little bit ahead of sales now thinking about how you've made some changes to.

Speaker Change: Thank you.

Tracy Kogan: It's Tracy Cogan filling in for Paul. I was wondering if you could talk about performance by income demographic, particularly as the quarter played out and we saw that weakness overall was wondering if you saw any differences by the different income cohorts. Thanks. Thanks for the question, Tracy. Yeah, I think that there was a pretty consistent reaction across all of our name plates in terms of the second quarter being softer than the first quarter.

Speaker Change: You're buying operations a couple of years ago.

Speaker Change: Maybe any thoughts on the investments you're making on the inventory in the just specifically on the go forward stores relative to the sales plan for the second half.

Tony Spring: Yeah, Mike, let me just add a couple of things on inventory because I think it's important. We obviously don't have a great clear compare in terms of year of a year because of the conversion. But I would say the inventory levels remain down double digits to a few years ago, and we are intent on being in stock for the customer. I think that one of the things that we have, you know, worked on very carefully, as I said, is getting transitional inventory, the level of clearance and value, and the amount of newness flowing properly. Neither Adrian nor I are worried about the risk associated with our inventory, kind of going into the fall season.

Speaker Change: Thanks, Brooke.

Speaker Change: Mike Let me just add a couple of things on inventory because I think it's important we obviously don't have a great clear compare in terms of year over year because of the conversion, but I would say the inventory levels remain down double digits to a few years ago and we are intent on being in stock for the customer I think that one of the.

Speaker Change: Good to talk to you.

Tracy Kogan: So yeah, you have to believe that everybody is being a little more cautious as they kind of watch what's going on in the macro environment and are just being more judicious in the purchases they make. I am really pleased with, you know, if I look at the first 50 or I look at Bloomingdale's performance or I look at Blue Mercury, those were all essentially in the flat to positive range. I didn't get an environment where the customer is looking for why should I buy.

Things that we have worked on very carefully as I said is getting transitional inventory the level of clearance in value and the amount of newness flowing properly neither adrian or I are worried about the risk associated with our inventory kind of going into the fall season, we look at it on an age basis, we look at it on a.

Speaker Change: Turning to luxury, Bloomingdale's net sales were down 0.2% and comms were down 1.4%, while Blue Mercury net sales and comms rose 1.7% and 2% respectively.

Adrian Mitchell: We look at it on an age basis. We look at it on a marked down inventory basis. And I think it's being in stock on replenishment, flowing fashion and newness into those go forward stores. I think we're in a much better position than we were a year ago going into the third quarter. The only thing I'd add there is, you know, we do acknowledge, to your point, Mike, that inventories at the end of the second quarter were slightly higher than our expectation. But the good news is that in the second quarter, we already started to take action to adjust the appropriate quantity and composition of inventory for the fall season, key three and key fours, Tony mentioned.

Speaker Change: We're confident in the future of these two nameplates and believe our initiatives sets us up well to take additional luxury markets.

Mark: Mark down inventory basis, and I think it's being in stock on replenishment flowing fashion and newness into those go forward stores I think we're so much better position than we were a year ago going into the third quarter.

Speaker Change: Chair.

Tracy Kogan: And I've said to our team, our challenge is not just to have the lowest price. Our challenge is to create a compelling reason for the customer to buy at Macy's Bloomingdale's Blue Mercury. And we have that in our inventory composition. We have that in the amount of newness that we flow to our stores and to our site. We have that in the exclusivity that we offer with private brands. And I think as we mentioned, we have the celebration of Italy at Bloomingdale's which begins in September and the 25th anniversary campaign from Blue Mercury which begins in September. So those are all other ways that we get all economic income levels of consumers to shop and buy at our three name plates.

Speaker Change: Moving to other revenues, which rose 6% to $159 million, net credit card revenues were up $5 million, or 4.2% to $125 million.

Operator: Page. Thank you.

Speaker Change: Net credit losses were in line with our expectations.

Speaker Change: Only thing I'd add there as we do acknowledge to your point, Mike that inventories at the end of the second quarter was slightly higher than our expectation, but the good news is that in the second quarter. We already started to take action to adjust the appropriate quantity and composition of inventory for the fall season, Q3, and Q4 as Tony mentioned with regards to that.

Speaker Change: As a reminder, in the second quarter of 2023, credit card revenues were negatively impacted by a change in net credit loss trends.

Speaker Change: Our priority remains to strengthen card usage among current holders, while acquiring new card holders, and we are pleased to have achieved three consecutive quarters of year-over-year, new credit card application growth.

Speaker Change: Macy's media network revenue rose $4 million, or 13.3% to $34 million, driven by higher advertiser and campaign counts.

Adrian Mitchell: With regards to the type of inventory or the amount of inventory by store, we're looking at, you know, sell-through trends, weeks of supply trends at a very specific location by location by category. So really being much more diligent with some of the disciplines that we've added in over the course of the last year to really manage the allocation of inventory in places where we can sell more at full price or first mark than what we would have seen in the past. Because, as you know, our margin expansion over the last several years has been around reducing the amount of clearance to the appropriate level as we transition from season to season.

Speaker Change: Before discussing gross margin in inventory, it is important to note that both are not directly comparable to the prior year given the recent conversion to cost accounting.

Speaker Change: Type of.

Speaker Change: Inventory or the amount of inventory by store, we're looking at sell through trends weeks of supply trends at a very specific location by location by category, So really being much more diligent with some of the disciplines that we've added in over the course of the last year to really manage the allocation of inventory in places, where we can sell more.

Speaker Change: Second quarter gross margin rate was 40.5%, 240 basis points higher than last year, and better than our expectation. Merchandise margin improvements were driven by lower year-over-year discounting, favorable shortage due to the company's asset protection work, and partially by the company's shift to cost accounting.

Alexandra Straton: The next question is coming from Alex Straton. If more can Stanley, please go ahead. Perfect. Thanks for taking the question. First and maybe for Tony, is just on your holiday fourth quarter approach. You've got election, compressed shopping period. We're lapping 53rd week. Just wondering if you guys have, you know, a different strategy this year with that backdrop. And then for Adrian, with the back half comp acceleration from the front half trend, I'm looking at that compared to a back half comp that's getting harder. So I'm just trying to understand how things get better or what exactly you're assuming there that that results in that outcome. Thanks a lot, guys. Thanks, Alex, good to talk to you.

Speaker Change: At full price or first mark than what we would have seen in the past because as you know our margin expansion over the last several years has been around reducing the amount of clearance to the appropriate level as we transition from season to season.

Adrian Mitchell: Okay.

Michael Bonetti: Thanks a lot. Appreciate it.

Speaker Change: Okay. Thanks, a lot and there's a lot of sense I appreciate it guys.

Michael Bonetti: Thanks, Mike. Thank you.

Mike: Thanks, Mike.

Chuck Grom: The next question is coming from Chuck Grom of Gordon.

Speaker Change: Thank you. The next question is coming from Chuck Grom with Gordon Haskett. Please go ahead.

Eric: Hasket, please go ahead. Hi, this is Eric on for Chuck. Just want to ask about the first 50 locations, the positive comms. Are you seeing the growth from existing customers coming and spending more, or is this new or lapse customers coming back? And how do you get out to customers that all the changes that have been made that get them to come back to the store? Eric, thanks for the question. I think we are again excited about the continued progress that we're seeing in the first 50. It's two consecutive quarters of comp store growth. It's 460 basis points of improvement versus the other Macy's locations or business.

Speaker Change: We are excited about the First 50, if we haven't made that clear enough.

Speaker Change: Hi, This is Eric on for Chuck.

Eric: Just wanted to ask about the first 50 locations. The positive comps have you seen the growth from existing customers coming and spending more or is this new or lapsed customers coming back and how do you get out to customers that all the changes that have been made that get them to come back to the store.

Speaker Change: In addition, improved delivery expense benefited from lower-ship sales volume and ongoing expense control reflecting cost savings and process re-engineering initiatives.

Tony Spring: Let me start with holiday and Adrian, I'll cover the comp progression. I just actually did the holiday style out with the team about a month ago. And I feel really good about our assortment that both Macy's Bloomingdale's and Blue Mercury. We have more newness than we had a year ago. We have some exclusive partnerships at both Macy's and Bloomingdale's that I'll wait till the next call to share in more detail. But I would tell you, the teams are really leaning into.

Eric: Again, that's star 1 to register a question at this time.

Eric: Today's first question is coming from Matthew Boss of J.P. Morgan.

Eric: Eric Thanks for the question I think we are again excited about the continued progress that we're seeing in the first 50, it's two consecutive quarters of comp store growth is 460 basis points of improvement versus the other macy's locations or business I think that the.

Eric: Please go ahead.

Eric: It's two consecutive quarters of comp store growth.

Eric: Great, thanks.

Eric: It's 600 basis points of improvement in NPS, 460 basis points of improvement versus the rest of Macy's.

Tony Spring: We don't want to have last year's assortment. We don't want to have the same old things that we've had in our mix of holiday gifting. We're being highly sensitive to the change in weather trends. So we have a broader range of product ideas than just cold weather categories. We're obviously leaning into the strength that we have at fragrance is across the three brands. So yes, we've got five less shopping days between Thanksgiving and Christmas.

Tony Spring: I think that the growth that we are seeing across all families of business, the fact that we have increased traffic and increased conversion versus other Macy's stores, shows us that the work that we're doing is resonating with the consumer. It is a combination of existing customers and some new customers, and our new head of marketing is working closely with our stores team in geo targeting communication via email and search, as well as SMS messages, to make sure that the eventing and the activations and new product messages getting out to customers. So the good news is we're seeing it resonate.

Eric: So, Tony, could you speak to the cadence of comps as the second quarter progressed?

Eric: And I want to make clearly, we will expand F50 or First 50.

Eric: The growth that we're seeing across all families of business. The fact that we have increased traffic and increased conversion versus other Macy's stores shows us that the work that we're doing is resonating with the consumer it is a combination of existing customers and some new customers and our new head of marketing is working closely with our stores.

Eric: It's a question of when, not if.

Eric: And I think we've said before on the, fourth quarter call, we will elaborate further on how many stores next year. But I think you can view it as a positive sign that we went ahead and did the 100-store test on handbags and shoes as the confidence that we have on those particular families of business on what it can mean to provide the ample level of staffing in a service-oriented business.

Eric: In terms of the magnitude, it's incorporated into our guidance.

Eric: I think our guidance gives, us the range to be able to use those levers to improve our performance.

Eric: But I look at the First 50 as continuing to be the best example of what Macy's can be in the future.

Eric: Him and Geo targeting communication via email and.

Eric: Search as well as SMS messages to make sure that the eventing and the Activations and new product. It message is getting out to customers. So the good news is we're seeing it resonate customers' awareness is growing we're only two quarters in two or three year plan and a change plan and.

Tony Spring: Customers' awareness is growing.

Tony Spring: We're only two quarters in to a three-year plan and a change plan, and obviously we want to have the right level of patience and determination.

Adrian Mitchell: Adrian. Good morning, Alex. Look, you know, the punch line is we're not standing still. You know, we're two quarters into a bowl new chapter strategy. And there's not only changes that we've implemented with that we're tracking and iterating and deploying where we have energy and confidence. But they're also more changes on the way. You know, we're continuing to make changes in stores as we both Tony and I spoke about earlier. We're making changes and digital that's coming online as we speak.

Eric: Obviously, we want to have the right level of patients and determination.

Adrian Mitchell: The only other thing I would add, Eric, is when you think about some of the things that's driving the business that Tony described, we just have more number of customers actually coming into these stores relative to what we saw in prior years. And when you think about the experience that we've been investing in, just to bring a little bit of color that Tony spoke about in previous calls, we're making additional staffing investments in handbags and shoes and ready to wear and home, also in the fitting room, which gives us the best opportunity to convert that customer and check out to make sure that we don't have long lines.

Eric: Elaborate on changes that you cited in the consumer backdrop and and just what what you've seen with early back to school or August trends may be relative to the second quarter comp performance.

Eric: The only other thing I would add Eric is when you think about some of the things that's driving the business as Tony described we just have more number of customers actually coming into these stores relative to what we saw in prior years and when you think about the experience that we've been investing in just to bring up a little bit of color that Tony spoke about on previous calls we're making additional.

Speaker Change: End of quarter inventories were up 6% year-over-year, which was above our expectations due to second quarter sales results and the decision to invest in areas of product strength for the back half of the year. We estimate that approximately half of the increase is due to the shift to cost accounting.

Eric: And then Adrian, if you could just walk through drivers of back half gross margin expansion, despite embedding the heightened promotional backdrop, I think that would, Thanks, Matt.

Speaker Change: Looking ahead, we will continue to remain disciplined about the quantity and composition of our inventory.

Speaker Change: SG&A expense dollars of $2 billion, or 38.7% as a percent of total revenue, were better than our expectations.

Speaker Change: Our teams pursued cost controls while protecting customer-facing investments where we're seeing tangible returns, particularly in first 50 locations.

Speaker Change: Compared to last year, SG&A expense was $7 million lower and up 120 basis points as a percent of total revenue due to lower sales volume.

Speaker Change: Staffing investments in handbags, and shoes and ready to wear and home also in the sitting room, which gives us the best opportunity to convert that customer and checkout to make sure that we don't have a long lines. We're activating the store through better visual presentation sharper looks greater value we have.

Speaker Change: For the second quarter, we delivered adjusted EPS of 53 cents, well above our outlook of 25 cents to 33 cents, and compared to 26 cents last year, reflecting an improved year-to-year gross margin rate and strong expense controls. In addition, an earlier than expected non-go-forward asset sale gain benefited EPS by 10 cents.

Adrian Mitchell: We're making adjustments with our media mix and marketing spend mix that seems to be giving us some good results. We're very encouraged with what we're seeing there. As I spoke about earlier, we're leaning into the value orientation of today's consumer being very clear on value. Not just the price for the quality of products that we offer, but also the total value equation. We're flowing goods better. We have better and stocks this year than we did last year.

Speaker Change: Cash from operating activities was $137 million while capital expenditures totaled $432 million.

Speaker Change: Free cash flow was an outflow of $244 million, and we paid $96 million in cash dividends.

Adrian Mitchell: We're activating the store through better visual presentation, sharper looks, greater value. We have events to get people reasons to come back to the store and spend time with us. We have digital messaging going out to customers in that locale that we know to get them excited about what's being offered in their local store, and we have local marketing to keep Macy's top of mind for those customers. So, you know, those are the kinds of things that we're seeing gaining traction. Into Tony's point. We're seeing it in terms of traffic and relative conversions. We're seeing it in a number of customers.

Speaker Change: Event is to give people reasons to come back to the store and spend time with US we have digital messaging going out to customers in that locale that we know to get them excited about what's being offered in their local store and we have local marketing to keep Macy's top of mind for those customers. So those are the kinds of things that we're seeing gaining traction into Tony's.

Adrian Mitchell: We have faster digital deliveries for our digital orders that we did last year. So there are a number of things across the business that's just getting better. We're more disciplined, better execution. And that gives us confidence that these building blocks are going to build into sequential improvement and top line as we get into the back half of the year. Thanks a lot, good luck. Thank you, Alex.

Speaker Change: We believe our healthy liquidity, including our asset-based credit facility, support our ability to navigate any potential uncertainty that may arise as we head into the back half of the- here.

Tony: Point, we're seeing it in terms of traffic and relative conversion receded in the number of customers. The categories that are touch had a a sequential.

Adrian Mitchell: The categories that are touched have a sequential improvement in sales performance. So, a lot of what we talk about is what's the appropriate pace, although a healthy pace, but they're appropriate pace, as Tony said, without tripping over ourselves.

Tony: <unk> improvement in sales performance. So a lot of what we talk about is what's the appropriate pace, although a healthy pace, but the appropriate pace as Tony said without tripping over ourselves.

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

Eric: And please know, we are going to move as fast as we possibly can without tripping on our, way to success.

Speaker Change: Regarding real estate monetization, we are pleased with the traction we've experienced to date with landlords and developers.

Eric: Thank you.

Eric: So I'm just careful about making sure that there are not false positives.

Eric: We got a lot of noise in the public environment right now.

Jay Sole: The next question is coming from Jay Soul of UBS, please. Great. Hopefully, you can hear me. My question is about asset sales gains and monetization proceeds. It looks like the guidance for this year went to the high end of the range because, compared to where it was last quarter. Maybe Adrian can just elaborate a little bit on what assets were so great. And you know what's driving the raised guidance, and that would be helpful. Thank you.

Speaker Change: Thank you. The next question is coming from Jay sole of UBS. Please.

Speaker Change: We're committed to monetizing these assets in certain distribution centers, but only at the right value.

Jay Sole: Great hopefully you can hear me and my question is about asset sale gains and monetization proceeds.

Jay Sole: It looks like the guidance for this year went to the high end of the range because compared to where it was last quarter, maybe Adrian could you just elaborate a little bit on what assets were sold and what's driving the raised guidance.

Neil Goh: Thanks. Thanks, Neil. Let me take the first part and Adrian can add his commentary. You know, I think we're looking at all the indicators that each of you are looking at. We're looking at inflation coming down. We're excited about potential rate cuts. We're looking at jobless claims. We're looking at the discretionary spending, consumer optimism. But I'm also focused predominantly on our health of our inventory levels, the compelling nature of our marketing campaigns.

Speaker Change: That would be helpful. Thank you.

Eric: Let's make sure we understand what's, causation versus correlation.

Adrian: Good to talk to you.

Adrian Mitchell: Great to be with you, Jay. The punchline here is we're very pleased with attraction and progress. We're getting very healthy responses from landlords and developers. The deal pipeline is healthy even in this environment. So, to your point, coming into the quarter, we had a range of 90 million to our 115 million in asset sales gains. Now we're saying it approximately 115 million. We were pleased with 36 million of gains in Q2. We're forecasting in our guidance, 30 million in Q3, which leads to the balance of 67 million in Q4. But overall, what I will tell you is trending quite well.

Adrian: Great to be with T. J. The punch line here is we're very pleased with the traction and progress were getting very healthy responses from landlords and developers the deal pipeline is healthy even in this environment. So to your point coming into the quarter. We had a range of $90 million were hesitant $15 million in asset sale gains now, we're saying approximately $100.

Adrian: The quarter played out, obviously, softer than we expected. It started to get softer in the middle of the quarter, and the team immediately took action, strengthening marketing, improving the quality of the products we were focused on, making sure that we were cutting back on receipts that were no longer necessary, and flowing back into things that were working.

Adrian: We saw an immediate impact, and while I'm not going to comment on third quarter sales, I will say that the changes we made in the second quarter are showing in the third quarter as well.

Adrian: Adrian?

Adrian: And our guidance, I think, gives us that conservative outlook for the remainder of the year that is both prudent and appropriate, allowing us to reaffirm our EPS guidance for the year and at the same time acknowledge the fact that the consumer is more discriminated.

Adrian: I do think that the changes that we're making in the first 50 serve as a great barometer and opportunity for us to continue to learn and apply to more stores going forward.

Adrian: $15 million, we were pleased with $36 million of gains in Q2, we're forecasting or in our guidance $30 million in Q3, which leaves a balance of $67 million in Q4, but overall, what I would tell you is trending quite well.

Neil Goh: I think that we look well positioned from an inventory composition level, from an age of inventory level, from a percent of newness. And I would add in where we haven't always got it right, the balance of transitional product, the balance of clearance, the balance of newness. And I think that's why the trends that we saw in the second quarter after we started to take some action are continuing into the third quarter.

Adrian Mitchell: Lots of good traction. The implication of that is that we're going to be closing approximately 55 stores relative to our prior outlook of 50 stores. So, this is just all further evidence of the traction that we're having. And we're also very pleased with the value we're able to unlock in those deals and those transactions. Got it.

Adrian: Lots of good traction the implication of that is that we're gonna be closing approximately 55 stores relative to our prior outlook of 50 stores. So this is just all further evidence of the traction that we're having and we're also very pleased with the value we're able to unlock in those in those deals in those transactions.

Neil Goh: So this is always a game of making sure that you have the right balance of growing after the consumer and where she is, here she is shopping and at the same time that you are protecting the bottom line. I think the team is doing a really good job of that. And we're obviously not sitting on where we are today. We're aggressively pursuing opportunities to enhance and improve the business going forward. Neil, Tony, summed it up quite well.

Adrian Mitchell: Okay.

Adrian: Got it okay Adrienne thank you.

Adrian Mitchell: Adrian, thank you.

Jack: Thank you Jack.

Adrian Mitchell: Thank you.

Janet Kloppenberg: The next question is coming from Janet Joseph Kloppenberg of JKK Research. Please go ahead. Good morning, everyone. I had a couple of questions. First, on merchandise margin or product margin, whichever way you look at it, tell me for those second quarter, how was that versus your expectations? I mean, peeling away the favorable transportation and the cost-accounting benefits. How was it?

Speaker Change: Thank you. The next question is coming from Janet Joseph Kloppenburg of GTK Research. Please go ahead.

Speaker Change: We are encouraged by the progress that our season real estate team is making.

Adrian: Good morning, Brooke.

Speaker Change: As noted earlier, we have increased our expected number of store closures this year to approximately 55 locations from roughly 50.

Adrian: To your question about the adjustments on promotions and marketing, the context that we are operating under is a consumer that's really oriented on value.

Speaker Change: Hi, good morning, everyone.

Speaker Change: To conclude the conversation on recent results, I am proud of our teams.

Speaker Change: I had a couple of questions first on merchandise margin or product margin whichever way you look at it Tony for the second quarter, how was that versus your expectations I mean peeling away.

Speaker Change: As the environment became more challenging, we executed with discipline.

Neil Goh: The only thing I would add is that we're controlling what we can control. We have a lot of opportunities that we see ahead within the business to provide a better experience. We see the green shoots on growth. And so we're just being very thoughtful as we enter the biggest time of year for us, which is the holiday season.

Speaker Change: We found opportunities and efficiencies that supported our bottom line performance while continuing to make progress on our bold new chapter strategy.

Speaker Change: The favorable.

Speaker Change: Our full year and third quarter outlooks reflect everything we know about the consumer, our operations and our goals as of today.

Speaker Change: Transportation and the.

Speaker Change: As we navigate the remainder of the year, we will leverage our operational agility and execution disciplines to protect our profitability.

Speaker Change: <unk>.

Speaker Change: Cost accounting benefits.

Adrian Mitchell: And what's the thought process on that merchandise margin level in the second half of the year?

Speaker Change: And what's the thought process on that merchandise margin level in the second half of the year.

Speaker Change: Before discussing our full year and third quarter assumptions, a few reminders.

Neil Goh: Great. Thank you both. Thank you, Neil. Thank you.

Tony Spring: And I also wanted to ask you the enhanced results you're seeing in handbags and men's in the 50 stores. Is that primarily from service and environment, or is there a different brand matrix that you'll start to put in to the existing Macy stores?

Speaker Change: And I also wanted to ask you.

Michael Bonetti: The next question is coming from Michael Bonetti of Evercore ISI. Please go ahead. Thanks for taking our questions here. I guess, Adrian, maybe just any thought on your assumption for the second half, same-store sale guidance you just gave us between the go-forward stores and the non-go-forward stores. Any thought on how to think about maybe the spread between the two? Any way to help triangulate our model. And then I know you don't usually guide on forward-quarter comps on a quarterly basis, but we usually model it off of the spread of comps to total sales.

Speaker Change: The enhanced results Youre seeing in handbags and Madden.

Speaker Change: And the 50 stores is that primarily from service and environment or is there a different brand matrix.

Speaker Change: To put in.

Speaker Change: To the existing Macy stores and just lastly.

Tony Spring: And just lastly, if you could talk a little bit about the denim cycle, which we're seeing help a lot of companies, this second quarter going into third quarter, and how Macy has acted upon that opportunity. Thank you.

Speaker Change: If you could talk a little bit about the denim cycle, which we're seeing a lot of companies. This second quarter going into third quarter and how Macy's has acted upon that opportunity. Thank you.

Michael Bonetti: Is there any reason that spread changes in 3Q relative to 2Q just to be aware of? I know the calendar adds and noise. Maybe just remind us how that impacted 2Q and 3Q. If there's a difference? Absolutely. So I'll comment against anything to add. Please do, Tony. So one of the things we expected on the non-go-forward stores is that they would actually perform worse than we then effectively perform better than what we'd actually plan.

Adrian: And so some of the things that we've been doing is experimenting with our media marketing mix, which we're very encouraged by the experiments that we're seeing on the business, as Tony referenced, since we've made those changes from Q2.

Tony Spring: Thanks, Janet. I appreciate the questions. First on merchandise margin, I think it's the collective work of the team that led to beating our margin guidance for the quarter and has led us to guide appropriately for the fall season. It's making sure that we're providing compelling value, but we're obviously learning from all the pricing science and the opportunities to negotiate in the market and give value to the consumer without giving away margin as a brand and a company.

Speaker Change: Thanks, Janet I appreciate the questions first on merchandise margin I think it's the collective work of the team that led to beating our margin guidance for the quarter and has led us to guide appropriately for the fall season.

Adrian: We're being very clear on value in our promotional calendar and our communicated messages.

Adrian: But we also recognize that there are other dimensions when the customer shows up on our website or in our stores that matter around value as well.

Adrian: And that's having colleagues available, having a good experience within our stores, making sure that we have strong visual presentation, that we're amplifying the value that's available to the customer when they visit us.

Adrian: So those are the kinds of adjustments that we're making, but really all centered around sharper on the value messaging to the consumer every day that they're actually visiting with us.

Adrian: Great.

Adrian: It's making sure that we're providing compelling value, but we're obviously learning from all the pricing science and the opportunities to negotiate in the market and give value to the consumer without giving away margin as a as a brand and a company a part of our margin is always related to the quality of our inventory. So that is why Adrian I. Both emphasize we feel good about the quality.

Adrian: The next question is coming from Ashley Huggins of Jefferies.

Adrian: Thanks so much.

Adrian: Please go ahead.

Adrian: I'll pass it on.

Adrian: Ashley, you may be on mute.

Adrian: Thanks, Brooke.

Adrian: Would you like me to move on to the next question?

Adrian: Thank you.

Michael Bonetti: So customers are still shopping those stores. So when we think about the year-over-year performance, they're slightly better. So we've made some of that adjustment overall in our outlook and guidance for the back half of the year. As we think about cons, it's really getting the fundamentals better and better every day, every week, every month. And as we think about the trajectory for the back half of the year, third quarter and fourth quarter, it's a lot of the adjustments that Tony and I have been speaking about on this call.

Adrian: Yes.

Adrian: Thank you.

Adrian: The next question is coming from Bob Drbul of Guggenheim.

Adrian: Please go ahead.

Adrian: Hi.

Adrian: Good morning.

Speaker Change: First, our outlook assumes a more discriminating consumer and heightened promotional environment relative to our prior expectations.

Adrian: Just a couple of questions for me.

Adrian: On the merchandising side, just what you're seeing in handbags and shoes to really lead, that acceleration.

Adrian: Just wondering if you could comment.

Tony Spring: Part of our margin is always related to the quality of our inventory, so that's why Adrian and I both emphasize we feel good about the quality of our inventories. As it relates to the first 50 and the opportunity to expand to 100 other doors with handbag and chew pilots, yes, it's a combination of the staffing and of the inventory, the quality of the inventory. So that's why it's good to hear brands like Lauren by Ralph Lauren and Karl Lagerfeld and Coach, which are available in all of these stores, doing well. In addition, we know that having a service model in an environment where you're buying a three, four hundred dollar handbag, you need assistance.

Adrian: I think that's been a tougher category, so some of the changes that you're seeing would, be helpful.

Adrian: And a similar question just on women's.

Speaker Change: We believe our range gives us room to address the ongoing uncertainty in the discretionary consumer market.

Adrian: When you look at what's happening in women's and some of the brands that you called out, any of the trends that you see and sort of links to those trends in the back half of the year?

Adrian: Sure.

Adrian: Thanks, Bob, for the question.

Adrian: We are seeing green shoots in ready-to-wear.

Adrian: So that's why we're citing those examples in terms of Donna Karan or Yvette Lafee or, Karl Lagerfeld or at Bloomingdale's in Lajance or in Alice and Olivia or Veronica Beard.

Adrian: We are taking advantage of the fact that we are in an apparel cycle.

Adrian: And whether that's wide-bottom denim or a change in silhouette or improved fabrications, we want to go after the business at both brands.

Adrian: Our inventories as it relates to the first 50 and the opportunity to expand to 100 other doors with handbags and shoe pilots, yes, it's a combination of the staffing and of our of the inventory the quality inventory. So that's why it's good to hear brands like Lauren by Ralph Lauren and Karl Lagerfeld and co.

Speaker Change: Second, we have not included any impact from the potential CFPB Lake V regulation.

Adrian: In terms of handbags and shoes, we were pleased to see the disparate or the magnitude of the, difference in our F50 stores in those two categories, which have been tougher for us.

Adrian: And I would say we know staffing is an ingredient.

Adrian: We know merchandise is an ingredient.

Michael Bonetti: And so as we think about those investments, we actually believe that it's going to improve the business sequentially as we get into the back half of the year. As we think about the performance of, for example, the Macy's first 50, other go-forward stores within the fleet and the non-go-forward, we continue to see, for example, with our first 50 stores, the sequential trends continuing to improve relative to the balance. So it just gives us confidence that as we introduce changes into these stores, whether it's visual changes, whether it's some of the staffing changes and the 100 additional stores and handbag and shoes that we'll be able to actually put in more of those building blocks to really get the relative comp sales go-through every year to Groove.

Adrian: So we're pleased to go after 100 more stores in those two categories.

Adrian: And we think that the assortment in shoes is very conducive to a department store environment, where a customer wants selection and variety of price points and brands, doesn't always know their size by brand, and it's a chance for us to lean into something that we're particularly good at.

Adrian: In the case of handbags, I think we cited the fact that we're starting to see some light, at the end of the tunnel on brands like Lauren by Ralph Lauren and Karl Lagerfeld.

Adrian: And the coach business has been particularly good lately.

Adrian: So I'm cautiously optimistic that those tests are going to help improve the quality of our, business in the fall.

Adrian: The next question is coming from Dana Telsey of Telsey Advisory Group.

Adrian: And if I could just ask a follow-up, Adrian, on the credit card business, can you expand, a bit more sort of, you know, in some of the trends that you're seeing within, you know, the cardholders and delinquencies, you know, I think you said as expected, but can you put a little more color on that for us?

Adrian: Please go ahead.

Adrian: Absolutely, Bob, and good morning.

Adrian: Hi.

Adrian: So our net credit losses and delinquencies, as I mentioned earlier, we're very much in, line with our expectations.

Adrian: What we are seeing is that there are slightly lower payment rates, which is not necessarily, translating into bad debt.

Adrian: <unk>, which are available in all of these stores are doing well. In addition, we know that having a service model in a environment, where you're buying a three or $400 handbag you'd need assistance and so we've seen that impact in the first 50, we're excited to see that impact in both handbags and shoes in the hunt.

Adrian: So what's been happening is that we're seeing the customer sit on revolving balances a little, bit longer, but certainly paying off, they're paying their bills in a cycle that effectively has allowed us to have revenue a little bit better than our expectations. And that revenue is really driven by higher balances with, you know, delinquencies and, net credit losses in line with what we expected in our forecast, podcast.

Adrian: Thank you very much.

Adrian: Good morning, everyone.

Adrian: No problem, Bob.

Adrian: As you think about some of your other formats, whether it's the smaller format, Macy's, Backstage, Outlets and Digital, how did they perform relative to the core and how are you thinking about them for the back half?

Adrian: Thank you.

Adrian: And then just following up on AUR, which I think was up 4% in the first quarter, up 3.6% in the second.

Adrian: Drivers of AUR gains and how you're thinking, about it going forward.

Adrian: And just lastly, you tweaked up the investment in CapEx.

Adrian: What are those growth initiatives?

Adrian: Is some of it by Italy for Bloomingdale's that's coming up, or how are you thinking about it?

Adrian: Thank you.

Adrian: Thanks, Dana.

Adrian: Good to talk to you.

Adrian: Let's first talk about portfolios, because I think it's a big part of what we're trying to accomplish with opening Macy's small format.

Tony Spring: And so we've seen that impact in the first 50. We're excited to see that impact in both handbags and shoes in the hundred stores that we are expanding this fall.

Adrian: We opened six in the spring. We have six more that we're opening in the fall, which brings us to 24 stores.

Adrian: We did announce 100 stores that we're adding staffing tests to in both handbags and shoes.

Adrian: The fact that in the first 50, all categories outperformed the rest of the nameplate, the fact that we're seeing it on the top line, we're seeing it on the customer service scores, we're seeing it in better traffic and conversion, so we think we have a model that we just need a little longer to learn from, but we're prepared to use that as the go-forward strategy for the Macy's brand.

Adrian: Adrian?

Adrian: Grids stores that we're expanding this fall.

Tony Spring: And finally, on your question on the denim cycle, Janet, we absolutely are in a new silhouette or shape in denim after so many years in skinny, where we're now in a wide leg and, you know, a high rise, and so how we take advantage of that. We obviously have the great premium assortment at Bloomingdale's, and we have a powerful assortment of Levi's, as well as in a brand like Seven and Silver at Macy's. And so expect to find men's and women's in kids at both Macy's and Bloomingdale's a great assortment of denim for the fall season.

Janet: And finally on your question on the on the denim cycle. Janet we absolutely are in a new silhouette or shape in denim. After so many years and skinny where we're now in a wide leg and you know a high rise and so how we take advantage of that we obviously have the great premium assortment at bloomingdale's.

Michael Bonetti: Okay. And then, if I could sneak one more in, can you just talk to us about how you're thinking about inventory investment specifically in the go forward stores. We're kind of watching out of the inventory is pacing a little bit ahead of sales now, thinking about how you've made some changes to your buying operations a couple of years ago. Yeah, Mike, let me just add a couple things on inventory because I think it's important.

Adrian: We obviously have the first 50 initiative, and we have our digital business.

Adrian: And what we have focused on is trying to win by market.

Adrian: And what you'll see us talking more about is what is the right complement of small format, stores, great on-mall stores, and the digital business by geography to be able to win the customer and succeed market by market.

Adrian: So it's not like choosing your favorite child.

Adrian: These all fit into our ecosystem.

Adrian: We have to have the best off-mall stores and best on-mall stores, and a healthy digital business.

Adrian: The AUR increase is consistent with what we've seen by improving the quality of our product, not charging more, not pulling back from promotion.

Adrian: So I would expect to see low single-digit AUR growth as we continue to try to improve the traffic and conversion in our stores and on our site. The single biggest area that we have been challenged with is on conversion. And we're doing everything we can on both the site and the presentation in our stores to improve the quality of conversion.

Adrian: I think Adrian mentioned on the call, both traffic and conversion were stronger in our first 50.

Adrian: So, I think we know what we have to do.

Adrian: We just need to react appropriately and make sure that we're managing both the top line and the bottom line.

Janet: And we have assortment powerful assortment of Levi's as well as in a brand like seven and silver at at Macy's and so expect define in mens and womens and kids at both Macy's and Bloomingdale's, a great assortment of denim for the fall season.

Adrian: Adrian, anything you had?

Adrian: Yes.

Adrian: Good morning, Dan.

Adrian: To your question on capital investment, you know that we're very, disciplined on capital allocation.

Adrian: We're very focused on maintaining a healthy balance sheet, returning excess cash value to our investors.

Adrian: But the second dimension of our capital allocation is really what you're experiencing with a slight increase in capital spend for this year.

Adrian: We're going to be investing in high-return investments in the business.

Adrian: For example, what we're seeing in our F50 stores is that some of the visual enhancements in areas like our private brands seem to be working. So we want to lean into that.

Adrian: Some of the biggest improvement in our scores around F50 stores, as well as the broader network, is around need and clean.

Adrian: But we want to make sure that in these stores where we're making the changes, that the general upkeep of the store and the maintenance of the store is actually appropriately invested in so that there's a good experience for the customer.

Adrian: We see some opportunities around digital.

Adrian: And so we've been leaning into that piece as well.

Adrian: So really being very thoughtful and surgical about those investments that will help us deliver a better experience and also deliver growth.

Adrian: And so we're really taking the opportunity to lean into some of those investments, this year.

Adrian: Thank you.

Tony Spring: Lots of luck. Thanks so much.

Adrian: Thank you, Dana.

Speaker Change: Lots of luck. Thanks, so much.

Adrian: Thank you.

Adrian: The next question is coming from Ashley Helgans of, Jeffreys.

Tony Spring: Thank you.

Speaker Change: Third, the outlook for gross margin and inventory continues to reflect the conversion to cost accounting earlier this year and as previously noted, are not directly comparable to prior year balances.

Michael Bonetti: We obviously don't have a great clear compare in terms of year of a year because of the conversion. But I would say the inventory levels remain down double digits to a few years ago, and we are intent on being in stock for the customer. I think that one of the things that we have, you know, worked on very carefully, as I said, is getting transitional inventory, the level of clearance and value and the amount of newness flowing properly.

Speaker Change: Good morning, Matt.

Speaker Change: Thank you at this time I would like to turn the floor back over to Mr. Spring for closing comments.

Tony Spring: At this time, I would like to turn the floor back over to Mr. Spring for closing comments. Thank you all. Thanks, everyone. I should say we appreciate your time today. We hope you have a good rest of what is a few days, I guess, left of summer. And we certainly look forward to providing another update on the third quarter call. Have a good morning.

Speaker Change: The range that we have for the year of 39% to 39.2% we believe just gives us sufficient flexibility to respond to the uncertainty that may be on the horizon.

Speaker Change: Please go ahead.

Speaker Change: Now as we plan, as we think about our gross margin outlook for the balance of the year and the fall season, there are really three things that we're focused on.

Speaker Change: Hey, guys.

Mr. Spring: The first is around inventories, and we feel at this point that we do have inventories under control. We took some actions coming out of the second quarter, given we had softer sales in the second quarter, and we've already made the appropriate adjustments for Q3 and Q4.

Mr. Spring: And the kinds of things that we're leaning into are the things that you're familiar with.

Mr. Spring: We have good disciplines and good controls already in place.

Speaker Change: And lastly, 2024 continues to be a transition and investment year for Macy's Inc.

Mr. Spring: But there are a couple of other things that are important for us as well.

Mr. Spring: Thank you all thanks, everyone I should say we appreciate your time today. We hope you have a good rest of what is a few days I guess left of summer and we certainly look forward to providing another update on the third quarter call have a good morning.

Mr. Spring: At this moment in time, our H inventories are well under control. We're pleased with the level of newness, because we're now approaching the holiday season, and we have a healthy flow, given some of the constraints I mentioned a bit earlier around container availability and supply chain delays.

Mr. Spring: The second one being shortage trends. We benefited in the second quarter from lower shortage than we expected, as we've made investments at the end of last year into the beginning of this year with our asset protection team, and the initiatives that they're pursuing seem to be working.

Mr. Spring: So we're very pleased with that.

Mr. Spring: Apologies about earlier.

Mr. Spring: The last piece is lower delivery costs.

Mr. Spring: This is Blake on for Ashley.

Mr. Spring: We continue to diversify our carriers who have lower rates without actually compromising service levels.

Mr. Spring: Wanted to ask on the implied sales guide for the second half, in terms of kind of your consumer, assumptions, are you assuming the consumer is more stable or becomes increasingly challenged?

Mr. Spring: We also recognize that it's important to have the right balance of upstream versus downstream fulfillment, which has enabled us to minimize split shipments, which can be quite costly for us.

Mr. Spring: How is that reflected in the guide?

Mr. Spring: So as we think about inventory discipline, shortage trends, and lower delivery costs, we're encouraged by our outlook for the balance of the year, and also encouraged by what we expect to deliver in the third quarter.

Mr. Spring: And also on the color and Q3 sales, Adrian, did you provide a, comp at all for that?

Mr. Spring: Great Color Festival.

Mr. Spring: And then last one for us was also for Adrian on cost accounting.

Mr. Spring: Thanks, Matt.

Mr. Spring: How much is embedded in that for the full year gross margin?

Mr. Spring: The next question is coming, from Paul Leshway of Citi.

Speaker Change: We will continue to evaluate, pilot and iterate new ideas. Not everything will work, but as we find what does, we will scale as appropriate.

Mr. Spring: Thank you.

Mr. Spring: Thanks so much.

Mr. Spring: Please go ahead.

Mr. Spring: The next question is coming from Brooke Roach of Goldman Sachs.

Mr. Spring: Absolutely.

Mr. Spring: Thanks.

Mr. Spring: Please go ahead.

Mr. Spring: So, Blake, great to be with you.

Mr. Spring: It's Tracy Kogan filling in for Paul.

Mr. Spring: Good morning, and thank you for taking our question.

Mr. Spring: Let me talk a little bit about sales to get started.

Mr. Spring: I was wondering if you could talk about performance by income demographic, particularly as the quarter played out and we saw that weakness overall.

Mr. Spring: Let me take the first part and Adrian can add his commentary.

Mr. Spring: Tony, I was hoping you could help frame the magnitude of the potential tailwinds you see from the rollout of these select first 50 staffing tests, to get back to locations this fall.

Mr. Spring: You know, when you think about our sales range for both Q3 and for the year, it just gives us an opportunity to address the uncertainty in the discretionary spending categories that we operate in.

Mr. Spring: I was wondering if you saw any differences by the different income cohorts.

Mr. Spring: Yeah, I think we're looking at all the indicators that each of you are looking at.

Speaker Change: And then broader, bigger picture, the key factors that you're looking for that will allow you to more aggressively expand these First 50 initiatives to the rest of the fall, and then perhaps for Adrian.

Speaker Change: And so, as Tony mentioned a bit earlier, we've been very thoughtful and cautious about what we're seeing in the back half.

Speaker Change: Thanks.

Speaker Change: We're looking at inflation coming down.

Speaker Change: Can you elaborate on the adjustments that Macy's is making to its promotion and marketing calendar for the balance of the year?

Speaker Change: At the same time, we expect our S50 Macy's locations to outperform the broader fleet. We're encouraged enough in terms of the performance that Tony just spoke to, to expand a couple of changes around handbags and shoes that we're seeing real gains in the first 50 locations to an additional 100 locations this fall.

Speaker Change: Thanks for the question, Tracy.

Speaker Change: We're excited about potential rate cuts.

Speaker Change: Thanks, Brooke.

Speaker Change: We're continuing to make investments in our digital business around site enhancements, search engine optimization, a better mobile mix.

Speaker Change: Yeah, I think that there was a pretty consistent reaction across, all of our nameplates in terms of the second quarter being softer than the first quarter.

Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lunch or log off the webcast at this time and enjoy the rest of your day. Thank you very much.

Speaker Change: Ladies and gentlemen, this concludes today's event.

Speaker Change: We're looking at jobless claims.

Speaker Change: Okay.

Speaker Change: Good to talk to you.

Speaker Change: So again, we have a number of things that we see green shoots that we're leaning into, but we also recognize that we're in a context of uncertainty with regards to discretionary spend.

Speaker Change: So, yeah, you have to believe that everybody is being a little more cautious as they kind of watch what's going on in the macro environment and are just being more judicious in the purchases they make.

Speaker Change: Ladies and gentlemen. This concludes today's event you may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

Speaker Change: We're looking at the discretionary spending, consumer optimism.

Speaker Change: We are excited about the first 50, you know, if we haven't made that clear enough.

Speaker Change: As we think about cost accounting, you know, the way I would think about it is that the best way, to track our performance this year is to look at our outlook for the year.

Speaker Change: I am really pleased with, you know, if I look at the first 50 or I look at the second 50, or I look at Bloomingdale's performance, or I look at Blue Mercury, those were all essentially in the flat to positive range.

Speaker Change: But I'm also focused predominantly on our health of our inventory levels, the compelling nature of our marketing campaigns.

Speaker Change: You may disconnect your line to log off the webcast at this time and enjoy the rest of your day.

Speaker Change: It's two consecutive quarters of comp store growth.

Speaker Change: That's really going to be the best way.

Speaker Change: You may disconnect your line to log off the webcast at this time and enjoy the rest of your day.

Speaker Change: I think in an environment where the customer is looking for, why should I buy?

Speaker Change: I think that we look well positioned from an inventory composition level, from an age of inventory level, from a percent of newness.

Speaker Change: It's 600 basis points of improvement in NPS, 460 basis points of improvement versus the rest of Macy's.

Speaker Change: On an annual basis, some of the adjustments that you would expect from the transition from retail accounting to cost accounting are not material for the year. We provided a little bit more detail in Q2, but it's a bit chunky as you go throughout the year, but again, not material for the overall year.

Speaker Change: With that, for fiscal 2024, we now expect net sales of approximately 22.1 to 22.4 billion dollars. The primary drivers of our reduced sales outlook relative to prior expectations are second quarter sales results and the more challenging environment.

Michael Bonetti: Neither Adrian or I are worried about the risk associated with our inventory, kind of going into the fall season. We look at it on an age basis. We look at it on a marked down inventory basis. And I think it's being in stock on replenishment, flowing fashion and newness into those go forward stores. I think we're so much better position than we were a year ago going into the third quarter. The only thing I'd add there is, you know, we do acknowledge to your point, Mike, that inventories at the end of the second quarter were slightly higher than our expectation.

Speaker Change: And I've said to our team, our challenge is not just to have the lowest price.

Speaker Change: And I would add in where we haven't always got it right, the balance of transitional product, the balance of clearance, the balance of newness.

Speaker Change: And I want to make clearly, we will expand F50 or first 50.

Speaker Change: And with regards to how we're thinking about gross margin in the third quarter, you know, we're looking at about 40.3 to 40.5%. And we feel that given the ranges on top line, on gross margin, on the bottom line, we should be able to navigate to those outcomes.

Speaker Change: Our challenge is to create a compelling reason for the customer to buy at Macy's, Bloomingdale's, or Blue Mercury.

Speaker Change: And I think that's why the trends that we saw in the second quarter after we started to take some action are continuing into the third quarter.

Speaker Change: It's a question of when, not if.

Speaker Change: Great.

Speaker Change: And we have that in our inventory composition.

Speaker Change: So this is always a game of making sure that you have the right balance of going after the consumer and where she is, he or she are shopping, and at the same time that you are protecting the bottom line.

Speaker Change: And I think we've said before on the fourth quarter call, we will elaborate further on how many stores next year. But I think you can view it as a positive sign that we went ahead and did the 100 store test on handbags and shoes as the confidence that we have on those particular families of business on what it can mean to provide the ample level of staffing in a service-oriented business.

Speaker Change: Thank you.

Speaker Change: We have that in the amount of newness that we flow to our stores and to our site.

Speaker Change: I think the team is doing a really good job of that.

Speaker Change: In terms of the magnitude, it's incorporated into our guidance.

Speaker Change: Best of luck.

Speaker Change: We have that in the exclusivity that we offer with private brands.

Speaker Change: And we're obviously not sitting on where we are today.

Speaker Change: I think our guidance gives us the range to be able to use those levers to improve our performance.

Speaker Change: Thank you, Blake.

Speaker Change: And I think as we mentioned, we have the celebration of Italy at Bloomingdale's, which begins in September, and the 25th anniversary campaign from Blue Mercury, which begins in September.

Speaker Change: [music].

Speaker Change: We're aggressively pursuing opportunities to enhance and improve the business going forward.

Speaker Change: But I look at the first 50 as continuing to be the best example of what Macy's can be in the future.

Speaker Change: Thank you.

Speaker Change: So those are all other ways that we get all economic income levels of consumers to shop and buy at our three nameplates.

Speaker Change: For the full year, we now assume Macy's Inc, comps inclusive of non-go-forward locations and digital to be down 2% to down 0.5% with Macy's name plate go-forward locations and digital to be down 1.5% to flat and our luxury name plates to collectively be up 0.5% to up 2%.

Speaker Change: Neil, Tony summed it up quite well.

Speaker Change: And please know, we are going to move as fast as we possibly can without tripping on our way to success.

Speaker Change: Thank you.

Speaker Change: The only thing I would add is that we're controlling, what we can control.

Speaker Change: So I'm just careful about making sure that there are not false positives.

Speaker Change: The next question is coming from Alex Straton of Morgan Stanley.

Speaker Change: Other revenue of 670 to 685 million dollars, including credit card revenues of 490 to 585 million dollars.

Speaker Change: We have a lot of opportunities that we see ahead within the business to provide a better experience.

Speaker Change: We got a lot of noise in the public environment right now.

Speaker Change: Please go ahead.

Speaker Change: We see the green shoots on growth.

Speaker Change: Let's make sure we understand what's causation versus correlation.

Speaker Change: Perfect.

Speaker Change: And so we're just being very thoughtful as we enter the biggest time of year for us, which is the holiday season.

Speaker Change: Good morning, Brooke.

Speaker Change: Thanks a lot for taking the question.

Speaker Change: Great.

Speaker Change: You know, to your question about the adjustments on promotions and marketing, you know, the context that we are operating under is a consumer that's really oriented on value.

Speaker Change: First one maybe for Tony is just on your holiday fourth quarter approach.

Speaker Change: Thank you both.

Speaker Change: And so some of the things that we've been doing is experimenting with our media marketing mix, which we're very encouraged by the experiments that we're seeing on the business, as Tony referenced, since we've made those changes from Q2.

Speaker Change: You've got election, compressed shopping period, we're lapping 53rd week.

Speaker Change: Thank you, Neil.

Speaker Change: We're being very clear on value in our promotional calendar and our communicated messages, but we also recognize that there are other dimensions when the customer shows up on our website or in our stores that matter around value as well.

Speaker Change: Just wondering if you guys have a different strategy this year with that backdrop.

Speaker Change: Thank you.

Speaker Change: And that's having colleagues available, having a good experience within our stores, making sure that we have strong visual presentation, that we're amplifying the value that's available to the customer when they visit us.

Speaker Change: And then for Adrian, with the back half comp acceleration from the front half trend, I'm, looking at that compared to a back half comp that's getting harder, so I'm just trying to understand how things get better or what exactly you're assuming there that results in that outcome.

Speaker Change: Thank you.

Speaker Change: So those are the kinds of adjustments that we're making, but really all centered around sharper on the value messaging to the consumer every day that they're actually visiting.

Speaker Change: Thanks a lot, guys.

Speaker Change: The next question is coming from Michael Bonetti of Evercore ISI.

Speaker Change: Great, thanks so much.

Speaker Change: Thanks, Alex.

Speaker Change: Please go, ahead.

Speaker Change: I'll pass it on.

Speaker Change: Good to talk to you.

Speaker Change: Hey, guys.

Speaker Change: Thanks, Brooke.

Speaker Change: Let me start with holiday, and Adrian will cover the comp progression.

Speaker Change: Thanks for taking our questions here.

Speaker Change: Thank you.

Speaker Change: I just actually did the holiday style out with the team about a month ago, and I feel, really good about our assortments at both Macy's Bloomingdale's and Blue Mercury. We have more newness than we had a year ago.

Speaker Change: I guess, Adrian, maybe just any thought, on your assumption for the second half same-store sales guidance you just gave us between the go-forward stores and the non-go-forward stores, or any thought on how to think about maybe the spread between the two, any way to help triangulate our model.

Speaker Change: The next question is coming from Ashley Helgans of Jeffreys.

Speaker Change: We have some exclusive partnerships at both Macy's and Bloomingdale's that I'll wait till, the next call to share in more detail, but I will tell you the teams are really leaning into.

Speaker Change: And then I know you don't usually guide on forward quarter comps on a quarterly basis, but we usually model it off of the spread of comps to total sales.

Speaker Change: Please go ahead.

Speaker Change: We don't want to have last year's assortment.

Speaker Change: Is there any reason that spread changes in 3Q relative to 2Q just to be aware of?

Speaker Change: Ashley may be on mute.

Speaker Change: We don't want to have the same old things that we've had in our mix of holiday gifting.

Speaker Change: I know the calendar adds some noise.

Speaker Change: Would you like me to move on to the next question?

Speaker Change: We're being highly sensitive to the change in weather trends, so we have a broader range, of product ideas than just cold weather categories.

Speaker Change: Maybe just remind, us how that impacted 2Q and 3Q, if there's a difference.

Speaker Change: Thank you.

Speaker Change: We're obviously leaning into the strength that we have at fragrances across the three, brands, so yes, we got five less shopping days between Thanksgiving and Christmas.

Speaker Change: Absolutely.

Speaker Change: The next question is coming from Bob Drbul of Guggenheim.

Speaker Change: We certainly have an election in there, but I think, remember, retail and our three brands, provide a form of escapism and entertainment, and our job is to make sure that we're capitalizing on an opportunity to have a larger share of wallet in the fourth quarter because of the range of prices and brands and categories that we sell.

Speaker Change: So I'll comment.

Speaker Change: Please go ahead.

Speaker Change: Adrian?

Speaker Change: If you have anything to add, please do, Tony.

Speaker Change: Hi, good morning.

Speaker Change: Good morning, Alex.

Speaker Change: So one of the things, we expected on the non-go-forward stores is that they would actually perform worse than – effectively perform better than what we'd actually planned. So customers are still shopping those stores.

Speaker Change: Just a couple of questions for me.

Speaker Change: Look, the punchline is we're not standing still. We're two quarters into a bold new chapter strategy, and there's not only changes that, we've implemented that we're tracking and iterating and deploying where we have energy and confidence, but there are also more changes underway.

Speaker Change: So when we think about the year-over-year performance, they're slightly better, so we made some of that adjustment overall in our outlook and guidance for the back half of the year.

Speaker Change: On the merchandising side, just what you're seeing in handbags and shoes, you know, to really lead that acceleration.

Speaker Change: We're continuing to make changes in stores, as Tony and I spoke about earlier.

Speaker Change: As we think about comps, it's really getting the fundamentals better and better every day, every week, every month.

Speaker Change: Just wondering if you could comment.

Speaker Change: We're making changes in digital that's coming online as we speak.

Speaker Change: And as we think about the trajectory for the back half of the year, third quarter and fourth quarter, it's a lot of the adjustments that Tony and I have been speaking about on this call.

Speaker Change: I think that's been a tougher category.

Michael Bonetti: But the good news is that in the second quarter, we already started to take action to adjust the appropriate quantity and composition of inventory for the fall season, key three and key fours, Tony mentioned. With regards to the type of inventory or the amount of inventory by store, we're looking at, you know, sell through trends weeks of supply trends at a very specific location by location by category. So really being much more diligent with some of the disciplines that we've added in over the course of the last year to really manage the allocation of inventory in places where we can sell more at full price or first mark than what we would have seen in the past.

Speaker Change: We're making adjustments with our media mix and marketing spend mix that seems to be giving, us some good results. We're very encouraged with what we're seeing there.

Speaker Change: And so as we think about those investments, we actually believe that it's going to improve the business sequentially as we get into the back half of the year.

Speaker Change: So, you know, some of the changes that you're seeing would be helpful.

Speaker Change: As I spoke about earlier, we're leaning into the value orientation of today's consumer, being very clear on value, not just the price for the quality of products that we offer, but also the total value equation.

Speaker Change: As we think about the performance of, for example, the Macy's first 50 other go-forward stores within the fleet and the non-go-forward, we continue to see, for example, with our first 50 stores, the sequential trends continuing to improve relative to the balance.

Speaker Change: And a similar question just on women's, you know, when you look at what's happening in women's and some of the brands that you called out, any of the trends, you know, that you see and sort of links to those trends in the back half of the year?

Speaker Change: We're flowing goods better. We have better in-stocks this year than we did last year.

Speaker Change: So it just gives us confidence that as we introduce changes into these stores, whether it's visual changes, whether it's some of the staffing changes and the 100 additional stores in handbag and shoes, that we'll be able to actually put in more of those building blocks to really get the relative comp sales growth year-over-year to improve.

Speaker Change: Sure.

Speaker Change: We have faster digital deliveries for our digital orders than we did last year.

Speaker Change: Okay.

Speaker Change: Thanks, Bob, for the question.

Speaker Change: So there are a number of things across the business that's just getting better. We're more disciplined, better execution, and that gives us confidence that these building, blocks are going to build into sequential improvement and top line as we get into the back half of the year.

Speaker Change: And then if I could sneak one more in.

Speaker Change: We are seeing green shoots in ready-to-wear, so that's why we're citing those examples in terms of Donna Karan or Yvette Lafee or Karl Lagerfeld or at Bloomingdale's in Lajance or in Alice and Olivia or Veronica Beard.

Speaker Change: Thanks a lot.

Speaker Change: Can you just talk to us about how you're thinking, about inventory investments specifically in the go-forward stores?

Speaker Change: We are taking advantage of the fact that we are in an apparel cycle, and whether that's wide-bottom denim or a change in silhouette or improved fabrications, we want to go after the business at both brands.

Speaker Change: Good luck.

Speaker Change: We're kind of watching how the inventory is pacing a little bit ahead of sales now, thinking about how you've made some changes to your buying operations a couple of years ago.

Speaker Change: In terms of handbags and shoes, we were pleased to see the disparate or the magnitude of the difference in our F50 stores in those two categories, which have been tougher for us.

Speaker Change: Thank you, Alex.

Speaker Change: Are those – maybe any thoughts on the investments you're making on the inventory in the – just specifically in the go-forward stores relative to sales plans in the second half?

Speaker Change: And I would say we know staffing is an ingredient.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: We know merchandise is an ingredient.

Speaker Change: The next question is coming from Oliver Chen of TD Cowen.

Speaker Change: Mike, let me just add a couple things on inventory, because I think it's important.

Speaker Change: So we're pleased to go after 100 more stores in those two categories.

Speaker Change: Hi, good morning.

Speaker Change: We obviously don't have a great, clear compare in terms of year-over-year because of the, conversion, but I would say that inventory levels remain down double digits to a few years ago, and we are intent on being in stock for the customer.

Speaker Change: And we think that the assortment in shoes is very conducive to a department store environment where a customer wants selection and variety of price points and brands, doesn't always know their size by brand, and it's a chance for us to lean into something that we're particularly good at.

Speaker Change: This is Neil Goh on for Oliver this morning.

Speaker Change: I think that one of the things that we have worked on very carefully, as I said, is getting transitional inventory, the level of clearance and value, and the amount of newness flowing properly.

Speaker Change: And in the case of handbags, I think we cited the fact that we're starting to see some light at the end of the tunnel on brands like Lauren by Ralph Lauren and Karl Lagerfeld.

Speaker Change: I just want to touch more, on the promotional cadence as it pertains to the 2024 guidance.

Speaker Change: Neither Adrian or I are worried about the risk associated with our inventory kind of going into the, fall season.

Speaker Change: And the coach business has been particularly good lately.

Speaker Change: How much of the heightened promotional environment that you expect in the back half is driven from the competitive landscape, both from legacy players and new digital concepts versus what's more reflective of Macy's current inventory position?

Speaker Change: We look at it on an age basis.

Speaker Change: So I'm cautiously optimistic that those tests are going to help improve the quality of our business in the fall.

Speaker Change: And then just more broadly, just any key puts and takes that you're watching as it pertains to the health of consumer that you see currently?

Speaker Change: We look at it on a markdown inventory basis, and I think it's being in stock on replenishment, flowing fashion and newness into those go-forward stores.

Speaker Change: And if I could just ask a follow-up.

Speaker Change: Thanks.

Speaker Change: I think we're so much better positioned than we were a year ago going into the third quarter. The only thing I'd add there is we do acknowledge, to your point, Mike, that inventories at the, end of the second quarter were slightly higher than our expectation, but the good news is that in the second quarter, we already started to take action to adjust the appropriate quantity and composition of inventory for the fall season, Q3 and Q4, as Tony mentioned.

Speaker Change: Adrian, on the credit card business, can you expand a bit more sort of, you know, in some of the trends that you're seeing within, you know, the cardholders and delinquencies and, you know, I think you said as expected, but can you put a little more color on that for us?

Speaker Change: Thanks, Neil.

Speaker Change: With regards to the type of inventory or the amount of inventory by store, we're looking at sell-through trends, weeks of supply trends at a very specific location by location by category, so really being much more diligent with some of the disciplines that we've added in over the course of the last year to really manage the allocation of inventory in places where we can sell more at full price or first mark than what we would have seen in the past, because as you know, our margin expansion over the last several years has been around reducing the amount of clearance to the appropriate level as we transition from season to season.

Speaker Change: Absolutely, Bob, and good morning.

Speaker Change: Okay.

Speaker Change: So our net credit losses and delinquencies, as I mentioned earlier, were very much in line with our expectations.

Speaker Change: Thanks a lot.

Speaker Change: What we are seeing is that there are slightly lower payment rates, which is not necessarily and is not necessarily translating into bad debt. So what's been happening is that we're seeing the customer sit on revolving balances a little bit longer, but certainly paying off, they're paying their bills in a cycle that effectively has allowed us to have revenue a little bit better than our expectations.

Speaker Change: It makes a lot of sense.

Speaker Change: And that revenue is really driven by higher balances with delinquencies and net credit losses in line with what we expected in our forecast.

Speaker Change: Appreciate it, guys.

Speaker Change: Thank you very much.

Speaker Change: Thanks, Mike.

Speaker Change: No problem, Bob.

Speaker Change: Thank you.

Speaker Change: The next question is coming from Chuck Grom of Gordon-Haskett.

Speaker Change: The next question is coming from Dana Telsey of Telsey Advisory Group.

Speaker Change: Please go ahead.

Speaker Change: Hi.

Speaker Change: Hi, good morning everyone.

Speaker Change: This is Eric on for Chuck.

Speaker Change: As you think about some of your other formats, whether it's the smaller format, Macy's, backstage, outlets, and digital, how did they perform relative to the core and how are you thinking about them for the back half?

Speaker Change: I just want to ask about the first 50 locations, the positive, comps.

Speaker Change: And then just following up on AUR, which I think was up 4% in the first quarter, up 3.6% in the second.

Speaker Change: Are you seeing the growth from existing customers coming and spending more, or is this new or lapsed customers coming back?

Speaker Change: Drivers of AUR gains and how you're thinking about it going forward.

Speaker Change: And how do you get out to customers that all the changes that have been made that get them to come back to the store?

Speaker Change: And just lastly, you tweaked up the investment in CapEx.

Speaker Change: Eric, thanks for the question.

Speaker Change: What are those growth initiatives?

Speaker Change: I think we are, again, excited about the continued progress, that we're seeing in the first 50. It's two consecutive quarters of comp store growth.

Speaker Change: Is some of it by Italy for Bloomingdale's that's coming up or how are you thinking about it?

Speaker Change: It's 460 basis points of improvement versus the other Macy's locations or business.

Speaker Change: Thank you.

Speaker Change: I, think that the growth that we are seeing across all families of business, the fact that we have increased traffic and increased conversion versus other Macy's stores, shows us that the work that we're doing is resonating with the consumer.

Speaker Change: Thanks, Dana.

Speaker Change: It is a combination of existing customers and some new customers, and our new head of marketing is working closely with our stores team in geotargeting, communication via email and search, as well as SMS messages to make sure that the eventing and the activations and new product messages getting out to customers.

Speaker Change: Good to talk to you.

Speaker Change: So the good news is we're seeing it resonate.

Speaker Change: Let's first talk about portfolios, because I think it's a big part of what we're trying to accomplish with opening Macy's Small Format. We opened six in the spring. We have six more that we're opening in the fall, which brings us to 24 stores.

Speaker Change: Customer's awareness is growing.

Speaker Change: We obviously have the first 50 initiative, and we have our digital business.

Speaker Change: We're only, two quarters in to a three-year plan and a change plan.

Michael Bonetti: Because as you know, our margin expansion over the last several years has been around reducing the amount of clearance to the appropriate level as we transition from season to season. Okay. Thanks a lot. Appreciate it. Thanks, Mike.

Speaker Change: And what we have focused on is trying to win by market.

Speaker Change: And obviously, we want to have the right level of patience and determination.

Speaker Change: And what you'll see us talking more about is what is the right complement of small format stores, great on-mall stores, and the digital business by geography to be able to win the customer and succeed market by market.

Speaker Change: The only other thing I would add, Eric, is when you think about some of the things that's, driving the business, as Tony described, we just have more number of customers actually coming into these stores relative to what we saw in prior years.

Speaker Change: So it's not like choosing your favorite child.

Speaker Change: And when you think about the experience that we've been investing in, just to bring a little, bit of color that Tony spoke about in previous calls, we're making additional staffing investments in handbags, in shoes, in ready-to-wear, in home, also in the fitting room, which gives us the best opportunity to convert that customer and check out to make sure that we don't have long lines.

Speaker Change: These all fit into our ecosystem.

Speaker Change: We're activating the store through better visual presentation, sharper looks, greater, value.

Speaker Change: We have to have the best off-mall stores and best on-mall stores and a healthy digital business.

Speaker Change: We have events to give people reasons to come back to the store and spend time with us.

Speaker Change: The AUR increase is consistent with what we've seen by improving the quality of our product, not charging more, not pulling back from promotion.

Speaker Change: We have digital messaging going out to customers in that locale that we know to get them excited, about what's being offered in their local store.

Speaker Change: So I would continue to expect to see low single digit AUR growth as we continue to try to improve the traffic and conversion in our stores and on our site. The single biggest area that we have been challenged with is on conversion, and we're doing everything we can on both the site and the presentation in our stores to improve the quality of conversion.

Speaker Change: And we have local marketing to keep Macy's top of mind for those customers.

Speaker Change: I think Adrian mentioned on the call, both traffic and conversion were stronger in our first 50.

Speaker Change: So those are the kinds of things that we're seeing gaining traction, and to Tony's point, we're seeing it in terms of traffic and relative conversions.

Speaker Change: So I think we know what we have to do.

Speaker Change: We're seeing it in the number of customers.

Speaker Change: We just need to react appropriately and make sure that we're managing both the top line and the bottom line.

Speaker Change: The categories that are touched have a sequential improvement in sales performance.

Speaker Change: Adrian, anything you had?

Speaker Change: So a lot of what we talk about is what's the appropriate pace, although a healthy pace, but the appropriate pace, as Tony said, without tripping over ourselves.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Good morning, Dan.

Speaker Change: The next question is coming from Jay Soule of UBS.

Speaker Change: To your question on capital investment, you know that we're very disciplined on capital allocation. We're very focused on maintaining a healthy balance sheet, returning excess cash value to our investors, but the second dimension of our capital allocation is really what you're experiencing with a slight increase in capital spend for this year. We're going to be investing in high-return investments in the business.

Speaker Change: Please go ahead.

Speaker Change: For example, what we're seeing in our F50 stores is that some of the visual enhancements in areas like our private brands seem to be working, so we want to lean into that.

Speaker Change: Great.

Speaker Change: Some of the biggest improvement in our scores around F50 stores as well as the broader network is around need and clean, but we want to make sure that in these stores where we're making the changes that the general upkeep of the store and the maintenance of the store is actually appropriately invested in so that there's a good experience for the customer.

Speaker Change: SG&A is a percent of total revenue of 36.3% to 36.6% 10%.

Eric: Thank you. The next question is coming from Chuck Grom of Gordon. Hasket, please go ahead. Hi, this is Eric on for Chuck. Just want to ask about the first 50 locations, the positive comms. Are you seeing the growth from existing customers coming and spending more or is this new or lapse customers coming back? And how do you get out to customers that all the changes that have been made that get them to come back to the store?

Speaker Change: Hopefully, you can hear me.

Speaker Change: We see some opportunities around digital, and so we've been leaning into that piece as well, so really being very thoughtful and surgical about those investments that will help us deliver a better experience and also deliver growth, and so we're really taking the opportunity to lean into some of those investments.

Speaker Change: My question is about asset sale gains and monetization proceeds.

Speaker Change: Thank you.

Speaker Change: We will continue to invest in near-term sales-driving efforts and longer-term, bull-new chapter strategy initiatives while prioritizing efficiency and effectiveness in non-customer-facing areas.

Speaker Change: It looks like the guidance for this year went to the high end of the range compared to where, it was last quarter.

Speaker Change: Thank you, Dana.

Speaker Change: Maybe, Adrian, could you just elaborate a little bit on what assets were sold and what's, driving the raised guidance, and that would be helpful.

Speaker Change: Thank you.

Speaker Change: The next question is coming from Ashley Helgans of Jeffreys.

Speaker Change: Our monetization and our upwardly revised monetization expectation for the third quarter.

Speaker Change: Great to be with you, Jay.

Speaker Change: Please go ahead.

Speaker Change: The punchline here is we're very pleased with the traction and progress. We're getting very healthy responses from landlords and developers.

Speaker Change: Hey, guys.

Speaker Change: Adjusted EBITDA as a percent of total revenue of 8.6% to 9%, interest expense of $120 million due to higher expected interest income.

Speaker Change: The deal pipeline is healthy, even in this environment.

Speaker Change: Apologies about earlier.

Speaker Change: So to your point, coming into the quarter, we had a range of $90 million to $115 million, in asset sale gains. Now, we're seeing approximately $115 million. We were pleased with $36 million of gains in Q2. We're forecasting, in our guidance, $30 million in Q3, which leaves a balance of $67 million, in Q4.

Speaker Change: This is Blake.

Speaker Change: But overall, what I will tell you is trending quite well, lots of good traction.

Speaker Change: I'm for Ashley.

Speaker Change: The implication of that is that we're going to be closing approximately 55 stores relative, to our prior outlook of 50 stores.

Speaker Change: Wanted to ask on the implied sales guide for the second half.

Speaker Change: So this is just all further evidence of the traction that we're having.

Speaker Change: In terms of kind of your consumer assumptions, are you assuming the consumer is more stable or becomes increasingly challenged?

Speaker Change: And we're also very pleased with the value we're able to unlock in those deals and those, transactions.

Speaker Change: How is that reflected in the guide?

Speaker Change: Got it.

Speaker Change: And also on the color and Q3 sales, Adrian, did you provide a comp at all for that?

Speaker Change: Okay.

Speaker Change: And then last one for us was also for Adrian, on cost accounting, how much is embedded in that for the full year gross margin?

Speaker Change: Adrian, thank you.

Speaker Change: Thanks so much.

Speaker Change: Thank you, Jay.

Speaker Change: Absolutely.

Speaker Change: Thank you.

Speaker Change: We are maintaining our annual adjusted diluted EPS outlook of $2.55 to $2.90 reflecting our commitment to enhancing gross margin and exercising expense controls.

Speaker Change: So Blake, great to be with you.

Speaker Change: The next question is coming from Janet Joseph-Kloppenberg of JJK Research.

Speaker Change: Let me talk a little bit about sales to get started.

Speaker Change: Please go ahead.

Speaker Change: You know, when you think about our sales range for both Q3 and for the year, it just gives us an opportunity to address the uncertainty in the discretionary spending categories that we operate in.

Speaker Change: Good morning, everyone.

Speaker Change: And so, as Tony mentioned a bit earlier, we've been very thoughtful and cautious about what we're seeing in the back half.

Speaker Change: I had a couple of questions.

Speaker Change: First, on merchandise margin or product margin, whichever way you look at it, Tony, for the, second quarter, how was that versus your expectations?

Speaker Change: We're continuing to make investments in our digital business around site enhancement.

Speaker Change: I mean, peeling away the favorable transportation and the cost accounting benefits, how was, it?

Speaker Change: Search Engine Optimization, a better mobile mix.

Speaker Change: And what's the thought process on that merchandise margin level in the second half of the year?

Speaker Change: Our second quarter beat and favorable interest expense assumptions are expected to be offset by headwinds from lower sales volume and a heightened promotional landscape.

Eric: Eric, thanks for the question. I think we are again excited about the continued progress that we're seeing in the first 50. It's two consecutive quarters of comp store growth. It's 460 basis points of improvement versus the other Macy's locations or business. I think that the growth that we are seeing across all families of business, the fact that we have increased traffic and increased conversion versus other Macy's stores, shows us that the work that we're doing is resonating with the consumer.

Speaker Change: And I also wanted to ask if the enhanced results you're seeing in handbags and men's in the, 50 stores, is that primarily from service and environment or is there a different brand matrix that you'll start to put in to the existing Macy's stores?

Speaker Change: As we think about cost accounting, the way I would think about it is that the best way to track our performance this year is to look at our outlook for the year.

Speaker Change: And just lastly, if you could talk a little bit about the denim cycle, which we're seeing, help a lot of companies this second quarter going into third quarter and how Macy's has acted upon that opportunity.

Speaker Change: That's really going to be the best way.

Speaker Change: Thank you.

Speaker Change: Thanks, Janet.

Speaker Change: And with regards to how we're thinking about gross margin in the third quarter, we're looking at about 40.3% to 40.5%, and we feel that given the ranges on top line, on gross margin, on the bottom line, we should be able to navigate to those outcomes.

Speaker Change: I appreciate the questions.

Speaker Change: Great, thank you.

Speaker Change: First, on merchandise margin, I think it's, the collective work of the team that led to beating our margin guidance for the quarter and has led us to guide appropriately for the fall season.

Speaker Change: Best of luck.

Speaker Change: It's making sure that we're providing compelling value, but we're obviously learning from all the pricing science and the opportunities to negotiate in the market and give value to the consumer without giving away margin as a brand and a company.

Speaker Change: Thank you, Blake.

Speaker Change: Part of our margin is always related to the quality of our inventory, so that's why Adrian and I both emphasize we feel good about the quality of our inventories. As it relates to the first 50 and the opportunity to expand to 100 other doors with handbags and shoe pilots, yes, it's a combination of the staffing and of the inventory, the quality inventory.

Speaker Change: Thank you.

Speaker Change: So that's why it's good to hear brands like Lauren by Ralph Lauren and Karl Lagerfeld and Coach, which are available in all of these stores, doing well.

Speaker Change: The next question is coming from Paul Lejuez City.

Speaker Change: In addition, we know that having a service model in an environment where you're buying a $300, $400 handbag, you need assistance.

Speaker Change: Please go ahead.

Speaker Change: And so we've seen that impact in the first 50.

Speaker Change: Thanks.

Speaker Change: We're excited to see that impact in both handbags and shoes in the 100 stores that, we are expanding this fall.

Speaker Change: It's Tracy Kogan filling in for Paul.

Speaker Change: And finally, on your question on the denim cycle, Janet, we absolutely are in a new silhouette or shape in denim. After so many years in skinny, we're now in a wide leg and a high rise.

Speaker Change: I was wondering if you could talk about performance by income demographic, particularly as the quarter played out and we saw that weakness overall.

Speaker Change: And so how we take advantage of that, we obviously have the great premium assortment at Bloomingdale's, and we have an assortment, a powerful assortment of Levi's, as well as brands like Seven and Silver at Macy's.

Speaker Change: I was wondering if you saw any differences by the different income cohorts.

Speaker Change: And so expect to find in men's and in women's and kids at both Macy's and Bloomingdale's a great assortment of denim for the fall season.

Speaker Change: Thanks.

Speaker Change: Lots of luck.

Speaker Change: Thanks for the question, Tracy.

Speaker Change: Thanks so much.

Speaker Change: Yeah, I think that there was a pretty consistent reaction across all of our nameplates in terms of the second quarter being softer than the first quarter.

Speaker Change: Thank you.

Speaker Change: So you have to believe that everybody is being a little more cautious as they kind of watch what's going on in the macro environment and are just being more judicious in the purchases they make.

Speaker Change: At this time, I would like to turn the floor back over to Mr. Spring for closing comments.

Speaker Change: I am really pleased with, you know, if I look at the first 50 or I look at Bloomingdale's performance or I look at Blue Mercury, those were all essentially in the flat to positive range.

Speaker Change: Thank you all.

Speaker Change: I think in an environment where the customer is looking for, why should I buy?

Speaker Change: Thanks, everyone, I should say.

Speaker Change: And I've said to our team, our challenge is not just to have the lowest price.

Speaker Change: We appreciate your time today.

Speaker Change: Our challenge is to create a compelling reason for the customer to buy at Macy's, Bloomingdale's or Blue Mercury.

Speaker Change: We hope you have a good rest of what is a few, days, I guess, left of summer, and we certainly look forward to providing another update on the third quarter call.

Speaker Change: And we have that in our inventory composition.

Speaker Change: Have a good morning.

Speaker Change: We have that in the amount of newness that we flow to our stores and to our site.

Speaker Change: Ladies and gentlemen, this concludes today's event.

Speaker Change: We have that in the exclusivity that we offer with private brands.

Speaker Change: So those are all other ways that we get all economic income levels of consumers to shop and buy at our three nameplates.

Speaker Change: Thank you.

Speaker Change: The next question is coming from Alex Straton of Morgan Stanley.

Speaker Change: Please go ahead.

Eric: It is a combination of existing customers and some new customers and our new head of marketing is working closely with our stores team in geo targeting communication via email and search as well as SMS messages to make sure that the eventing and the activations and new product messages getting out to customers. So the good news is we're seeing it resonate. Customers awareness is growing. We're only two quarters in to a three-year plan and a change plan and obviously we want to have the right level of patience and determination.

Speaker Change: Perfect.

Speaker Change: Thanks a lot for taking the question.

Speaker Change: First one maybe for Tony is just on your holiday fourth quarter approach.

Speaker Change: You've got election, compressed shopping period, we're lapping 53rd week.

Speaker Change: Just wondering if you guys have a different strategy this year with that backdrop.

Speaker Change: And then for Adrian, with the back half comp acceleration from the front half trend, I'm looking at that compared to a back half comp that's getting harder.

Speaker Change: So I'm just trying to understand how things get better or what exactly you're assuming there that results in that outcome.

Speaker Change: Thanks a lot guys.

Speaker Change: Thanks, Alex.

Speaker Change: Good to talk to you.

Speaker Change: Let me start with Holiday, and Adrian will cover the comp progression.

Speaker Change: I just actually did the Holiday style-out with the team about a month ago, and I feel really good about our assortments at both Macy's Bloomingdale's and Blue Mercury.

Speaker Change: We have more newness than we had a year ago.

Speaker Change: We have some exclusive partnerships at both Macy's and Bloomingdale's that I'll wait until the next call to share in more detail.

Speaker Change: But I will tell you, the teams are really leaning into, we don't want to have last year's assortment.

Speaker Change: We don't want to have the same old things that we've had in our mix of holiday gifting.

Speaker Change: We're being highly sensitive to the change in weather trends, so we have a broader range of product ideas than just cold weather categories.

Speaker Change: We're obviously leaning into the strength that we have at fragrances across the three brands.

Speaker Change: So, yes, we got five less shopping days between Thanksgiving and Christmas.

Speaker Change: We certainly have an election in there.

Speaker Change: But I think, remember, retail and our three brands provide a form of escapism and entertainment, and our job is to make sure that we're capitalizing on an opportunity to have a larger share of wallet in the fourth quarter because of the range of prices and brands and categories that we sell.

Speaker Change: Adrian?

Speaker Change: Good morning, Alex.

Eric: The only other thing I would add, Eric, is when you think about some of the things that's driving the business that's Tony described, we just have more number of customers actually coming into these stores relative to what we saw in prior years, and when you think about the experience that we've been investing in just to bring a little bit of color that Tony spoke about in previous calls, we're making additional staffing investments in handbags and shoes and ready to wear and home also in the fitting room which gives us the best opportunity to convert that customer and check out to make sure that we don't have long lines. We're activating the store through better visual presentation, sharper looks, greater value.

Speaker Change: Look, you know, the punchline is we're not standing still. You know, we're two quarters into a bold new chapter strategy, and there's not only changes that we've implemented that we're tracking and iterating and deploying where we have energy and confidence, but there are also more changes underway.

Speaker Change: You know, we're continuing to make changes in stores, as we both, Tony and I spoke about earlier.

Speaker Change: We're making changes in digital that's coming online as we speak.

Eric: We have events to get people reasons to come back to the store and spend time with us. We have digital messaging going out to customers in that locale that we know to get them excited about what's being offered in their local store and we have local marketing to keep Macy's top of mind for those customers. So, you know, those are the kinds of things that we're seeing gaining traction into Tony's point.

Speaker Change: We're making adjustments with our media mix and marketing spend mix that seems to be giving us some good results. We're very encouraged with what we're seeing there.

Speaker Change: We're flowing goods better. We have better end stocks this year than we did last year.

Speaker Change: We have faster digital deliveries for our digital orders than we did last year.

Speaker Change: So there are a number of things across the business that's just getting better.

Speaker Change: We're more disciplined, better execution, and that gives us confidence that these building blocks are going to build into sequential improvement and top line as we get into the back half of the year.

Speaker Change: Thanks a lot.

Speaker Change: Good luck.

Speaker Change: Thank you, Alex.

Speaker Change: Thank you.

Speaker Change: The next question is coming from Oliver Chen of TD Cowen.

Speaker Change: Please go ahead.

Speaker Change: Hi, good morning.

Speaker Change: This is Neil Goh on for Oliver this morning.

Speaker Change: I just want to touch more on the promotional cadence as it pertains to the 2024 guidance.

Speaker Change: How much of the heightened promotional environment that you expect in the back half is driven from the competitive landscape, both from, you know, legacy players and new digital concepts, versus, you know, what's more reflective of Macy's current inventory position?

Speaker Change: And then just more broadly, just any key puts and takes that you're watching as it pertains to the health of consumer that you see currently.

Speaker Change: Thanks.

Speaker Change: Thanks, Neil.

Speaker Change: Let me take the first part, and Adrian can add his commentary.

Speaker Change: Yeah, I think we're looking at all the indicators that each of you are looking at.

Speaker Change: We're looking at inflation coming down.

Speaker Change: We're excited about potential rate cuts.

Speaker Change: We're looking at jobless claims.

Speaker Change: We're looking at the discretionary spending, consumer optimism.

Speaker Change: But I'm also focused predominantly on the health of our inventory levels, the compelling nature of our marketing campaigns. I think that we look well-positioned from an inventory composition level, from an age of inventory level, from a percent of newness.

Speaker Change: And I would add in where we haven't always got it right, the balance of transitional product, the balance of clearance, the balance of newness.

Speaker Change: And I think that's why the trends that we saw in the second quarter after we started to take some action are continuing into the third quarter.

Speaker Change: So this is always a game of making sure that you have the right balance of going after the consumer and where he or she is shopping, and at the same time that you are protecting the bottom line.

Speaker Change: I think the team is doing a really good job of that, and we're obviously not sitting on where we are today. We're aggressively pursuing opportunities to enhance and improve the business going forward.

Speaker Change: Neal, Tony summed it up quite well.

Speaker Change: The only thing I would add is that we're controlling what we can control.

Speaker Change: We have a lot of opportunities that we see ahead within the business to provide a better experience.

Speaker Change: We see the green shoots on growth.

Speaker Change: And so we're just being very thoughtful as we enter the biggest time of year for us, which is the holiday season.

Speaker Change: Great, thank you both.

Speaker Change: Thank you, Neil.

Speaker Change: Thank you.

Speaker Change: The next question is coming from Michael Binetti of Evercore ISI.

Speaker Change: Please go ahead.

Speaker Change: Hey, guys.

Speaker Change: Thanks for taking our questions here.

Speaker Change: I guess, Adrian, maybe just any thought on your assumption for the second half same-store sales guidance you just gave us between the go-forward stores and the non-go-forward stores, or any thought on how to think about maybe the spread between the two, any way to help triangulate our model.

Speaker Change: And then I know you don't usually guide on forward quarter comps on a quarterly basis, but we usually model it off of the spread of comps to total sales.

Speaker Change: Is there any reason that spread changes in 3Q relative to 2Q, just to be aware of?

Speaker Change: I know the calendar adds some noise.

Speaker Change: Maybe just remind us how that impacted 2Q and 3Q, if there's a difference.

Speaker Change: Absolutely.

Speaker Change: So I'll comment, if you have anything to add, please do, Tony.

Speaker Change: So one of the things we expected on the non-go-forward stores is that they would actually perform worse than, effectively perform better than what we'd actually planned.

Speaker Change: So customers are still shopping those stores, so when we think about the year-over-year performance, they're slightly better, so we've made some of that adjustment overall in our outlook and guidance for the back half of the year.

Speaker Change: As we think about comps, it's really getting the fundamentals better and better every day, every week, every month.

Speaker Change: And as we think about the trajectory for the back half of the year, third quarter, and fourth quarter, it's a lot of the adjustments that Tony and I have been speaking about on this call. And so as we think about those investments, we actually believe that it's going to improve the business sequentially as we get into the back half of the year. As we think about the performance of, for example, the Macy's First 50, other go-forward stores within the fleet and the non-go-forward, we continue to see, for example, with our First 50 stores, the sequential trends continuing to improve relative to the balance.

Speaker Change: So it just gives us confidence that as we introduce changes into these stores, whether it's visual changes, whether it's some of the staffing changes, and the 100 additional stores in handbag and shoes, that we'll be able to actually put in more of those building blocks to really get the relative comp sales growth year-over-year to improve.

Speaker Change: Okay, and then if I could sneak one more in.

Speaker Change: Can you just talk to us about how you're thinking about inventory investments specifically in the go-forward stores?

Speaker Change: We're kind of watching how the inventory is pacing a little bit ahead of sales now, thinking about how you've made some changes to your buying operations a couple years ago.

Speaker Change: Are those, maybe any thoughts on the investments you're making on the inventory in the, just specifically in the go-forward stores relative to the sales plan for the second half?

Speaker Change: Yeah, Mike, let me just add a couple things on inventory, because I think it's important.

Speaker Change: We obviously don't have a great, clear compare in terms of year over year because of the conversion, but I would say that inventory levels remain down double digits to a few years ago, and we are intent on being in stock for the customer.

Speaker Change: I think that one of the things that we have, you know, worked on very carefully, as I said, is getting transitional inventory, the level of clearance and value, and the amount of newness flowing properly.

Speaker Change: Neither Adrian or I are worried about the risk associated with our inventory kind of going into the fall season.

Speaker Change: We look at it on an age basis.

Speaker Change: We look at it on a markdown inventory basis, and I think it's being in stock on replenishment, flowing fashion and newness into those go-forward stores.

Speaker Change: I think we're so much better positioned than we were a year ago going into the third quarter.

Speaker Change: The only thing I'd add there is, you know, we do acknowledge to your point, Mike, that inventories at the end of the second quarter were slightly higher than our expectation. But the good news is that in the second quarter, we already started to take action to adjust the appropriate quantity and composition of inventory for the fall season, Q3 and Q4, as Tony mentioned.

Speaker Change: With regards to the type of inventory or the amount of inventory by store, we're looking at, you know, sell-through trends, weeks of supply trends at a very specific location by location, by category, so really being much more diligent with some of the disciplines that we've added in over the course of the last year to really manage the allocation of inventory in places where we can sell more at full price or first mark than what we would have seen in the past, because as you know, our margin expansion over the last several years has been around reducing the amount of clearance to the appropriate level as we transition from season to season.

Speaker Change: Okay, thanks a lot.

Speaker Change: Makes a lot of sense.

Speaker Change: Appreciate it.

Speaker Change: Thanks, Mike.

Eric: We're seeing it in terms of traffic and relative conversions. We're seeing it in a number of customers. The categories that are touched have a sequential improvement in sales performance. So, a lot of what we talk about is what's the appropriate pace, although a healthy pace, but they're appropriate pace, as Tony said, without tripping over ourselves. Thank you.

Speaker Change: Thank you.

Speaker Change: The next question is coming from Chuck Grom of Gordon-Haskett.

Jay Sole: The next question is coming from Jay Soul of UBS, please.

Speaker Change: Please go ahead.

Speaker Change: Hi, this is Erica.

Speaker Change: I just want to ask about the first 50.., positive comms, are you seeing the growth from existing...

Speaker Change: Are we spending more or is this new or left?

Speaker Change: Thank you all for joining us today.

Speaker Change: Thank you.

Speaker Change: Eric, thanks for the question.

Speaker Change: I think we are, again, excited about the continued progress that we're seeing in the first 50. It's two consecutive quarters of comp store growth. It's 460 basis points of improvement versus the other Macy's locations or business.

Speaker Change: I think that the growth that we are seeing across all families of business, the fact that we have increased traffic and increased conversion versus other Macy's stores shows us that the work that we're doing is resonating with the consumer.

Speaker Change: It is a combination of existing customers and some new customers, and our new head of marketing is working closely with our stores team in geotargeting, communication, via email, and, you know, we're working with, Search, as well as SMS messages to make sure that the eventing and the activations and new product message is getting out to customers.

Speaker Change: So the good news is we're seeing it resonate.

Speaker Change: Customers' awareness is growing.

Speaker Change: We're only two quarters in to a three-year plan and a change plan. And obviously, we want to have the right level of patience and determination.

Speaker Change: The only other thing I would add, Eric, is when you think about some of the things that's driving the business, as Tony described, we just have more number of customers actually coming into these stores relative to what we saw in prior years.

Speaker Change: And when you think about the experience that we've been investing in, just to bring a little bit of color that Tony spoke about in previous calls, we're making additional staffing investments in handbags, in shoes, in ready-to-wear, in home, also in the fitting room, which gives us the best opportunity to convert that customer and check out to make sure that we don't have long lines.

Speaker Change: We're activating the store through better visual presentation, sharper looks, greater value.

Speaker Change: We have events to give people reasons to come back to the store and spend time with us. We have digital messaging going out to customers in that locale that we know to get them excited about what's being offered in their local store.

Speaker Change: And we have local marketing to keep Macy's top of mind for those customers.

Speaker Change: So, you know, those are the kinds of things that we're seeing gaining traction.

Speaker Change: And to Tony's point, we're seeing it in terms of traffic and relative conversions, we're seeing it in the number of customers, the categories that are touched have a sequential improvement in sales performance.

Speaker Change: So a lot of what we talk about is what's the appropriate pace, although a healthy pace, but the appropriate pace, as Tony said, without tripping over ourselves.

Speaker Change: Thank you.

Speaker Change: The next question is coming from Jay Sole of UBS.

Speaker Change: Great.

Speaker Change: Hopefully you can hear me.

Speaker Change: My question is about asset sale gains and monetization proceeds.

Speaker Change: It looks like the guidance for this year went to the high end of the range compared to where it was last quarter.

Speaker Change: Maybe Adrian could just elaborate a little bit on what assets were sold and what's driving the raised guidance, and that would be helpful.

Speaker Change: Thank you.

Speaker Change: Great to be with you, Jay.

Jay Sole: Great. Hopefully you can hear me. My question is about asset sales gains and monetization proceeds. It looks like the guidance for this year went to the high end of the range because compared to where it was last quarter. Maybe Adrian can just elaborate a little bit on what assets were so great. And you know, what's driving the raised guidance and that would be helpful.

Speaker Change: The punchline here is we're very pleased with the traction and progress. We're getting very healthy responses from landlords and developers.

Speaker Change: Capital spend of about 875 to $890 million slightly higher than our prior outlook as we pursue additional growth investments.

Speaker Change: The deal pipeline is healthy even in this environment.

Speaker Change: So to your point, coming into the quarter, we had a range of $90 million to $115 million in asset sale gains. Now we're seeing approximately $115 million.

Speaker Change: We were pleased with $36 million of gains in Q2.

Speaker Change: For the third quarter, net sales are expected to be $4.7 to $4.82 billion. Other revenues are projected to be roughly $152 million including credit card revenues of approximately $110 million. Gross margin rate to be approximately 40.3% to 40.5% and end of quarter inventories versus last year up mid-single digits on a reported basis.

Speaker Change: We're forecasting in our guidance $30 million in Q3, which leaves a balance of $67 million in Q4.

Speaker Change: But overall, what I will tell you is trending quite well, lots of good traction.

Speaker Change: The implication of that is that we're going to be closing approximately 55 stores relative to our prior outlook of 50 stores.

Speaker Change: So this is just all further evidence of the traction that we're having, and we're also very pleased with the value we're able to unlock in those deals and those transactions.

Speaker Change: Got it, okay.

Speaker Change: Adrian, thank you.

Speaker Change: Thank you, Jack.

Speaker Change: Thank you.

Speaker Change: The next question is coming from Janet Joseph-Kwappenberg of JJK Research.

Speaker Change: Please go ahead.

Speaker Change: Good morning, everyone.

Speaker Change: I had a couple of questions.

Speaker Change: First, on merchandise margin or product margin, whichever way you look at it, Tony, for the second quarter, how was that versus your expectations?

Speaker Change: I mean, peeling away the favorable transportation and the cost accounting benefits, how was it?

Speaker Change: And what's the thought process on that merchandise margin level in the second half of the year?

Adrian Mitchell: Thank you. Great to be with you Jay. The punchline here is we're very pleased with attraction and progress. We're getting very healthy responses from landlords and developers. The deal pipeline is healthy even in this environment. So, to your point coming into the quarter, we had a range of 90 million to our 115 million in asset sales gains. Now we're saying it approximately 115 million. We were pleased with 36 million of gains in Q2.

Speaker Change: And I also wanted to ask if, The enhanced results you're seeing in handbags and men's in the 50 stores, is that primarily from service and environment, or is there a different brand matrix that you'll start to put in to the existing Macy's stores?

Speaker Change: And just lastly, if you could talk a little bit about the denim cycle, which we're seeing help a lot of companies this second quarter, going into third quarter, and how Macy's has acted upon that opportunity.

Speaker Change: Thank you.

Speaker Change: Thanks, Janet.

Speaker Change: Appreciate the questions.

Speaker Change: First, on merchandise margin, I think it's the collective work of the team that led to beating our margin guidance for the quarter and has led us to guide appropriately for the fall season.

Speaker Change: A part of our margin is always related to the quality of our inventory, so that's why Adrian and I both emphasize we feel good about the quality of our inventory.

Speaker Change: As it relates to the first 50 and the opportunity to expand to 100 other doors with handbags and shoe pilots, yes, it's a combination of the staffing and of the inventory, the quality inventory.

Speaker Change: So that's why it's good to hear brands like Lauren by Ralph Lauren and Karl Lagerfeld and Coach, which are available in all of these stores, doing well.

Speaker Change: In addition, we know that having a service model in an environment where you're buying a $300, $400 handbag, you need assistance.

Speaker Change: And so we've seen that impact in the first 50.

Speaker Change: Entering the third quarter, the quantity and composition of our inventory is well-positioned.

Speaker Change: We're excited to see that impact in both handbags and shoes in the 100 stores that we are expanding this fall.

Speaker Change: And finally, on your question on the denim cycle, Janet, we absolutely are in a new silhouette or shape in denim after so many years in skinny.

Speaker Change: We're now in a wide leg and a high rise, and so how we take advantage of that, we obviously have the great premium assortment at Bloomingdale's, and we have an assortment, a powerful assortment of Levi's, as well as brands like Seven and Silver at Macy's, and so expect a fine in men's and in women's and kids at both Macy's and Bloomingdale's, a great assortment of denim for the fall season.

Speaker Change: Lots of luck.

Speaker Change: Thanks so much.

Speaker Change: Thank you.

Speaker Change: At this time, I would like to turn the floor back over to Mr. Spring for closing comments.

Speaker Change: Age inventories are under control and we are pleased with the level of newness. We're also seeing healthy inventory flows and have ongoing mitigation strategies in place to offset elevated ocean transit times and constrained container capacity.

Speaker Change: Thank you all.

Speaker Change: Thanks, everyone, I should say.

Speaker Change: We expect to end the third quarter and ultimately the fall season without any meaningful inventory liabilities.

Speaker Change: We appreciate your time today.

Speaker Change: We hope you have a good rest of what is a few days, I guess, left of summer, and we certainly look forward to providing another update on the third quarter call.

Speaker Change: Have a good morning.

Speaker Change: Finally, we expect adjusted diluted EPS of the loss of 4 cents to earnings of 1 cent including a roughly $30 million asset sale gain assumption for the monetization of non-go-forward assets.

Adrian Mitchell: We're forecasting in our guidance, 30 million in Q3, which leads to the balance of 67 million in Q4. But overall, what I will tell you is trending quite well. Lots of good traction. The implication of that is that we're going to be closing approximately 55 stores relative to our prior outlook of 50 stores. So, this is just all further evidence of the traction that we're having. And we're also very pleased with the value we're able to unlock in those deals and those transactions. Got it. Okay. Adrian, thank you. Thank you, Jay. Thank you.

Speaker Change: In closing, we remain relentlessly focused on executing our boldly-chapter strategy and controlling what we can control. This includes cost savings initiatives, inventory discipline, cash management and strong operational execution.

Speaker Change: With that, I'll now pass it back to Tony.

Adrian Mitchell: Thank you, Adrian.

Speaker Change: I'm pleased with the progress we're making on our bold new chapter strategy. My team and I share a passion for finding new and innovative ways to serve and excite the customer and we have a unique advantage through our iconic events as well as our everyday interactions.

Speaker Change: We understand that being in the business of retail is being in the business of people.

Speaker Change: We're listening to our customers, finding that balance between art and science and are committed to delivering improved product and a better, more connected customer experience while returning the company to long-term profitable sales.

Speaker Change: Road.

Speaker Change: With that operator, we are ready for questions.

Speaker Change: Thank you.

Speaker Change: The floor is now open for questions.

Speaker Change: If you would like to ask a question, please press star one on your telephone keypad at this time.

Janet Kloppenberg: The next question is coming from Janet Joseph Kloppenberg of JKK Research.

Speaker Change: A confirmation tone will indicate your line is in the question queue.

Janet Kloppenberg: Please go ahead.

Speaker Change: If you may press star two, if you would like to remove your question from the queue for participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Tony Spring: Good morning, everyone. I had a couple of questions. First, on merchandise margin or product margin, whichever way you look at it, tell me for those second quarter, how was that versus your expectations? I mean, peeling away the favorable transportation and the cost-accounting benefits. How was it? And what's the thought process on that merchandise margin level in the second half of the year? And I also wanted to ask you the enhanced results you're seeing in handbags and men's in the 50 stores.

Speaker Change: We do ask that you please limit yourself to one question and one follow up.

Speaker Change: Again, that's star one to register a question at this time.

Speaker Change: Today's first question is coming from Matthew Boss of JP Morgan.

Speaker Change: Please go ahead.

Speaker Change: Great.

Speaker Change: Thanks.

Tony Spring: Is that primarily from service and environment or is there a different brand matrix that you'll start to put in to the existing Macy stores? And just lastly, if you could talk a little bit about the denim cycle, which we're seeing help a lot of companies, this second quarter going into third quarter, and how Macy has acted upon that opportunity.

Speaker Change: So Tony, could you speak to the cadence of comps as the second quarter progressed, elaborate on changes that you cited in the consumer backdrop and just what you've seen with early back to school or August trends, maybe relative to the second quarter comp performance.

Tony Spring: Thank you. Thanks Janet, appreciate the questions. First on merchandise margin, I think it's the collective work of the team that led to beating our margin guidance for the quarter and has led us to guide appropriately for the fall season. It's making sure that we're providing compelling value, but we're obviously learning from all the pricing science and the opportunities to negotiate in the market and give value to the consumer without giving away margin as a brand and a company.

Speaker Change: And then Adrian, if you could just walk through drivers of back half gross margin expansion, despite embedding the heightened promotional backdrop, I think that would be great.

Matt: Thanks, Matt.

Speaker Change: Good to talk to you.

Tony Spring: Part of our margin is always related to the quality of our inventory, so that's why Adrian and I both emphasize we feel good about the quality of our inventories. As it relates to the first 50 and the opportunity to expand to 100 other doors with handbag and chew pilots, yes, it's a combination of the staffing and of the inventory, the quality of the inventory. So that's why it's good to hear brands like Lauren by Ralph Lauren and Carl Lagerfeld and Coach, which are available in all of the these stores doing well.

Speaker Change: The quarter played out obviously softer than we expected.

Speaker Change: It started to get softer in the middle of the quarter. And the team immediately took action, strengthening marketing, improving the quality of the products we're focused on, making sure that we were cutting back on receipts that were no longer necessary and flowing back into things that we're working.

Tony Spring: In addition, we know that having a service model in an environment where you're buying a three four hundred dollar handbag, you need assistance. And so we've seen that impact in the first 50. We're excited to see that impact in both handbags and shoes in the hundred stores that we are expanding this fall. And finally, on your question on the on the denim cycle Janet, we absolutely are in a new silhouette or shape in denim after so many years in skinny, where we're now in a wide leg and you know a high rise and so how we take advantage of that.

Speaker Change: We saw an immediate impact.

Speaker Change: And while I'm not going to comment on third quarter sales, I will say that the changes we made in the second quarter are showing in the third quarter as well.

Speaker Change: And our guidance, I think, gives us that conservative outlook for the remainder of the year that is both prudent and appropriate, allowing us to reaffirm our EPS guidance for the year and at the same time acknowledge the fact that the consumer is more discriminating.

Speaker Change: I do think that the changes that we're making in the first 50 serve is a great parameter and opportunity for us to continue to learn and apply to more stores going forward.

Tony Spring: We obviously have the great premium assortment at Bloomingdale's and we have a assortment powerful assortment of Levi's as well as in a brand like seven and silver at Macy's. And so expect to find and men's and and women's in kids at both Macy's and Bloomingdale's a great assortment of denim for the fall season.

Speaker Change: We did announce a hundred stores that were adding staffing tests to in both handbags and shoes.

Operator: Lots of luck. Thanks so much. Thank you.

Speaker Change: The fact that in the first 50, all categories outperformed the rest of the name plate, the fact that we're seeing it on the top line, we're seeing it on the customer service scores, we're seeing it in better traffic and conversion.

Tony Spring: At this time, I would like to turn the floor back over to Mr. Spring for closing comments. Thank you all. Thanks everyone, I should say we appreciate your time today. We hope you have a good rest of what is a few days, I guess, left of summer. And we certainly look forward to providing another update on the third quarter call. Have a good morning.

Speaker Change: So we think we have a model that we just need a little longer to learn from, but we're prepared to use that as the go forward strategy for the Macy's brand.

Speaker Change: Adrian?

Matt: Good morning, Matt.

Speaker Change: Let me speak a little bit to Gross Margin.

Speaker Change: So as you know that we're quite pleased with our Q2 Gross Margin results.

Speaker Change: And we're certainly confident in our outlook for the years we spoke about a few moments ago. The range that we have for the year of 39% to 39.2%, we believe just gives us sufficient flexibility to respond to the uncertainty that may be on the horizon.

Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lunch or log off the webcast at this time and enjoy the rest of your day.

Speaker Change: Now as we plan, as we think about our Gross Margin outlook for the balance of the year in the fall season, there are really three things that we're focused on. The first is around inventories. And we feel at this point that we do have inventories on the control.

Operator: Thank you very much.

Speaker Change: We took some actions coming out of the second quarter given we had softer sales on the quarter. And we've already made the appropriate adjustments for Q3 and Q4.

Speaker Change: And the kinds of things that we're leaning into are the things that you're familiar with.

Speaker Change: We have good disciplines and good controls already in place.

Speaker Change: At this moment in time, our age inventories are well on the control.

Speaker Change: We're pleased with the level of units because we're now approaching the holiday season. And we have a healthy flow given some of the constraints I mentioned a bit earlier around container availability and supply chain delays.

Speaker Change: But there are a couple of other things that are important for us as well.

Speaker Change: The second one being shortage trends.

Speaker Change: We've benefited in the second quarter from lower shortage than we expected.

Speaker Change: As we've made investments that the end of last year into the beginning of this year with our asset protection team. And the initiatives that they're pursuing seem to be working. So we're very pleased with that.

Speaker Change: The last piece is lower delivery costs.

Speaker Change: You know, we continue to diversify our carriers who have lower rates without actually compromising service levels.

Speaker Change: We also recognize that it's important to have the right balance of upstream versus downstream fulfillment, which is enabled us to minimize split shipments, which can be quite costly for us.

Speaker Change: So as we think about inventory discipline, shortage trends and lower delivery costs.

Speaker Change: We're encouraged by our outlook for the balance of the year and also encouraged by what we expect to deliver in the third quarter.

Speaker Change: Thanks, Matt.

Speaker Change: Thank you.

Speaker Change: The next question is coming from Brooke Roach of Goldman Sachs.

Speaker Change: Please go ahead.

Speaker Change #100: Good morning and thank you for taking our question.

Speaker Change #101: Tony, I was hoping you could help frame the magnitude of the potential tailwinds you see from the rollout of these select first 50 staffing tests to locations this fall.

Tony Spring: And then broader, bigger picture, the key factor that you're looking for that will allow you to more aggressively expand these first 50 initiatives to the rest of the fleet.

Speaker Change #102: And then perhaps for Adrian, can you elaborate on the adjustments that Macy's is making to its promotion and marketing calendar for the balance of the year?

Speaker Change #102: Thank you.

Speaker Change #103: Thanks, Brooke.

Speaker Change #104: Good to talk to you.

Speaker Change #105: We are excited about the first 50.

Speaker Change #106: You know, if we haven't made that clear enough, it's two consecutive quarters of Com Store growth. It's 600 basis points of improvement in NPS, 460 basis points of improvement versus the rest of Macy's.

Speaker Change #107: And I want to make clearly we will expand F 50 or first 50.

Speaker Change #107: It's a question of when not if.

Speaker Change #108: And I think we said before on the fourth quarter call, we will elaborate further on how many stores next year. But I think you can view it as a positive sign that we went ahead and did the hundred store tests on handbags and shoes as the confidence that we have on those particular families of business on what it can mean to provide the ample level of staffing in a service oriented business.

Speaker Change #109: In terms of the magnitude, it's incorporated into our guidance.

Speaker Change #109: I think our guidance gives us the range to be able to use those levers to improve our performance.

Speaker Change #110: But I look at the first 50 as continuing to be the best example of what Macy's can be in the future.

Speaker Change #110: And please know we are going to move as fast as we possibly can without tripping on our way to success.

Speaker Change #110: So I'm just careful about making sure that there are not false positives.

Speaker Change #110: We got a lot of noise in the public environment right now.

Speaker Change #111: Let's make sure we understand what's causation versus correlation.

Speaker Change #111: Adrian.

Speaker Change #112: Good morning, Brooke.

Speaker Change #113: You know, to your question about the adjustments on promotions and marketing into the context that we are operating under as a consumer that's really oriented on value.

Speaker Change #114: And so some of the things that we've been doing is experimenting with our media marketing mix, which were very encouraged by the experiments that we're seeing on the business as Tony referenced since we've made those changes from Q2.

Speaker Change #115: We're being very clear on value in our promotional calendar and our communicated messages, but we also recognize that there are other dimensions when the customer shows up on our website or in our stores that matter around value as well.

Speaker Change #116: And that's having colleagues available, having a good experience within our stores, making sure that we have strong visual presentation that we amplifying the value that's available to the customer when they visit us.

Speaker Change #116: So those are the kinds of adjustments that we're making, but really all centered around sharper on the value messaging to the consumer every day that they're actually visiting with us.

Speaker Change #116: Great.

Speaker Change #116: Thanks so much.

Speaker Change #116: I'll pass it on.

Speaker Change #117: Thanks, Brooke.

Speaker Change #118: Thank you.

Speaker Change #119: The next question is coming from Ashley Hulgens of Jeffries.

Speaker Change #120: Please go ahead.

Speaker Change #121: Ashley, you may be on mute.

Speaker Change #122: Would you like me to move on to the next question?

Speaker Change #122: Yes.

Speaker Change #123: Thank you.

Speaker Change #124: The next question is coming from Bob Durable of Fuggenheim.

Speaker Change #125: Please go ahead.

Speaker Change #126: Hi, good morning.

Speaker Change #127: Just a couple of questions for me.

Speaker Change #128: On the merchandising side, just what you're saying.

Speaker Change #129: Seeing in handbags and shoes, you know, to really lead that acceleration, just wondering if you could comment.

Speaker Change #129: I think that's been a tougher category.

Speaker Change #129: So, you know, some of the changes that you're saying would be helpful.

Speaker Change #129: And a similar question, just on women's, you know, when, when you look at what's happening in women's and some of the brands that you caught up, any of the trends, you know, that you see in sort of the legs to those trends in the back half of the year?

Speaker Change #129: Sure.

Speaker Change #129: Thanks, Bob, for the question.

Speaker Change #129: We are seeing green shoots in the redded wear.

Speaker Change #130: So that's why we're you know, citing those examples in terms of Donna Karen or a veck Lafay or Carl Lagerfeld or Bloomingdale's in Lijance or in Ellison, Olivia or Veronica Beard.

Speaker Change #131: We are taking advantage of the fact that we are in an apparel cycle.

Speaker Change #132: And whether that's wide bottom, denim or change in silhouette or improve fabrications, we want to go after the business at both brands.

Speaker Change #133: In terms of handbags and shoes, we were pleased to see the disparate or the magnitude of the difference in our F50 stores in those two categories, which have been tougher for us.

Speaker Change #133: And I would say we know staffing is an ingredient, we know merchandises an ingredient.

Speaker Change #134: So we're pleased to go after a hundred more stores in those two categories.

Speaker Change #135: And we think that the assortment in shoes is very conducive to a department store environment, where a customer wants selection and variety of price points and brands doesn't always know their size by brand.

Speaker Change #136: And it's a chance for us to lean into something that we're particularly good at. In the case of handbags, I think we cited the fact that we're starting to see some light at the end of the tunnel on brands like Lauren by Ralph Lauren and Carl Lagerfeld.

Speaker Change #137: And the coach business has been particularly good lately.

Speaker Change #137: So cautiously optimistic that those tests are going to help improve the quality of our business in the fall.

Speaker Change #138: And if I could just ask a follow-up, Adrian, on the credit card business, you expand a bit more sort of, you know, in some of the trends that you're seeing within, you know, the card holders and delinquencies.

Speaker Change #139: You know, I think you said as expected, but can you put a little more color on that for us?

Speaker Change #139: Absolutely, Bob, and good morning.

Adrian Mitchell: So our net credit losses and delinquencies, as I mentioned earlier, were very much in line with our expectations.

Speaker Change #140: What we are seeing is that there are slightly lower payment rates, which is not necessary and is not necessarily translating into bad debt.

Speaker Change #141: So what's been happening is that we're seeing the customer sit on revolving balances a little bit longer, but certainly paying off their paying their bills in a cycle that effectively has allowed us to have revenue a little bit better than our expectations.

Speaker Change #142: And that revenue is really driven by higher balances with, you know, delinquencies and that credit losses in line with what we expected in our fort.

Speaker Change #142: Gast.

Speaker Change #142: Thank you very much.

Speaker Change #143: No problem Bob.

Speaker Change #143: Thank you.

Speaker Change #144: The next question is coming from Dana Telsey, of Telsey Advisory Group.

Speaker Change #145: Please go ahead.

Speaker Change #146: Hi, good morning everyone.

Dana Telsey: If you think about some of your other formats, whether it's the smaller format, Macy's backstage, outlets and digital, how did they perform relative to the core and how you're thinking about them for the back half, and then just following up on AUR, which I think was up 4% in the first quarter of 3.6% in a second, drivers of AUR gains and how you're thinking about it going forward.

Dana Telsey: And just lastly, you tweaked up the investment in CAP-X.

Speaker Change #148: What are those growth initiatives, is some of it by Italy for balloon sales that's coming up, or how you're thinking about it.

Speaker Change #148: Thank you.

Speaker Change #149: Thanks, Dana.

Speaker Change #150: Good to talk to you.

Speaker Change #150: Let's first talk about Portfolios because I think it's a big part of what we're trying to accomplish with opening Macy's small format.

Speaker Change #151: We open six in the spring. We have six more that we're opening in the fall, which brings us to 24 stores.

Speaker Change #151: We obviously have the first 50 initiative, and we have our digital business.

Speaker Change #151: And what we have focused on is trying to win by market.

Speaker Change #152: And what you'll see us talking more about is what is the right complement of small format stores, great on mall stores, and the digital business by geography to be able to win the customer and succeed market by market.

Speaker Change #152: So it's not like choosing your favorite child.

Speaker Change #152: These all fit into our ecosystem.

Speaker Change #152: We have to have the best off mall stores and best on mall stores and a healthy digital business.

Speaker Change #152: The AUR increase is consistent with what we've seen by improving the quality of our product, not charging more, not pulling back from promotion.

Speaker Change #153: So I would continue to expect to see low single digit AUR growth as we continue to try to improve the traffic and conversion in our stores and on our site. The single biggest area that we have been challenged with is on conversion. And we're doing everything we can on both the site and the presentation in our stores to improve the quality conversion.

Speaker Change #154: I think Adrian mentioned on the call, both traffic and conversion were stronger in our first 50.

Speaker Change #155: So I think we know what we have to do.

Speaker Change #155: We just need to react appropriately and make sure that we're managing both the top line and the bottom line.

Speaker Change #156: Adrian, anything you've had?

Dana Telsey: Yes, good morning, Dana.

Speaker Change #157: To your question on capital investment, you know that we're very disciplined on capital allocation.

Speaker Change #158: We're very focused on maintaining a healthy balance sheet, returning excess cash value to our investors.

Speaker Change #159: But the second dimension of our capital allocation is really what you're experiencing with a slight increase in capital spend for this year.

Speaker Change #159: We're going to be investing in high return investments in the business.

Speaker Change #159: For example, what we're seeing in our 50 stores is that some of the visual enhancements in areas like our private brands seem to be working. So we want to lean into that.

Speaker Change #160: Some of the biggest improvement in our stores around 50 stores as well as a broader network is around need and clean.

Speaker Change #160: But we want to make sure that in these stores, we're making the changes that the general upkeep of the store and the maintenance of the store is actually appropriately invested in so that there's a good experience for the customer.

Speaker Change #160: We see some opportunities around digital.

Speaker Change #160: And so we've been leaning into that into that piece as well.

Speaker Change #160: So really being very thoughtful and surgical about those investments that will help us deliver a better experience and also deliver growth.

Speaker Change #160: And so we're really, you know, taking the opportunity to lean into some of those investments, this year.

Speaker Change #160: Thank you.

Speaker Change #161: Thank you, Dana.

Speaker Change #161: Thank you.

Speaker Change #161: The next question is coming from Ashley Helgans of Jeffries.

Speaker Change #162: Please go ahead.

Speaker Change #163: Hey guys, apologies about earlier.

Speaker Change #163: This is Blake on for Ashley.

Speaker Change #164: Wanted to ask on the applied sales guide for the second half in terms of kind of your consumer assumptions are used to mean the consumer is more stable or becomes increasingly challenged.

Speaker Change #165: How is that reflected in the guide and also on the on the color and Q3 sales.

Speaker Change #165: Adrian, did you provide a comp at all for that?

Speaker Change #165: And then last one for us was also for Adrian on cost accounting.

Speaker Change #166: How much is embedded in that for the full year gross margin?

Speaker Change #167: Thanks so much.

Speaker Change #167: Absolutely.

Speaker Change #167: So Blake, great to be with you.

Speaker Change #168: Let me talk a little bit about sales to get started.

Speaker Change #169: You know, when you think about our sales range for both Q3 and for the year, it just gives us an opportunity to address the uncertainty in the discretionary spending categories that we operate in.

Speaker Change #170: And so as Tony mentioned a bit earlier, we've been very thoughtful and cautious about what we're seeing in the back half.

Speaker Change #171: At the same time, we expect our S50 Macy's locations to outperform the broader fleet. We're encouraged enough in terms of the performance that Tony just spoke to to expand a couple of changes around handbags and shoes that we're seeing real gains in the first 50 locations to an additional 100 locations this fall.

Speaker Change #172: We're continuing to make investments in our digital business around site enhancements, search engine optimization, a better mobile mix.

Speaker Change #173: So again, we have a number of things that we see green shoes that we're leaning into, but we also recognize that we're in a context of uncertainty with regards to discretionary spend.

Speaker Change #173: As we think about cost accounting, you know, the way I would think about it is that the best way to track our performance this year is to look at our outlook for the year.

Speaker Change #173: That's really going to be the best way.

Speaker Change #173: On an annual basis, some of the adjustments that you would expect from the transition from retail accounting to cost accounting are not material for the year. We provided a little bit more detail in Q2, but it's a bit chunky as you go throughout the year, but again, not material for the overall year.

Speaker Change #174: And with regards to how we're thinking about gross margin in the third quarter, you know, we're looking at about 40.3 to 40.5%. And we feel that given the ranges on top line on gross margin on the bottom line, we should be able to navigate to those outcomes.

Speaker Change #174: Great.

Speaker Change #174: Thank you.

Speaker Change #174: Best of luck.

Speaker Change #175: Thank you, Blake.

Speaker Change #175: Thank you.

Speaker Change #176: The next question is coming from Polish way of city.

Speaker Change #177: Please go ahead.

Speaker Change #177: Thanks.

Speaker Change #177: It's Tracy Cogan filling in for Paul.

Speaker Change #178: I was wondering if you could talk about performance by income demographic, particularly as the quarter played out and we saw that weakness overall was wondering if you saw any differences by the different income cohorts.

Speaker Change #178: Thanks.

Speaker Change #179: Thanks for the question, Tracy.

Speaker Change #180: Yeah, I think that there was a pretty consistent reaction across all of our name plates in terms of the second quarter being softer than the first quarter. So yeah, you have to believe that everybody is being a little more cautious as they kind of watch what's going on in the macro environment and are just being more judicious in the purchases they make.

Speaker Change #181: I am really pleased with, you know, if I look at the first 50 or I look at Bloomingdale's performance or I look at Blue Mercury, those were all essentially in the flat to positive range.

Speaker Change #182: I didn't get an environment where the customer is looking for why should I buy.

Speaker Change #182: And I've said to our team, our challenge is not just to have the lowest price.

Speaker Change #183: Our challenge is to create a compelling reason for the customer to buy at Macy's Bloomingdale's Blue Mercury.

Speaker Change #183: And we have that in our inventory composition.

Speaker Change #183: We have that in the amount of newness that we flow to our stores and to our site.

Speaker Change #183: We have that in the exclusivity that we offer with private brands.

Speaker Change #183: And I think as we mentioned, we have the celebration of Italy at Bloomingdale's which begins in September and the 25th anniversary campaign from Blue Mercury which begins in September.

Speaker Change #183: So those are all other ways that we get all economic income levels of consumers to shop and buy at our three name plates.

Speaker Change #183: Page.

Speaker Change #183: Thank you.

Speaker Change #183: The next question is coming from Alex Straton.

Speaker Change #184: If more can Stanley, please go ahead.

Speaker Change #184: Perfect.

Speaker Change #185: Thanks for taking the question.

Speaker Change #186: First and maybe for Tony, is just on your holiday fourth quarter approach.

Speaker Change #187: You've got election, compressed shopping period.

Speaker Change #188: We're lapping 53rd week.

Speaker Change #189: Just wondering if you guys have, you know, a different strategy this year with that backdrop.

Speaker Change #190: And then for Adrian, with the back half comp acceleration from the front half trend, I'm looking at that compared to a back half comp that's getting harder.

Speaker Change #191: So I'm just trying to understand how things get better or what exactly you're assuming there that that results in that outcome.

Speaker Change #191: Thanks a lot, guys.

Speaker Change #192: Thanks, Alex, good to talk to you.

Speaker Change #193: Let me start with holiday and Adrian, I'll cover the comp progression.

Speaker Change #194: I just actually did the holiday style out with the team about a month ago.

Speaker Change #195: And I feel really good about our assortment that both Macy's Bloomingdale's and Blue Mercury.

Speaker Change #196: We have more newness than we had a year ago.

Speaker Change #196: We have some exclusive partnerships at both Macy's and Bloomingdale's that I'll wait till the next call to share in more detail.

Speaker Change #196: But I would tell you, the teams are really leaning into.

Speaker Change #197: We don't want to have last year's assortment.

Speaker Change #197: We don't want to have the same old things that we've had in our mix of holiday gifting.

Speaker Change #197: We're being highly sensitive to the change in weather trends.

Speaker Change #197: So we have a broader range of product ideas than just cold weather categories.

Speaker Change #197: We're obviously leaning into the strength that we have at fragrance is across the three brands.

Speaker Change #197: So yes, we've got five less shopping days between Thanksgiving and Christmas.

Speaker Change #197: We certainly have an election in there.

Speaker Change #197: But I think remember retail and our three brands provide a form of escapism and entertainment.

Speaker Change #197: And our job is to make sure that we're capitalizing at an opportunity to have a larger share of wallet in the fourth quarter because of the range of prices and brands and categories that we sell.

Speaker Change #197: Adrian.

Speaker Change #198: Good morning, Alex.

Speaker Change #199: Look, you know, the punch line is we're not standing still.

Speaker Change #200: You know, we're two quarters into a bowl new chapter strategy. And there's not only changes that we've implemented with that we're tracking and iterating and deploying where we have energy and confidence. But they're also more changes on the way.

Speaker Change #201: You know, we're continuing to make changes in stores as we both Tony and I spoke about earlier.

Speaker Change #202: We're making changes and digital that's coming online as we speak.

Speaker Change #203: We're making adjustments with our media mix and marketing spend mix that seems to be giving us some good results. We're very encouraged with what we're seeing there.

Speaker Change #204: As I spoke about earlier, we're leaning into the value orientation of today's consumer being very clear on value. Not just the price for the quality of products that we offer, but also the total value equation.

Speaker Change #204: We're flowing goods better.

Speaker Change #204: We have better and stocks this year than we did last year.

Speaker Change #204: We have faster digital deliveries for our digital orders that we did last year.

Speaker Change #204: So there are a number of things across the business that's just getting better.

Speaker Change #204: We're more disciplined, better execution.

Speaker Change #204: And that gives us confidence that these building blocks are going to build into sequential improvement and top line as we get into the back half of the year.

Speaker Change #204: Thanks a lot, good luck.

Speaker Change #205: Thank you, Alex.

Speaker Change #206: Thank you.

Speaker Change #207: The next question is coming from Oliver Chen of TD Cowan.

Speaker Change #208: Please go ahead.

Speaker Change #209: Hi, good morning.

Speaker Change #210: This is Neil Goh on for this morning.

Speaker Change #211: I just want to touch more on the promotional cadence as it pertains to the 2024 guidance.

Speaker Change #212: How much of the heightened promotional environment that you expect in the back half is driven from the competitive landscape, both from, you know, legacy players and new digital concepts versus, you know, what's more reflective of Macy's current inventory position.

Speaker Change #212: And then just more broadly, just any key puts in takes that you're watching as it pertains to the health and consumer that you see currently.

Speaker Change #212: Thanks.

Speaker Change #213: Thanks, Neil.

Speaker Change #213: Let me take the first part and Adrian can add his commentary.

Speaker Change #214: You know, I think we're looking at all the indicators that each of you are looking at.

Speaker Change #215: We're looking at inflation coming down.

Speaker Change #216: We're excited about potential rate cuts.

Speaker Change #217: We're looking at jobless claims.

Speaker Change #218: We're looking at the discretionary spending, consumer optimism.

Speaker Change #219: But I'm also focused predominantly on our health of our inventory levels, the compelling nature of our marketing campaigns.

Speaker Change #220: I think that we look well positioned from an inventory composition level, from an age of inventory level, from a percent of newness.

Speaker Change #221: And I would add in where we haven't always got it right, the balance of transitional product, the balance of clearance, the balance of newness.

Speaker Change #221: And I think that's why the trends that we saw in the second quarter after we started to take some action are continuing into the third quarter.

Speaker Change #222: So this is always a game of making sure that you have the right balance of growing after the consumer and where she is, here she is shopping and at the same time that you are protecting the bottom line.

Speaker Change #222: I think the team is doing a really good job of that.

Speaker Change #222: And we're obviously not sitting on where we are today.

Speaker Change #222: We're aggressively pursuing opportunities to enhance and improve the business going forward.

Speaker Change #223: Neil, Tony, summed it up quite well.

Speaker Change #224: The only thing I would add is that we're controlling what we can control.

Speaker Change #225: We have a lot of opportunities that we see ahead within the business to provide a better experience.

Speaker Change #226: We see the green shoots on growth.

Speaker Change #227: And so we're just being very thoughtful as we enter the biggest time of year for us, which is the holiday season.

Speaker Change #227: Great.

Speaker Change #227: Thank you both.

Neil Goh: Thank you, Neil.

Speaker Change #229: Thank you.

Speaker Change #229: The next question is coming from Michael Bonetti of Evercore ISI.

Speaker Change #230: Please go ahead.

Speaker Change #231: Thanks for taking our questions here.

Speaker Change #232: I guess, Adrian, maybe just any thought on your assumption for the second half, same-store sale guidance you just gave us between the go-forward stores and the non-go-forward stores.

Speaker Change #233: Any thought on how to think about maybe the spread between the two?

Speaker Change #233: Any way to help triangulate our model.

Speaker Change #234: And then I know you don't usually guide on forward-quarter comps on a quarterly basis, but we usually model it off of the spread of comps to total sales.

Speaker Change #235: Is there any reason that spread changes in 3Q relative to 2Q just to be aware of?

Speaker Change #236: I know the calendar adds and noise.

Speaker Change #237: Maybe just remind us how that impacted 2Q and 3Q.

Speaker Change #238: If there's a difference?

Speaker Change #238: Absolutely.

Speaker Change #238: So I'll comment against anything to add.

Speaker Change #239: Please do, Tony.

Speaker Change #240: So one of the things we expected on the non-go-forward stores is that they would actually perform worse than we then effectively perform better than what we'd actually plan.

Speaker Change #241: So customers are still shopping those stores.

Speaker Change #242: So when we think about the year-over-year performance, they're slightly better.

Speaker Change #243: So we've made some of that adjustment overall in our outlook and guidance for the back half of the year.

Speaker Change #243: As we think about cons, it's really getting the fundamentals better and better every day, every week, every month.

Speaker Change #244: And as we think about the trajectory for the back half of the year, third quarter and fourth quarter, it's a lot of the adjustments that Tony and I have been speaking about on this call.

Speaker Change #245: And so as we think about those investments, we actually believe that it's going to improve the business sequentially as we get into the back half of the year. As we think about the performance of, for example, the Macy's first 50, other go-forward stores within the fleet and the non-go-forward, we continue to see, for example, with our first 50 stores, the sequential trends continuing to improve relative to the balance.

Speaker Change #245: So it just gives us confidence that as we introduce changes into these stores, whether it's visual changes, whether it's some of the staffing changes and the 100 additional stores and handbag and shoes that we'll be able to actually put in more of those building blocks to really get the relative comp sales go-through every year to Groove.

Speaker Change #245: Okay.

Speaker Change #245: And then, if I could sneak one more in, can you just talk to us about how you're thinking about inventory investment specifically in the go forward stores.

Speaker Change #246: We're kind of watching out of the inventory is pacing a little bit ahead of sales now, thinking about how you've made some changes to your buying operations a couple of years ago.

Speaker Change #247: Yeah, Mike, let me just add a couple things on inventory because I think it's important.

Speaker Change #248: We obviously don't have a great clear compare in terms of year of a year because of the conversion.

Speaker Change #249: But I would say the inventory levels remain down double digits to a few years ago, and we are intent on being in stock for the customer. I think that one of the things that we have, you know, worked on very carefully, as I said, is getting transitional inventory, the level of clearance and value and the amount of newness flowing properly.

Speaker Change #250: Neither Adrian or I are worried about the risk associated with our inventory, kind of going into the fall season.

Speaker Change #251: We look at it on an age basis.

Speaker Change #252: We look at it on a marked down inventory basis.

Speaker Change #253: And I think it's being in stock on replenishment, flowing fashion and newness into those go forward stores.

Speaker Change #254: I think we're so much better position than we were a year ago going into the third quarter.

Speaker Change #255: The only thing I'd add there is, you know, we do acknowledge to your point, Mike, that inventories at the end of the second quarter were slightly higher than our expectation.

Speaker Change #256: But the good news is that in the second quarter, we already started to take action to adjust the appropriate quantity and composition of inventory for the fall season, key three and key fours, Tony mentioned. With regards to the type of inventory or the amount of inventory by store, we're looking at, you know, sell through trends weeks of supply trends at a very specific location by location by category.

Speaker Change #257: So really being much more diligent with some of the disciplines that we've added in over the course of the last year to really manage the allocation of inventory in places where we can sell more at full price or first mark than what we would have seen in the past.

Speaker Change #257: Because as you know, our margin expansion over the last several years has been around reducing the amount of clearance to the appropriate level as we transition from season to season.

Speaker Change #257: Okay.

Speaker Change #257: Thanks a lot.

Speaker Change #258: Appreciate it.

Speaker Change #259: Thanks, Mike.

Speaker Change #259: Thank you.

Speaker Change #260: The next question is coming from Chuck Grom of Gordon.

Speaker Change #261: Hasket, please go ahead.

Speaker Change #262: Hi, this is Eric on for Chuck.

Speaker Change #263: Just want to ask about the first 50 locations, the positive comms.

Speaker Change #264: Are you seeing the growth from existing customers coming and spending more or is this new or lapse customers coming back?

Speaker Change #265: And how do you get out to customers that all the changes that have been made that get them to come back to the store?

Speaker Change #266: Eric, thanks for the question.

Speaker Change #267: I think we are again excited about the continued progress that we're seeing in the first 50. It's two consecutive quarters of comp store growth.

Speaker Change #268: It's 460 basis points of improvement versus the other Macy's locations or business. I think that the growth that we are seeing across all families of business, the fact that we have increased traffic and increased conversion versus other Macy's stores, shows us that the work that we're doing is resonating with the consumer.

Speaker Change #269: It is a combination of existing customers and some new customers and our new head of marketing is working closely with our stores team in geo targeting communication via email and search as well as SMS messages to make sure that the eventing and the activations and new product messages getting out to customers.

Speaker Change #269: So the good news is we're seeing it resonate.

Speaker Change #269: Customers awareness is growing.

Speaker Change #269: We're only two quarters in to a three-year plan and a change plan and obviously we want to have the right level of patience and determination.

Speaker Change #270: The only other thing I would add, Eric, is when you think about some of the things that's driving the business that's Tony described, we just have more number of customers actually coming into these stores relative to what we saw in prior years, and when you think about the experience that we've been investing in just to bring a little bit of color that Tony spoke about in previous calls, we're making additional staffing investments in handbags and shoes and ready to wear and home also in the fitting room which gives us the best opportunity to convert that customer and check out to make sure that we don't have long lines.

Speaker Change #271: We're activating the store through better visual presentation, sharper looks, greater value.

Speaker Change #272: We have events to get people reasons to come back to the store and spend time with us. We have digital messaging going out to customers in that locale that we know to get them excited about what's being offered in their local store and we have local marketing to keep Macy's top of mind for those customers.

Speaker Change #273: So, you know, those are the kinds of things that we're seeing gaining traction into Tony's point.

Speaker Change #274: We're seeing it in terms of traffic and relative conversions.

Speaker Change #274: We're seeing it in a number of customers.

Speaker Change #274: The categories that are touched have a sequential improvement in sales performance.

Speaker Change #275: So, a lot of what we talk about is what's the appropriate pace, although a healthy pace, but they're appropriate pace, as Tony said, without tripping over ourselves.

Speaker Change #275: Thank you.

Speaker Change #276: The next question is coming from Jay Soul of UBS, please.

Speaker Change #276: Great.

Speaker Change #276: Hopefully you can hear me.

Speaker Change #277: My question is about asset sales gains and monetization proceeds.

Speaker Change #278: It looks like the guidance for this year went to the high end of the range because compared to where it was last quarter.

Speaker Change #278: Maybe Adrian can just elaborate a little bit on what assets were so great.

Speaker Change #279: And you know, what's driving the raised guidance and that would be helpful.

Speaker Change #279: Thank you.

Speaker Change #280: Great to be with you Jay.

Speaker Change #281: The punchline here is we're very pleased with attraction and progress.

Speaker Change #281: We're getting very healthy responses from landlords and developers.

Speaker Change #282: The deal pipeline is healthy even in this environment.

Speaker Change #282: So, to your point coming into the quarter, we had a range of 90 million to our 115 million in asset sales gains. Now we're saying it approximately 115 million.

Speaker Change #282: We were pleased with 36 million of gains in Q2. We're forecasting in our guidance, 30 million in Q3, which leads to the balance of 67 million in Q4.

Speaker Change #282: But overall, what I will tell you is trending quite well.

Speaker Change #282: Lots of good traction.

Speaker Change #283: The implication of that is that we're going to be closing approximately 55 stores relative to our prior outlook of 50 stores.

Speaker Change #283: So, this is just all further evidence of the traction that we're having.

Speaker Change #283: And we're also very pleased with the value we're able to unlock in those deals and those transactions.

Speaker Change #283: Got it.

Speaker Change #283: Okay.

Speaker Change #284: Adrian, thank you.

Speaker Change #285: Thank you, Jay.

Speaker Change #286: Thank you.

Speaker Change #287: The next question is coming from Janet Joseph Kloppenberg of JKK Research.

Speaker Change #288: Please go ahead.

Speaker Change #289: Good morning, everyone.

Speaker Change #290: I had a couple of questions.

Speaker Change #291: First, on merchandise margin or product margin, whichever way you look at it, tell me for those second quarter, how was that versus your expectations?

Speaker Change #292: I mean, peeling away the favorable transportation and the cost-accounting benefits.

Speaker Change #292: How was it?

Speaker Change #292: And what's the thought process on that merchandise margin level in the second half of the year?

Speaker Change #293: And I also wanted to ask you the enhanced results you're seeing in handbags and men's in the 50 stores.

Speaker Change #294: Is that primarily from service and environment or is there a different brand matrix that you'll start to put in to the existing Macy stores?

Speaker Change #294: And just lastly, if you could talk a little bit about the denim cycle, which we're seeing help a lot of companies, this second quarter going into third quarter, and how Macy has acted upon that opportunity.

Speaker Change #294: Thank you.

Speaker Change #294: Thanks Janet, appreciate the questions.

Speaker Change #295: First on merchandise margin, I think it's the collective work of the team that led to beating our margin guidance for the quarter and has led us to guide appropriately for the fall season.

Speaker Change #296: It's making sure that we're providing compelling value, but we're obviously learning from all the pricing science and the opportunities to negotiate in the market and give value to the consumer without giving away margin as a brand and a company.

Speaker Change #297: Part of our margin is always related to the quality of our inventory, so that's why Adrian and I both emphasize we feel good about the quality of our inventories. As it relates to the first 50 and the opportunity to expand to 100 other doors with handbag and chew pilots, yes, it's a combination of the staffing and of the inventory, the quality of the inventory.

Speaker Change #298: So that's why it's good to hear brands like Lauren by Ralph Lauren and Carl Lagerfeld and Coach, which are available in all of the these stores doing well.

Speaker Change #299: In addition, we know that having a service model in an environment where you're buying a three four hundred dollar handbag, you need assistance.

Speaker Change #299: And so we've seen that impact in the first 50.

Speaker Change #300: We're excited to see that impact in both handbags and shoes in the hundred stores that we are expanding this fall.

Speaker Change #301: And finally, on your question on the on the denim cycle Janet, we absolutely are in a new silhouette or shape in denim after so many years in skinny, where we're now in a wide leg and you know a high rise and so how we take advantage of that.

Speaker Change #302: We obviously have the great premium assortment at Bloomingdale's and we have a assortment powerful assortment of Levi's as well as in a brand like seven and silver at Macy's.

Speaker Change #303: And so expect to find and men's and and women's in kids at both Macy's and Bloomingdale's a great assortment of denim for the fall season.

Speaker Change #303: Lots of luck.

Speaker Change #303: Thanks so much.

Speaker Change #303: Thank you.

Speaker Change #304: At this time, I would like to turn the floor back over to Mr. Spring for closing comments.

Speaker Change #305: Thank you all.

Speaker Change #306: Thanks everyone, I should say we appreciate your time today.

Speaker Change #307: We hope you have a good rest of what is a few days, I guess, left of summer.

Speaker Change #308: And we certainly look forward to providing another update on the third quarter call.

Speaker Change #309: Have a good morning.

Speaker Change #310: Ladies and gentlemen, this concludes today's event.

Speaker Change #311: You may disconnect your lunch or log off the webcast at this time and enjoy the rest of your day.

Speaker Change #311: Thank you very much.

Q2 2024 Macy's Inc Earnings Call

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