Q3 2024 Macy's Inc Earnings Call

December 11, 2024

<unk> answer session will follow the formal presentation.

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

As a reminder, this call is being recorded.

Speaker Change: I would now like to turn the call over to Pamela Quintile Yano VP of Investor Relations. Pamela you may now begin.

Speaker Change: Operator, good morning, everyone and thanks for joining US with me on the call today are Tony Spring, our chairman and CEO and Adrian Mitchell, our COO and CFO, along with our third quarter 2024 press release, a form 8-K has been filed with the SEC and the presentation has been posted on the investors section of our website.

Macy's, Inc. Dot com and is being displayed live during todays webcast.

Speaker Change: The form 8-K includes revisions made to its historical consolidated financial statements that were impacted by the immaterial misstatements that the company has previously disclosed.

Speaker Change: Unless otherwise noted the comparisons we provide will be versus 2023.

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Speaker Change: All references to our prior expectations outlook or guidance refer to information provided on our August 21st earnings call unless otherwise noted.

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Speaker Change: In addition, all references to comp sales throughout todays prepared remarks represent comparable owned plus licensed plus marketplace sales and owned plus licensed sales per store locations unless otherwise noted.

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Speaker Change: All forward looking statements are subject to the safe Harbor provisions of the private Securities Litigation Reform Act of $19 95.

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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.

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

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

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Tony Spring: 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.

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Tony Spring: Thank you Pam and good morning, everyone.

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Tony Spring: As previously reported Macy's first 50 locations Bloomingdales and Blue Mercury all comp positive in the third quarter.

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Tony Spring: We maintained effective expense controls generated above plan asset sale gains and are encouraged by our quarter to date comparable sales trends, which remain above our third quarter levels year to date, we have made progress in our bold new chapter strategy and remain on track to achieve our long term goal of sustainable.

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Tony Spring: Before we get into our third quarter financial performance I want to discuss the independent investigation into the issue related to small package delivery expenses in one of our accrual accounts.

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Tony Spring: We've determined that the individual responsible for the issue intentionally made erroneous accounting accrual entries beginning of Q4 2021 and in subsequent periods acted alone and did not pursue these acts for personal gain.

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Tony Spring: To provide transparency adjusted numbers for fiscal 2021, 2022, and 2023 and quarterly periods for fiscal 2023 are in today's form 8-K filed earlier this morning.

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Speaker Change: But I want to be clear integrity is paramount at Macy's, Inc, and we promote a culture of ethical conduct.

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Speaker Change: Now, let's turn to the third quarter results net sales of $4 7 billion were in line with our outlook provided in August.

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Speaker Change: Momentum in first 50 locations at Macy's and Bloomingdale's and Blue Mercury were offset by weakness in macys non first 50 locations its digital channel and its cold weather categories, all of which have registered sequential quarter to date comparable sales improvements from their third quarter levels.

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Speaker Change: Inclusive of delivery expense impact adjusted third quarter EPS of <unk> <unk> benefit from a pull forward of non go forward asset sale gains into the third quarter from the fourth quarter.

Speaker Change: We are pleased with our third quarter results. Our teams did a great job. They thoughtfully responded to the extended warm weather conditions and an active hurricane season, we took proactive steps to address the dynamic environment and best serve our customers through re prioritizing categories marketing in store presentations.

discovered, we move quickly to investigate and address the issue.

Speaker Change: And adjusting go forward of orders to provide more newness.

The responsible individual is no longer with the company following the discovery of their actions.

Speaker Change: At the same time, we continued to invest in and execute our bold new chapter strategy.

We've also identified and begun to implement additional controls to be a stronger and more disciplined organization.

Three quarters into the strategy initiatives continued to gain traction across all three pillars.

So that an action like this could not happen again.

We're using data to test iterate and refine our initiatives, our healthy balance sheet and ample liquidity allow us to deploy capital that supports our long term aspirations without compromising our financial health.

Now let's turn to the 3rd quarter results.

Net sales of 4.7 billion were in line with our outlook, providing in August.

Momentum in 1st 50 locations at Macy's.

And Bloomingdale's in Blue Mercury were offset by weakness in Macy's non-first 50 locations, it's digital channel, and it's cold weather categories.

Speaker Change: Turning to the first pillar of our strategy strengthening of Macy's nameplate.

Speaker Change: First 50 locations delivered a positive one 9% comp representing the third consecutive quarter of comp sales growth and 410 basis points of outperformance relative to the total Macy's nameplate.

All of which have registered sequential quarter to date comparable sales improvements from their 3rd quarter levels.

Inclusive of delivery expense impact, adjusted 3rd quarter EPS of 4 cents benefit from a pull forward.

Speaker Change: These results reflect positive customer response to investments in staffing merchandising visual presentation in eventing, which led to a 400 basis point improvement in net promoter scores compared to last year, representing our third consecutive quarter of improvement.

Of non go forward asset sale gains into the 3rd quarter from the 4th quarter.

We are pleased with our 3rd quarter results.

Our teams did a great job.

They thoughtfully responded to the extended warm weather conditions and an active hurricane season. We took proactive steps to address the dynamic environment and best serve our customers to reprioritizing categories, marketing, in-store presentations and adjusting go for orders to provide more newness.

Speaker Change: We've also been testing women's shoes, and handbags staffing at about 100 other go forward locations.

Speaker Change: Having dedicated runners to get shoes from the stockroom and salespeople available to assist in handbags allows our colleagues to spend more time with the customer.

At the same time, we continue to invest in and execute our bold new chapter strategy.

Speaker Change: Compared to non first 50, Macy's locations and those that did not receive additional staffing women's shoes, and handbags sales outperformed by roughly 607 hundred basis points, respectively year over year.

3 quarters into the strategy initiatives continued to gain traction across all three pillars.

We're using data to test, iterate, and refine our initiatives. Our healthy balance sheet, and ample liquidity allow us to deploy capital that supports our long term aspirations without compromising our financial health.

Speaker Change: This illustrates the importance of dedicated customer assistance and high touch point categories.

Speaker Change: These learnings along with those from the first 50 are being used to inform our plans for expanding initiatives to additional go forward locations in 2025, which will be discussed in more detail on the fourth quarter earnings call.

Turning to the first pillar of our strategy, strengthening the Macy's nameplate.

1st 50 locations delivered a positive 1.9% comp, representing their 3rd consecutive quarter of comp sales growth and 410 basis points of outperformance relative to the total Macy's nameplate.

Speaker Change: Improvements have not been limited to our first 50, and 100 test store locations across than Macy's nameplate, we continue to take active steps to improve the customer experience.

These results reflect positive customer response to investments and staffing, merchandizing, visual presentation, and eventting, which led to a 400 basis point improvement in net promoter scores compared to last year, representing our 3rd consecutive quarter of improvement.

Speaker Change: We are training colleagues to be more helpful by leveraging digital tools and in person coaching.

Speaker Change: And our merchandize revitalization is gaining traction we've reduced exposure to less relevant brands and expand our offering and ones that customers are responding to including <unk> Donna Karan, Steve Madden <unk> Dolce Vita just to name a few.

We've also been testing women's shoes and handbag staffing at about 100 other Goor locations.

Having dedicated runners to get shoes from the stock room and salespeople available to assist in handbags allows our colleagues to spend more time with the customer.

Speaker Change: We're providing compelling fashion and value and our women's private label brands, such as charter club in style and co.

Compared to non 1st 50 Macy's locations and those that did not receive additional staffing.

Speaker Change: Beyond women's apparel fragrances continued to be a standout while men's non active apparel handbags and home sales, although still weak sequentially improved in the third quarter.

Women's shoes and handbag sales outperformed by roughly 600 and 700 basis points respectively, year over year.

Speaker Change: Customers have taken notice of the better product and experience with total nameplate net promoter scores up roughly 230 basis points year over year, and representing our highest score ever.

This illustrates the importance of dedicated customer assistance and high touch point categories.

These learnings along with those from the 1st 50 are being used to inform our plans for expanding initiatives to additional go-forward locations in 2025, which will be discussed in more detail on the 4th quarter earnings call.

Speaker Change: Rounding out the discussion on Macys, we are encouraged by the pace and economics of our non go forward store deals. We now expect to close roughly 65 locations. This year in line with our typical cadence closures will occur post holiday.

Improvements have not been limited to our 1st 50 and 100 test store locations.

Across the Macy's nameplate, we continue to take active steps to improve the customer experience.

Speaker Change: The second pillar of our bold new chapter strategy is accelerating luxury growth, both bloomingdales and blue Mercury posted positive third quarter comps customers continued to respond well to their breath of product price points market in private brands and we remain confident in our ability to grow sales at each of these nameplates.

We are training colleagues to be more helpful by leveraging digital tools and in-person coaching.

And our merchandise revitalization is gaining traction.

We've reduced exposure to less relevant brands and expand at our offering in ones that customers are responding to.

Speaker Change: At Bloomingdale's, our aspirational to luxury positioning and associated price points are key differentiators comp sales rose three 2% driven by women's advanced contemporary apparel, which continued to be a standout as well as beauty and digital.

Including and song, Donna Karan, Steve Madden, Avec Lafi, Dolce Vita, just to name a few.

We're providing compelling fashion and value in our women's private label brands such as Charter Club and Style and Co.

Speaker Change: Customers responded well to new brands, including Skims, and Jenni Kayne and handbags have begun to show signs of improvement with strength and Tory Burch coach long shop, and re bag, which is our recent pre owned luxury accessories launch.

Beyond women's apparel, fragrances continued to be a standout, while men's non-active apparel, handbags, and home sales, although still weak, sequentially improved in the 3rd quarter.

Customers have taken notice of the better product and experience with total name plate net promoter scores up roughly 230 basis points year over year and representing our highest score ever.

Speaker Change: These improvements were partially offset by the softness in certain areas of the home store.

Speaker Change: During the third quarter Bloomingdale's habits from Italy, with Love campaign, which was a strong driver of traffic and a brand amplifier.

Rounding out the discussion on Macy's, we're encouraged by the pace and economics of our non go forward store deals. We now expect to close roughly 65 locations this year.

Speaker Change: Brought the best of Italy to the U S embracing its fashion design cuisine and culture through a 300 exclusive products from 150, plus renowned partners and 30, new brands and have garnered roughly 2 billion media impressions.

In line with our typical cadence, closures will occur post-holiday.

The second pillar of our bold new chapter strategy is accelerating luxury growth.

Speaker Change: From Italy with Love is a tangible example of how bloomingdale's remains close to and connects with its customers through unique product and experiences empowering it to be the local leader in the markets. It serves.

Both Bloomingdale's and Blue Mercury posted positive 3rd quarter cops.

Customers continue to respond well to their breadth of product, price points, market and private brands, and we remain confident in our ability to grow sales at each of these nameplates.

Speaker Change: We recently opened our fourth Bloomberg's location located in Shrewsbury, New Jersey. This store was informed by extensive customer and market research. It's our first women's only store and offers a highly curated assortment that's been well received.

At Bloomingdale's, our aspirational to luxury positioning and associated price points are key differentiators.

Com sales rose 3.2%.

Driven by women's advanced contemporary apparel, which continued to be a standout, as well as beauty and digital.

Speaker Change: Blue Mercury achieved its 15th consecutive quarter of positive comps posting a three 3% gain during the quarter, we expanded popular lines such as sisterly, Paris skin Medica, Augustine is barter and introduced Victoria Beckham beauty.

Customers responded well to new brands, including Skims and Jenny Cain.

And handbags have begun to show signs of improvement, with strength and Tory Burch, coach, Longsho, and Rebag, which is our recent pre-owned luxury accessories launch.

Speaker Change: The quarter also benefited from Bloomberg <unk>, 25th anniversary celebration, which kicked off in September with the unveiling of an elevated web cytostatic that offers improved navigation and educational blog and new logo.

These improvements were partially offset by the softness or certain areas of the home store.

During the 3rd quarter, Bloomingdale's had its from Italy with Love campaign.

Which was a strong driver of traffic and a brand amplifier.

Speaker Change: Blue Mercury's 20th anniversary celebration is not limited to its website. We've also introduced a more modern aesthetic to our new and remodeled stores during the quarter Blue Mercury remodeled four locations and opened eight for a total of five remodels and nine new stores this year.

It brought the best of Italy to the US embracing its fashion, design, cuisine, and culture through 300 exclusive products from 150 plus renowned partners and 30 new brands and are garnered roughly 2 billion media impressions.

Speaker Change: New and remodeled locations can continue to outperform the total fleet.

From Italy with Love is a tangible example of how Bloomingdale's remains closed to and connects with its customers through unique product and experiences, empowering it to be the local leader in the markets it serves.

Speaker Change: We plan to open an additional nine and remodel two more stores in the fourth quarter.

Speaker Change: Moving to our final pillar simplifying and modernizing intend operations. We are pleased with the work our teams are doing to phase out legacy technology across the organization improve our search platforms and deliver an improved customer experience and our supply chain, we remain focused on creating a more efficient.

We recently opened our 4th Bloomy location located in Shrewsbury, New Jersey. This store was informed by extensive customer and market research. It's our first women's only store and offers a highly curated assortment that's been well received.

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Lou Mercury achieved its 15th consecutive quarter of positive cops, posting a 3.3% gain.

Through the third quarter speed of delivery and fulfillment have each improved by roughly 800 basis points compared to the prior year to date period.

During the quarter, we expanded popular lines such as Sicily Paris, Schemetica, Augustinus Bader, and introduced Victoria Beckham Beauty.

Speaker Change: As a result of our multi year investments were realizing lower fulfillment costs optimize cash flow generation and seeing improved net promoter scores for product availability in stock rates and fulfillment of packages.

The quarter also benefited from Blue Mercury's 25th anniversary celebration, which kicked off in September with the unveiling of an elevated website aesthetic that offers improved navigation and educational blog and new logo.

Speaker Change: Before I turn it over to Adrian I wanted to share more on quarter to date trends and how we're approaching the remainder of the year.

Blue Mercury's 25th anniversary celebration is not limited to its website. We've also introduced a more modern aesthetic to our new and remodeled stores.

Speaker Change: Consistent with.

Speaker Change: Our press release commentary quarter to date comparable sales trends remain above third quarter levels, we're listening to our customers and believe our compelling product marketing value and experiences and of course frontline colleagues are giving them a reason to shop our nameplates.

During the quarter, Blue Mercury remodeled 4 locations and opened 8 for a total of 5 remodels and 9 new stores this year.

New and remodeled location can continue to outperform the total fleet.

Speaker Change: Our marketing teams in conjunction with merchandising digital have developed exciting holiday strategies with multiple touch points and events.

We plan to open an additional 9 and remodel 2 more stores in the 4th quarter.

Speaker Change: We're leveraging our Macy's Thanksgiving day parade, and gift, giving destination status heading into Thanksgiving operator deals event built excitement with 24 hour specials that culminated in our 98th annual parade, which had about 32 million viewers a new record.

Moving to our final pillar, simplifying and modernizing end to end operations.

We are pleased with the work our teams are doing to phase out legacy technology across the organization, improve our search platforms and deliver and improve customer experience.

In our supply chain, we remain focused on creating a more efficient and effective network.

Speaker Change: And this year, we've brought our gift guide to life in human form with actress Alison Brie, who stars in our holiday campaign, which is supported by a team of high profile social content creators with over 24 million followers, and we call them the macys Diffluence theirs.

Through the 3rd quarter, speed of delivery and fulfillment have each improved by roughly 800 basis points compared to the prior year to date period.

As a result of our multi-year investment, we're realizing lower fulfillment costs.

Optimize cash flow generation and seeing improved net promoter scores for product availability, in stock rates, and fulfillment of packages.

Speaker Change: And the excitement is not limited to Macy's Bloomingdale's holiday campaign and iconic windows are inspired by his collaboration with Universal Pictures wicket.

Before I turn over to Adrian, I wanted to share more on quarter to day trends and how we're approaching the remainder of the year.

Speaker Change: The Wicked good holiday campaign includes a 100 exclusive products of 150 brand participants and our biggest Aqua collection to date.

Consistent with our press release commentary, quarter day comparable sales trends remain above 3rd quarter levels. We're listening to our customers and believe our compelling product marketing value and experiences, and of course frontline colleagues are giving them a reason to shop our nameplates.

Speaker Change: And it blew mercury, we're emphasizing the gift of self care and unique skin and beauty products, including new perfume offerings and gives us from <unk> Marley Creed, the manicurist and Flamingo state.

Speaker Change: As we look to the remainder of the year and beyond we are well positioned across nameplates to capture mind share through curated assortments relevant messaging enhanced customer service compelling value and promotions all supported by improved end to end operations.

Our marketing teams in conjunction with merchandise and digital have developed exciting holiday strategies with multiple touch points and events.

We're leveraging our Macy's Thanksgiving Day parade and gift-giving destination status. Heading into Thanksgiving, our parade of deals event built excitement with 24 hour specials that culminated in our ninety-eighth annual parade, which had about 32 million viewers, a new record.

Adrian Mitchell: With that let me turn it over to Adrian.

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

Adrian Mitchell: Our third quarter performance reflects our team's ongoing focus and agility and navigating a dynamic environment positive reception to investments in our customer experience and the benefits of continued operational productivity efforts. These efforts continue as our teams work to deliver on holiday and the execution of our bold new chapter strategy.

And this year we've brought our gift guide to life in human form with actress Alison Brie, who stars in our holiday campaign, which is supported by a team of high profile social content creators with over 24 million followers.

Adrian Mitchell: <unk>.

And we call them the Macy's influencers.

Speaker Change: Before discussing the quarter I will first provide detail on the revisions to our financial statements.

And the excitement is not limited to Macy's. Bloomingdale's holiday campaign and iconic windows are inspired by its collaboration with Universal Pictures Wicked.

Speaker Change: We have concluded from our independent investigation that the erroneous entries had an immaterial impact on our financial results over the cumulative period the actions took place.

The wicked good holiday campaign includes 100 exclusive products, 150 brand participants and our biggest aqua collection to date.

<unk> entries from the fourth quarter of 2021 through the fiscal quarter ended November 2nd of this year totaled a combined $151 million.

And the blue mercury were emphasizing the gift of self-care and unique skin and beauty products, including new perfume offerings and gift sets from perfume to Marley, Creed, the manicurist and flamingo estate.

Speaker Change: During the same period the company recognized approximately $4 $36 billion of delivery expenses, the largest quarter delivery expense impact tended to occur in the fourth quarter due to elevated holiday volumes.

As we look for the remainder of the year and beyond, we are well positioned across name plates to capture mindshare through curated assortments, relevant messaging, enhanced customer service, compelling value promotions, all supported by improved end to end operations.

This was not that there was no impact to revenues and there was no impact to cash or inventories is all vendors were fully paid.

With that, let me turn it over to Adrian.

Speaker Change: This matter did not require issuing prior financial statements as the impacts were deemed immaterial. We have provided revised historical financial information in this morning's press release and 8-K for your reference.

Thank you, Tony. And good morning, everyone.

Our 3rd quarter performance reflects our team's ongoing focus and agility in navigating a dynamic environment.

Positive reception to investments in our customer experience and the benefits of continued operational productivity efforts.

Speaker Change: For purposes of today's call third quarter year over year comparisons as well as our fourth quarter and full year outlook reflect our revised results management performed additional analysis and other procedures to ensure that our consolidated financial statements were prepared in accordance with the U S generally accepted.

These efforts continue as our teams work to deliver on holiday and the execution of our bold new chapter strategy.

Before discussing the quarter, I'll first provide detail on the revisions to our financial statements.

We have concluded from our independent investigation that the erroneous entries had an immaterial impact on our financial results over the cumulative period the actions took place.

Speaker Change: <unk> accounting principles.

Speaker Change: Now diving into third quarter results total Macy's, Inc. Net sales were $4 7 billion down.

Down two 4% to last year unchanged from what we reported on November 25 owned AUR Rose three 7% driven primarily by category and product mix.

The erroneous entries from the 4th quarter of 2021.

Do the fiscal quarter ended November 2nd of this year, totaled a combined $151 million.

During the same period, the company recognized approximately $4.36 billion of delivery expenses.

Speaker Change: Total enterprise comps were down one 3%.

Speaker Change: Go forward business, Macy's, Inc, comps, which includes Macy's Bloomingdale's and Blue Mercury go forward locations plus digital declined <unk>, 9%.

The largest quarter delivery expense impact tended to occur in the 4th quarter due to elevated holiday volumes.

This was not theft.

Speaker Change: By nameplate Macy's net sales, which includes all Macy's locations and digital were down three 1% and comps were down two 2%.

There was no impact to revenues.

And there was no impact to cash or inventories as all vendors were fully paid.

This matter did not require reissuing prior financial statements as the impacts were deemed immaterial.

Speaker Change: We estimate that unseasonably mild temperatures and the associated negative impact on fall transitional and colder weather product sell throughs accounted for roughly one point of comp sales.

We have provided revised historical financial information in this morning's press release and 8K for your reference.

Speaker Change: Macy's nameplate go forward business comps, which include approximately 350 go forward locations and digital were down one 8%.

For purposes of today's call, 3rd quarter year over year comparisons, as well as our 4th quarter and full year outlooks reflect our revised results.

Speaker Change: First 50.

Management performed additional analysis and other procedures to ensure that our consolidated financial statements were prepared in accordance with the US generally accepted accounting principles.

Speaker Change: Which we view as the leading indicator of go forward Macy's ability to achieve comp sales growth posted a positive one 9% comp.

Speaker Change: Both bloomingdales and Blue Mercury had a strong third quarter Bloomingdale's net sales were up one 4% and comps rose three 2%, while blue Mercury net sales were up three 2% and comps rose three 3%.

Now diving into 3rd quarter results.

Total Macy's Inc. net sales were $4.7 billion down 2.4% for last year, unchanged from what we reported on November 25th.

Own AUR rose 3.7%, driven primarily by category and product mix.

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Speaker Change: Other revenues of $161 million declined nine 6%.

Total enterprise comps were down 1.3%.

Speaker Change: Net credit card revenues were $120 million.

Go forward business Macy's incomes, which includes Macy's Bloomingdale's and Blue Mercury go forward locations plus digital declined 0.9%.

Speaker Change: Profit share was better than our expectations, while net credit losses were in line.

Speaker Change: Macy's Media network revenues were $41 million and continued to be supported by higher advertiser and campaigned counts.

By nameplate, Macy's net sales, which includes all Macy's locations in digital were down 3.1% and comps were down 2.2%.

Speaker Change: Before discussing gross margin rates and inventory.

Speaker Change: Remind you that for this year, neither are directly comparable to the prior periods due to our conversion to cost accounting at the beginning of this fiscal year.

We estimate that unseasonably mild temperatures and the associated negative impact on fall transitional and colder weather products sell-throughs accounted for roughly 1 point of comp sales.

And gross margin rate for the current and prior year quarters have been adjusted for delivery expense by 30 basis points and 10 basis points respectively.

Macy's nameplate Go For business comps, which include approximately 350 go-forward locations and digital were down 1.8%.

Speaker Change: Gross margin rate was 39, 6% down 60 basis points year over year.

1st 50

Which we view as the leading indicator of Goor Macy's ability to achieve comp sales growth, posted a positive 1.9% comp.

Speaker Change: Within that merchandise margin declined 70 basis points.

Speaker Change: Relative to last year slightly less than half of the decline was due to our shift to cost accounting.

Both Bloomingdale's and Blue Mercury had a strong 3rd quarter.

Speaker Change: The remainder reflected product mix relative to our expectations, we took proactive discounting on seasonal fall transitional product and had higher penetration of clearance sell throughs in response to warmer weather conditions and a more value conscious customer.

Bloomingdale's net sales were up 1.4% and comps rose 3.2%, while Blue Mercury net sales were up 3.2%. Its rose 3.3%.

Other revenues of $161 million declined 9.6%.

Speaker Change: This was partially offset both year over year and relative to your expectations by efficiencies in the Companys fulfillment network and lower ship sales volume.

Net credit card revenues were $120 million.

Profit share was better than our expectations while net credit losses were in line.

Speaker Change: End of quarter inventories were up three 9% year over year, approximately half of which was due to the conversion to cost accounting.

Macy's Media network revenues were $41 million and continue to be supported by higher advertiser and campaign counts.

Speaker Change: We made sequential progress on the quantity and quality of our merchandise and believe Q3, ending inventories reflected an appropriate amount of newness for this holiday season.

Before discussing gross margin rate and inventory.

A reminder that for this year, neither are directly comparable to the prior periods due to our conversion to cost accounting at the beginning of this fiscal year.

Speaker Change: SG&A expense dollars were $2 1 billion or 42, 1% of total revenue.

And gross margin rate for the current and prior year quarters have been adjusted for delivery expense by 30 basis points and 10 basis points respectively.

Speaker Change: We continued to take a disciplined approach to cost controls, while making strategic customer facing investments.

Speaker Change: These investments contributed to the $24 million increase in SG&A compared to last year, while lower total revenue led to the 160 basis point increase in rate.

Gross margin rate was 39.6%, down 60 basis points year over year.

Within that, merchandise margin declined 70 basis points.

Relative to last year, slightly less than half of the decline was due to our shift to cost accounting.

Speaker Change: Turning to real estate during the quarter, we recognized $66 million of asset sale gains, reflecting the pull forward of select deals into the third quarter from the fourth quarter.

The remainder reflected product mix.

Relative to our expectations.

We took proactive discounting on seasonal fall transitional product and had higher penetration of clearance cells in response to warmer weather conditions and a more value-conscious customer.

Making environment remains favorable and as Tony mentioned, we now expect to close about 65 locations. This year up from our prior expectation of 55 and 50 at the beginning of the year.

This was partially offset both year for year and relative to expectations by efficiencies in the company's fulfillment network and lower shift sales volume.

Speaker Change: Concluding the conversation on earnings we delivered adjusted third quarter EPS of <unk> <unk>.

Speaker Change: Results, primarily reflect higher asset sale gains, which contributed roughly 10 cents of EPS.

End of quarter inventories were up 3.9% year over year, approximately half of which was due to the conversion to cost accounting.

Speaker Change: This was offset by this year's delivery expense adjustment related to our recent concluded investigation, which negatively impacted EPS by approximately <unk> <unk>.

We made sequential progress on the quantity and quality of our merchandise and believe Q3 ending inventories reflected an appropriate amount of newness for this holiday season.

Speaker Change: On a year to date basis cash used by operating activities was $30 million largely driven by lower earnings capital expenditures totaled $649 million free cash flow was an outflow of $492 million and we have paid 144 million.

SGA expense dollars were $2.1 billion or 42.1% of total revenue.

We continue to take a disciplined approach to cost controls while making strategic customer-facing investments.

These investments contributed to the $24 million increase in SGNA compared to last year, while lower total revenue led to the 160 basis point increase in rate.

Speaker Change: And cash dividends.

Speaker Change: We also completed a $220 million tender offer to further remove liabilities from the enterprise, while keeping the flexibility to fund our own growth and invest in consumer facing initiatives.

Turning to real estate during the quarter, we recognize $66 million of asset sale gains, reflecting the pull forward of select deals into the 3rd quarter from the 4th quarter.

Speaker Change: We along with our board are constantly evaluating our capital deployment to ensure it aligns with our priorities, which are maintaining a healthy balance sheet investing in profitable growth initiatives and returning capital to shareholders.

The dealmaking environment remains favorable, and as Tony mentioned, we now expect to close about 65 locations this year, up from our prior expectation of 55 and 50 at the beginning of the year.

Speaker Change: Before discussing our fourth quarter and full year outlooks a few reminders.

Concluding the conversation on earnings, we delivered adjusted 3rd quarter EPS of 4 cents.

Speaker Change: First the outlooks incorporate the revise historical delivery expense and updated delivery expense expectations for the fourth quarter and fiscal year as small package delivery expense had not been forecasted properly by the individual responsible for the erroneous accounting entries.

Results primarily reflect higher asset sale gains, which contributed roughly 10 cents of EPS.

This was offset by this year's delivery expense adjustment related to our recent concluded investigation, which negatively impacted EPS by approximately 4 cents.

Speaker Change: Second we assume current pressure on the consumer persists and that they will remain choice full in their discretionary spend.

On a year to date basis, cash used by operating activities was $30 million largely driven by lower earnings. Capital expenditures total $649 million.

Speaker Change: And third the fourth quarter of 2024 is a 13 week period, while fourth quarter 2023 was a 14 week period. The 50 <unk> week in fiscal 2023 contributed $252 million to net sales.

Free cash flow was an outflow of $492 million and we have paid $144 million in cash dividends.

Speaker Change: For the fourth quarter net sales are expected to be seven $8 billion to $8 billion on a 13 week basis net sales are expected to be down approximately 1% to up approximately one 5%.

We also completed a $220 million tender offer to further remove liabilities from the enterprise while keeping the flexibility to fund our own growth and invest in consumer facing initiatives.

Speaker Change: Although quarter to date comparable sales trends have improved sequentially from the third quarter. There are several large volume weeks still ahead we.

We, along with our board, are constantly evaluating our capital deployments to ensure it aligns with our priorities, which are maintaining a healthy balance sheet, investing in profitable growth initiatives and returning capital to shareholders.

Speaker Change: We are pleased with recent trends, but do not believe there will be a full recapture of the lost cold weather product sales, especially given this year's shortened holiday season.

Before discussing our 4th quarter and full year outlooks, a few reminders.

Other revenues are projected to be roughly $206 million to $216 million, including credit card revenues of approximately $138 million to $148 million.

First, the outlooks incorporate the revised historical delivery expense and updated delivery expense expectations for the 4th quarter and fiscal year, a small package delivery expense had not been forecasted properly by the individual responsible for the erroneous accounting entries.

Speaker Change: Gross margin rate to be approximately 35, 3% to 35, 7%, which includes a roughly 85 basis point accounting adjustment for delivery expense that was not included in our previously issued guidance.

Second, we assume current pressure on the consumer persists and that they will remain choiceful in their discretionary spend.

And 3rd, the 4th quarter of 2024 is a thirteen-week period while 4th quarter 2023 was a 14-week period.

Speaker Change: On an adjusted basis year over year. The majority of the anticipated gross margin rate decline is due to the shift of cost accounting at the beginning of this fiscal year.

The 53rd week in fiscal 2023 contributed $252 million to net sales.

Speaker Change: The gross margin outlook range also incorporates our expectation for a heightened promotional environment relative to our prior view and commitment to taking actions to limit inventory liabilities, particularly in seasonal goods as we enter fiscal 2025.

For the 4th quarter,

Net sales are expected to be 7.8 to $8 billion.

On a 13 week basis, net sales are expected to be down approximately 1% to up approximately 1.5%.

Speaker Change: End of quarter inventories to be roughly flat on a reported basis relative to last year.

Although quarter to date comparable sales trends have improved sequentially from the 3rd quarter.

Speaker Change: Adjusting for the shift to cost accounting inventories would be projected down low single digits.

There are several large volume weeks still ahead.

Speaker Change: We are proud of the work the team has done to improve our sales to stock ratio.

We are pleased with recent trends, but do not believe there will be a full recapture of the lost cold weather product sales, especially given this year's shortened holiday season.

Speaker Change: Asset sale gains are expected to be roughly $32 million primarily.

Speaker Change: Reflecting the pull forward of certain asset monetization into the fourth quarter from fiscal 2025.

Other revenues are projected to be roughly 206 to $2160 million including credit card revenues of approximately 138 to $148 million.

Speaker Change: Finally, we expect adjusted diluted EPS of $1 40.

Speaker Change: To $1 65.

Speaker Change: Including an approximately 17% adjustment for delivery expense.

Gross margin rate to be approximately 35.3% to 35.7%, which includes a roughly 85 basis point accounting adjustment for delivery expense that was not included in our previously issued guidance.

Speaker Change: Taking into account third quarter results and our fourth quarter outlook. We now expect the following for the full year 2024.

Speaker Change: Net sales of approximately 22, three to $22 $5 billion.

On an adjusted basis, year over year, the majority of the anticipated gross margin rate decline is due to the shift the cost accounting at the beginning of this fiscal year.

Speaker Change: For the full year, we now assume Macy's Inc. Comps inclusive of non go forward locations in digital to be down 1% to roughly flat representing a sequential improvement from the third quarter levels Macy.

The gross margin outlook range also incorporates our expectation for a heightened promotional environment relative to our prior view and commitment to taking actions to limit inventory liabilities, particularly in seasonal goods as we enter fiscal 2025.

Speaker Change: Macy's nameplate go forward locations and digital are expected to be down 1% to roughly flat and our luxury nameplates are expected to collectively be up 2% to up two 5%.

End of quarter inventories to be roughly flat on a reported basis relative to last year.

Adjusting for the shift to cost the counting, inventories would be projected down low single digits.

Speaker Change: Other revenue of $680 million to $690 million, including credit card revenues of $500 million to $510 million.

We are proud of the work the team has done to improve our sales to stock ratio.

Speaker Change: Gross margin as a percent of net sales of 38, 2% to 38, 3%. This compares to an adjusted prior outlook of 38, 6% to 38, 8%, which includes an approximate 40 basis point adjustment for delivery expense.

As they gains are expected to be roughly $32 million primarily reflecting the pull forward of certain asset monetizations into the 4th quarter from fiscal 2025.

Finally, we expect adjusted diluted EPS of $1.40 to $1.65 including an approximately 17 cents adjustment for delivery expense.

Speaker Change: The adjusted full year gross margin outlook is relatively in line with last year's adjusted rate.

Taken into account 3rd quarter results and our 4th quarter outlook, we now expect the following for the full year 2024.

Speaker Change: SG&A as a percent of total revenue of 36, 5% to 36, 3%.

Speaker Change: Asset sale gains of approximately $135 million in asset sale monetization proceeds of approximately $275 million compared to our prior outlook of $115 million and $150 million respectively.

Net sales of approximately 22.3 to $22.5 billion.

For the full year, we now assume Macy's Inc. Cos inclusive of non-go forward locations in digital to be down 1% to roughly flat, representing a sequential improvement from the 3rd quarter levels. Macy's nameplate go forward locations and digital are expected to be down 1% to roughly flat, and our luxury name plates are expected to collectively be up 2% to up 2.5%.

Speaker Change: Adjusted EBITDA as a percent of total revenue of 8% to eight 4%. This compares to an adjusted prior outlook of eight 2% to eight 7%, which includes an approximately 35 basis point adjustment for delivery expense.

Other revenue of 680 to $690 million including credit card revenues of 500 to $510 million.

Speaker Change: Annual adjusted diluted EPS outlook of $2 25 to.

Speaker Change: To $2 50.

Speaker Change: Which comparison adjusted prior outlook of $2 34.

Gross margin as a percent of net sales of 38.2% to 38.3%.

To $2 69, which.

Speaker Change: Which includes 21 related to the adjustment of delivery expense.

This compares to an adjusted prior outlook of 38.6% to 38.8%, which includes an approximate 40 basis point adjustment for delivery expense.

Speaker Change: Capital spend of approximately $895 million, which compares to roughly $993 million last year. This represents our second consecutive year of reduced capital expenditures and reflects our commitment to efficient capital allocation.

The adjusted full year gross margin outlook is relatively in line with last year's adjusted rate.

SGNA as a percent of total revenue of 36.5% to 36.3%.

Speaker Change: To conclude as we close out this year and look to fiscal 2025 were thoughtfully balancing the consumers' desire for value with our pursuit of profitable top line growth.

Asset sale gains of approximately $135 million in asset sale monetization proceeds of approximately $275 million compared to our prior outlook of $115 million and $150 million respectively.

We're taking learnings, making adjustments building on successes and finding additional areas of opportunity.

Speaker Change: We are encouraged by recent results and fourth quarter to date comparable sales trends across nameplates and remain focused on navigating the near term while executing our longer term goals supported by our strong and experienced team and our healthy balance sheet with that I'd like to pass it back to Tony.

Adjusted ebi dots a percent of total revenue of 8% to 8.4%.

This compares to an adjusted prior outlook of 8.2% to 8.7%, which includes an approximately 35 basis point adjustment for delivery expense.

Tony Spring: Thank you Adrian.

Tony Spring: We now have three quarters of our three year bold new chapter strategy in the books and three consecutive quarters of sales growth and improved net promoter scores leading to our third consecutive quarter of positive comps in Macy's first 50 locations and Bloomingdale's and Blue Mercury also comping positive in the third quarter.

And you'll adjust the diluted EPS outlook of $2.25 to $2.50 which compares to an adjusted prior outlook of $2.34 to $2.69 which includes 21 cents related to the adjustment of delivery expense.

Capital spend of approximately $895 million which compares to roughly $993 million last year.

Tony Spring: All of our nameplates are well positioned for growth supported by end to end operations, which are yielding customer facing benefits and cost savings as well as improving enterprise wide inventory management.

This represents our 2nd consecutive year of reduced capital expenditures and reflects our commitment to efficient capital allocation.

Tony Spring: Although we still have work to do we believe our bold new chapter initiatives, including the closure of roughly 65. Non go forward locations. This year gets us even closer to our go forward and state of becoming a more profitable Macy's Inc.

To conclude

As we close out this year and look to fiscal 2025.

We're thoughtfully balancing the consumer's desire for value with our pursuit of profitable top line growth.

We're taking learnings, making adjustments, building on successes, and finding additional areas of opportunity.

Speaker Change: Thank you Tony with that operator, we are ready for questions on our third quarter results and fourth quarter and fiscal year outlook.

We are encouraged by recent results and 4th quarter to date comparable sales trends across nameplates and remain focused on navigating the near term while executing our longer term goals, supported by our strong and experienced team and our healthy balance sheet.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Information tone will indicate your line is in the question queue you.

Speaker Change: 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 your handset before pressing the star keys. Please.

With that, I'd like to pass it back to Tony.

Thank you, Adrian.

We now have 3 quarters of our 3-year bold new chapter strategy in the books, and 3 consecutive quarters of sales growth and improved net promoter scores, leading to our 3rd consecutive quarter, a positive comps.

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

Speaker Change: Our first question today is coming from Matthew boss of Jpmorgan. Please go ahead.

Speaker Change: Great. Thanks.

In Macy's 1st 50 locations and Bloomingdale's and Blue Mercury also copy positive in the 3rd quarter.

So Tony could you elaborate on drivers of the comp improvement in the back half of the year and with the fourth quarter comp guidance pointing to your first positive comp in three years, what drivers do you see as sustainable what initiatives, specifically build or accelerate into 2025, and then Adrian <unk>.

All of our nameplates are well positioned for growth, supported by end to end operations which are yielding customer facing benefits and cost savings, as well as improving enterprise wide inventory management.

Although we still have work to do. We believe our bold new chapter initiatives, including the closure of roughly 65.

Speaker Change: On the target for long term sustainable positive growth.

Speaker Change: You see high <unk> gross margin is sustainable or or any areas of give back that we would need to consider.

Non go forward locations this year gets us even closer to our go forward end state of becoming a more profitable Macy's Inc.

Speaker Change: Thanks, Matt appreciate the question.

Speaker Change: Yes, we feel strongly about the progress we're seeing on the top line. Obviously, the first 50 locations at one 9% for the quarter are the best leading indicator of the growth potential of the Macy's brand. We look forward to expanding our first 50 program in 2025, and we'll talk about that more on the fourth.

Thank you, Tony. With that operator, we are ready for questions on our 3rd quarter results and 4th quarter and fiscal year outlook.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will your line is in the question queue.

Speaker Change: Our earnings call, but we're seeing progress across a number of categories, whether at Macy's, we're talking about tailored clothing or dresses continued strength in fragrances mattresses. So it's across a broad array of categories and I think those are all sustainable as we go into the next fiscal year, obviously, we're continuing to see.

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

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

Please limit yourself to one question and one follow-up.

Our first question today is coming from Matthew Boss of JP Morgan. Please go ahead.

Speaker Change: <unk> strength at Bloomingdale's, and Blue Mercury and I think the Bloomingdale's team has done an outstanding job at building on their recent success and positioning that brand for further expansion and growth.

Great, thanks, um, so Tony, could you elaborate on drivers of the comp improvement in the back half of the year and with the 4th quarter comp guidance pointing to your first positive comp in 3 years. What drivers do you see as sustainable? What initiatives specifically build or accelerate into 2025 and then Adrian just on the target for long term sustainable positive growth. So do you see high 30s gross margin, a sustainable or or any areas of give back.

The private brand reinvent is almost complete we have the home store to do next year, but that instead of being a headwind becomes a tailwind as we go forward. So looking at it from a merchandize assortment category assortment brand matrix.

Speaker Change: Price strategy I think if we could set aside some of the issues that have impacted us. This quarter. We are positioned I think for improvement as we go forward.

That we would need to consider.

Thanks, Matt. I appreciate the question. um, yes, we, uh, feel strongly about the progress we're seeing on the top line. Obviously the 1st 50 locations at 1.9% for the quarter are the best leading indicator of the growth potential of the Macy's brand. Uh, we look forward to expanding our 1st 50 program in 2025 and we'll talk about that more on the 4th quarter earnings call, but we're seeing progress across a number of categories whether it Macy's, we're talking about.

Speaker Change: Good morning, and thank you for your question as you think about the path ahead, we remain enthusiastic and we remain committed to the results that we believe a bold new chapter.

Speaker Change: We will deliver for us.

Speaker Change: Laser focused on really the fundamentals of the business and as Tony pointed out we're very encouraged with the top line momentum that we're seeing we're seeing it in the F 50 stores, we're seeing it in the 100 pilot stores for women's and handbags were seeing it in our luxury segment. We're just really encouraged by what that looks like on the <unk>.

clothing or dresses, continued strength and fragrances, mattresses, so it's across a broad array of categories.

Speaker Change: <unk> margin side, what I would say here is that we do expect to continue to lean into improvements in our gross margin through a combination of factors, but this holiday season, we're navigating a competitive discretionary environment, but what were seeing gives us encouragement that we can continue to achieve year over year sales growth that's.

And I think those are all sustainable as we go into the next fiscal year.

Obviously we're continuing to see strength at Bloomingdale's and Blue Mercury, and I think the Bloomingdale's team has done an outstanding job at building on their recent success and positioning that brand for further expansion and growth.

The uh private brand, uh, reinvent is almost complete. We have the home store to do next year, but that instead of being a headwind becomes a tailwind as we go forward. So looking at it from a merchandise assortment category assortment brand matrix, uh, price strategy. I think if we could set aside some of the issues that have impacted us this quarter. We are positioned, I think, for improvement as we go forward.

Speaker Change: Profitable overtime. If you just think about what we're dealing with in this environment. We do see a customer that's very value oriented we seed into higher sales penetration of our clearance. We are seeing it and how the customer has responded to our offers and one of the biggest challenges we had with the unseasonably warmer weather later into the year is that a lot.

Speaker Change: Our higher margin categories Cold weather is really coming on line sequentially a bit later than what we had expected, but we have to manage a number of variables. Matt we have to manage their inventory control we have to manage with a customer is looking for in terms of value, which is around experience great product et cetera, et cetera, we have to execute well.

Matt, good morning and, and thank you for your question as you think about uh the path ahead, you know, we remain enthusiastic. We remain committed to the results that we believe the bold new chapter, uh, you know, will deliver for us, you know, we're laser focused on really the fundamentals of the business and as Tony pointed out, we're very encouraged with the top line momentum that we that we're seeing, we're seeing it in the F50 stores. We're seeing it in the 100 pilot stores for women and handbags. We're seeing it in our luxury.

Speaker Change: And so we continue to invest in the fundamentals of the business and driving profitable sales growth and the thing that I would leave you with as well as we're really encouraged by the quality of execution in our opening remarks, we talked about better in stocks faster delivery highest NPS scores for bloomingdale's, and Macy's and history.

segment we're just really encouraged by what that looks like on the gross margin side, you know, what I would say here is that we do expect to continue to lean into improvements in our gross margin through a combination of factors. But, you know, in this holiday season, we're navigating a competitive discretionary environment, but what we're seeing gives us encouragement that we can continue to achieve year over year sales growth that's profitable over time. If you just think about what we're dealing with in this environment, we do see a

And so we're seeing progress coming out of this transition and investment year and we're very encouraged by the results as we look ahead.

Speaker Change: Great Best of luck.

Matt: Thank you Matt Thank you.

Speaker Change: Thank you. The next question is coming from <unk> of Goldman Sachs. Please go ahead.

Speaker Change: Good morning, and thank you for taking our question Tony as you invest in customer experience and staffing and for safety and select shoe and handbag initiative.

that's very value oriented. We see it in the higher sales penetration of our clearance, we're seeing it and how the customer has responded to our offers, and one of the biggest challenges we had with the unseasonably warmer weather later into the year is that a lot of our higher margin categories, cold weather is really coming online sequentially a bit later than what we had expected. But we have to manage a number of variables, Matt. We have to manage their inventory control. We have to manage what the customer is looking for in terms of value, which is.

Speaker Change: What gives you confidence that these test locations are transferable to a broader swath of the fleet and do you expect these to be accretive to profitability as we move into 2025, given the additional SG&A investments and then for Adrian could you just elaborate a little bit more on your updated outlook for gross margins for the fourth quarter and what youre seeing in the promotional environment.

Speaker Change: What changes have you made to your promotional calendar versus 90 days ago, and how should we be thinking about the opportunity to recapture that pressure into 2025.

Speaker Change: Good morning Brook, and thanks for the question I think that the investments that we've made in our first 50 locations and frankly in the 100 other pilot shoe and handbag doors gives us confidence that the customer is responding to the changes that we're making in those stores, that's three consecutive quarters of comp store sales growth.

Bloomingdale's and Macy's in history. And so we're seeing progress coming out of this transition and investment year and we're very encouraged by the results as we look ahead.

And acceleration of comp growth in the first 50 from the second quarter 600, 700 basis points of improvement in those additional 100 test locations. So I think the net promoter score being up over 400 basis points for a third consecutive quarter highest net promoter scores that we've seen on record at Macy's.

Great. Best of luck.

Thank you, ma'am. Thank you.

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

Good morning and thank you for taking our question. Tony, if you invest in customer experience and staffing in for 50 and select shoe and handbag initiative. What gives you confidence that these test locations are transferable to a broader swath of the fleet, and do you expect this to be a creative to profitability as we move into 2025 given the additional SGA investment.

Speaker Change: Brand. So all of those to me are strong indicators that the changes that we're making are the right changes that we underserved the customer in the Macy's brand and our store experience and we had to make the necessary changes to create a better shopping experience on the question of affordability of investment that's our responsibility.

And then for Adrian, could you just elaborate a little bit more on your updated outlook for gross margins for the 4th quarter and what you're seeing in the promotional environment, what changes have you made to your promotional calendar versus 90 days ago and how should we be thinking about the opportunity to recapture that pressure into 2025.

Speaker Change: We have to make choices and we have to make sure that we can provide the customer with a compelling reason to shop at macys, they are going to be accretive to the overall profitability of the company.

Speaker Change: But that will be through our adjustments to the other ways in which we invest in our business. This to us is a priority.

Good morning, Brooke and and thanks for the question. Uh, I think that the investments that we've made in our 1st 50 locations and frankly in the 100 other pilot shoe and handbag doors gives us confidence that the customers responding to the changes that we're making in those stores. That's 3 consecutive quarters of Compto sales growth and acceleration of comp growth in the 1st 50 from the second quarter, 600, 700 basis points of improvement in those additional 100 test locations.

Speaker Change: We set out this year to change the Macy's experience, we picked 50 stores to do it we will expand first 50 next year and that expansion strategy will be communicated on our fourth quarter call.

Speaker Change: Good morning Brook, let me speak briefly to the gross margin outlook I'd start here by saying that the teams are executing well there are a number of different factors that we're navigating.

Speaker Change: As it relates to the gross margin just a quick reminder, that the fourth quarter includes roughly 85 basis point adjustment for the delivery expense and we've reflected the adjusted numbers comparable year over year in the press release. This morning, and the form 8-K now relative to what we talked about with regards to our outlook we are updating.

So I think the net promoter score being up over 400 basis points for a third consecutive quarter, highest net promoter scores that we've seen in on record at the Macy's brand, so all those to me are strong indicators that the changes that we're making are the right changes that we underserve the customer in the Macy's brand in our store experience and we had to make the necessary changes to create a better shopping experience. On the question of affordability of investment, that's our respon

Speaker Change: Our outlook for just the competitive and promotional landscape that we're dealing with we see that the consumer remains under pressure the consumer remains quite choice full and discretionary spending and where we're adjusting is that we're focused on offering real value and making sure that we're doing so as profitably as possible.

po s s ibility We, we have to make choices and we have to make sure that we can provide the customer with a compelling reason to shop at Macy's.

Speaker Change: To win share within the market, but we are navigating a number of things, we're navigating whether we'd never in a competitive environment for navigating a variety of promotions that's happening in the marketplace, but overall, we feel good about our marketing calendar across all of our nameplates. The newness of content for the holiday season, the quality of the merchandise and the quality of execution.

They are going to be a creative to the overall profitability of the company, but that will be through our adjustments to the other ways in which we invest in our business. This to us is a priority. We set out this year to change the Macy's experience. We picked 50 stores to do it. We will expand 1st 50 next year and that expansion strategy will be communicated on our 4th quarter call.

Speaker Change: Across the operation across our markets and across our channels. So we will continue to be very thoughtful we're very pleased with the sequential improvement in sales throughout the course of quarter to date relative to the prior quarter, but were balancing profitability inventory management the quality of sell throughs as we navigate the balance of the season.

Good good morning Brooke. Let me speak briefly to the gross margin outlook, you know, I'd start here by saying that the teams are executing well, you know, there are a number of different factors that we're navigating.

As it relates to the gross margin, just a quick reminder that the 4th quarter includes roughly 85 basis point adjustment for the delivery expense and then be reflected the adjusted numbers comparable year over year in the press release this morning and the form AK. Now relative to what we talked about with regards to our outlook, you know, we're updating our outlook for just the competitive and promotional landscape that we're dealing with we see that the consumer remains under pressure, the consumer remains quite choiceful in this question.

Speaker Change: Okay.

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

Speaker Change: Thank you Brett.

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

Speaker Change: Hi, guys. This is Blake on for Ashley Thanks for taking our question. So I wanted to ask on the first 50 stores.

Speaker Change: Wondering if you could touch on AUR versus traffic and conversion for those and then just second question on that topic on the first 50.

or spending and where we're adjusting is that we're focused on offering real value and making sure that we're doing so as profitably as possible, you know, in order to win share within the market. But you know, we're navigating a number of things. We're navigating weather, we're navigating competitive environment, we're navigating a variety of promote marketplace, but overall, we feel good about our marketing calendar across all of our name plates, the newness of content for the holiday season, the quality of the merchandise, and the quality of execution across the

Speaker Change: Are you seeing new customers show up to the first with the stores that you might have.

Speaker Change: Not seen before.

Speaker Change: Does that customer compare to the traditional Macy's shopper.

Speaker Change: Thanks, Blake I'll take the first part of it and Adrian can add anything he'd like.

Speaker Change: We're seeing consistent performance in the first 50 as it relates to the metrics that we measure. So we're obviously looking at all elements of that equation, whether it be AUR IPP.

operation across our markets and across our channels. So we'll continue to be very thoughtful. We're very pleased with the sequential improvement in sales throughout the course of quarter to date relative to the prior quarter, but we're balancing profitability inventory management, the quality of self rus as we navigate the balance of the season.

Adrian Mitchell: Average order value numbers of customers conversion.

Adrian Mitchell: The biggest driver of performance has been AUR growth and average order value growth. We're certainly seeing the customers who are familiar with those stores spend more and increase their visits and we're beginning to see some new customers.

Adrian Mitchell: The reality is more of our new customers today come through our digital channel. So it's our opportunity because those those customers by the way live in a geography is to bring them into a location to make them an omni a consumer.

Great, thanks so much I'll pass it on.

Thank you bro.

Thank you. The next question is coming from Ashley Holgans of Jeffrey. Please go ahead.

Hi guys, it's Blake on for Ashley. Thanks for taking our question. So I wanted to ask on the 1st 50 stores.

Adrian Mitchell: The work again from the types of stores we have.

Uh, wondering if you could touch on AUR versus traffic and then conversion for those and then just second question on that topic on the 1st 50. Are you seeing uh new customers show up to the 1st 50 stores that you might have not seen before, uh, how does that customer compare to the traditional Macy's chopper.

Adrian Mitchell: Stores that are less than $40 million, we have stores that are over $150 million. So we're learning a lot with stores that exist across the entire country stores have different volume levels and as we did the expansion of the shoe and handbag test we went to lots of different types of stores to again increase our learnings in 2024 in this.

Adrian Mitchell: Transition and investment year to set us up for expansion of first 50 in 2025.

Thanks, uh, Blake. I'll take the first part of it in Adrian can add anything he'd like, um, you know, we're, we're seeing consistent performance in the 1st 50 as it relates to the metrics that we measure, so we're obviously looking at all elements of that equation, whether it be AUR IPT, um, average order value numbers of customers conversion, um, the biggest, uh, driver of performance has been AUR growth and average order value growth, we're certainly seeing the customers who are from

Adrian Mitchell: Adrian.

Adrian Mitchell: Blake good morning, Tony covered it quite well just a few things around the proof points, which I think is quite important here. When you think about some of the opening comments around NPS improved for our Macy's business, but it has improved even more sequentially for a 50 stores. When you think about the categories that we've touched like <unk>.

Adrian Mitchell: Ready to wear women's shoes handbags, the places where we've made capital light investments in these categories you see a pretty significant acceleration when you think about all the volatility and what we've dealt with throughout this year of 2024 year to date three consecutive quarters of year over year growth and growth that's more than 400 basis points ahead of those.

fa mi li ar with those stores, uh, spend more and increase their visits, and we're beginning to see some new customers. Uh, the reality is, uh, more of our new customers today come through our digital channel so it's our opportunity because those those customers, by the way, live in a geography is to bring them into a location to make them an Omni consumer.

Adrian Mitchell: Stores that did not have to change to Tony's earlier point. The 100 store test was really important for us because we wanted to demonstrate that putting in these key capital light changes into these stores can they make a difference and can they be replicated at scale and the simple answer is yes. They can so we are quite encouraged we've learned a ton.

Um, the, the work again from the types of stores we have, uh, stores that are less than $40 million. We have stores that are over $150 million so we're learning a lot with stores that exist across the entire country stores of different volume levels and as we did the expansion of the shoe and handbag test, we went to lots of different types of stores to again increase our learnings in 2024 in this transition and investment year to set us up for expansion of 1st 50.

Adrian Mitchell: We see additional opportunities that we will bring online in 2025, but we feel very good about what we've learned we feel good about the progress, but our work is not done.

In 2025.

Speaker Change: That's great to hear thanks, so much and best of luck for the holidays. Thank you Blayne. Thank you Blake.

Adrian, um, you know, I think, uh, Blake, good morning, uh, Tony covered it quite well. Just a few things around the proof points which I think is quite important here, you know, when you think about uh some of the opening comments around NPS. It's improved for our Macy's business, but it's improved even more sequentially for our F50 stores. When you think about the categories that we've touched, like ready to wear women's shoes, handbags, the places where we've made capital right investments in these categories, you see a pretty significant acceleration.

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

Speaker Change: Good morning, everyone and nice to see the progress on Bloomingdale's Mercury and.

Speaker Change: How you're progressing when you think about the store closure rate taken up the 66, what had been 55, what's the difference and does this change at all of the 150 in total over the next three years that you were talking to second thing is on the smaller format stores, how would those two billing and the merch margin down.

When you think about all the volatility and what we've dealt with throughout this, this year of 2024, year to date, 3 consecutive quarters of year over year growth and growth that's more than 400 basis points ahead of those stores that did not have to change. The Tony's earlier point, the 100 store task was really important for us because we wanted to demonstrate that putting in these key capital right changes into these stores. Can they make a difference? And can they be replicated at scale, and the simple answer is yes.

Speaker Change: 70 basis points I think it was up to 10 last quarter delivery expense and how do you unpack it and how you're thinking about it going forward. Thank you.

Speaker Change: Let me take the first one and I'm going to turn it over to Adrian for a good part of your question Dana Good morning.

Adrian Mitchell: At the start of the closure strategy said, we had locations that were less profitable and less productive and we wanted to monetize them as soon as possible. So the fact that we are closing more stores. This year is a reflection of the fact that our assets have value and that even in this less stable market.

they can. So we're quite encouraged. We've learned a ton. We see additional opportunities that we'll bring online in 2025, but we feel very good about what we've learned. We feel good about the progress, but our work is not done.

Adrian Mitchell: We're transacting and the number remains approximately 150 will provide an update on that as we get into 2025, but the core is to get to a fleet that we think can provide sustainable profitable growth for the enterprise.

That's great to hear. Thanks so much and best of luck for the holidays.

Thank you. Thank you, Blake.

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

Good morning everyone, and nice to see the progress on the Bloomingdale and Mercury and, and how you, how, how you're progressing. When you think about the store closure rate taken up to 66 from what had been 55. What's the difference and does this change at all, the 150 in total over the next 3 years that you were talking to. Second thing is on the smaller format stores, how are those doing? And the merch margin down 70 basis points, I think it was up 210 last quarter.

Adrian Mitchell: We've continued to open Macy's small formats, we're up to 24 located locations and like first 50, we're learning as we go Bloomingdale's opened its fourth small format and Shrewsbury in New Jersey, and very pleased with the initial response to that smallest location.

Adrian Mitchell: We have.

Adrian Mitchell: Adrian will talk little bit about margin, yes, absolutely. Let me just add one thing with regards to the closures just to amplify Tony's point.

Delivery expense and how do you unpack it and how you're thinking about it going forward. Thank you.

Adrian Mitchell: With regards to the closures of approximately 65 relative to the <unk> year with we're just seeing really good deal, making and we are eager to get to the go forward enterprise. So when we're able to have favorable deals that are at or above our expectations. We're certainly taken advantage of that opportunity and as we said earlier, we do have a <unk>.

Uh, let, let me take the first and I'm going to turn over to Adrian for a good part of your question, Dana. Uh, good morning. Um, we, at the start of the closure strategy said we had locations that were uh less profitable and less productive, and we wanted to monetize them as as soon as possible, so with the fact that we are closing more stores this year is a reflection of the fact that our assets have value and that even in this less uh stable uh market, uh, we're transacting and the

Adrian Mitchell: A long history in terms of managing these opportunities unlocking value. The great thing about that is that with the monetization, which we highlighted in terms of sales proceeds being approximately $275 million forecasted for this year Thats almost two X what we planned coming into the year that gives us capital to invest in the go forward enterprise and <unk>.

Uh, number remains approximately 150. We'll we'll provide an update on that as we get into 2025, but the core is to get to a fleet that we think can provide sustainable profitable growth for the enterprise.

Adrian Mitchell: To return to our shareholders now as it relates to margin on the adjusted financials that we provided what you see is some deterioration in the in the merchandise margin that's about the product mix given the weather impact that's about the competitive environment that we're in that we spoke to a little bit earlier and in terms of the delivery expense from an operating standpoint, we do see.

Um, we've, uh, continued to uh open uh Macy's small formats, uh, we're up to 24 locations, um, and like, uh, 1st 50, we're learning as we go, uh, Bloomingdale's opened its 4th, uh, small, uh, format in Shrewsbury, New Jersey, and very pleased with the initial response to that smallest uh location that we have.

<unk> and how we are managing the expense profile and the quality of execution on the delivery side, but keep in mind Tony myself. The team are very much focused on the fundamentals focus on managing our profitability and we do have line of sight to our goal of achieving profitable growth as we look ahead.

Adrian, you wanna talk a little bit about margin? Yes, absolutely. Let me just add one thing with regards to the closures just to amplify Tony's point, um, with regards to the closures of approximately 65 relative to the 50 we started the year with, we're just seeing really good deal making and we are eager to get to the go for enterprise. So when we're able to have favorable deals that are at or above our expectations, we're certainly taking advantage of that opportunity. And as we said earlier, we do have a long history in terms of managing.

Speaker Change: And Dana I would just add that the comparability because of their conversion to cost accounting. The reference you made to the second quarter beat the gross margin.

Was benefited from cost accounting conversion and the third quarter Miss was impacted by the conversion of cost accounting, we couldnt be more excited to get to 2025. So that we have these conversions and changes behind us. So you have a better view into the natural margin of the company.

these opportunities unlocking value. The great thing about that is that with the monetization, which we highlighted in terms of sales proceeds being approximately 275 million forecasted for this year. That's almost 2x what we planned coming into the year that gives us capital to invest in the Goor enterprise and capital to return to our shareholders. Now, as it relates to margin, on the adjusted financials that we provided, what you see is some deterioration in the, in the merchandise margin. That's about the product mix, given the weather.

Speaker Change: Thank you.

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

Oliver Chen: Hi, happy holidays.

Oliver Chen: Assumed in terms of the guidance at the higher end of your comp range relative to the lower.

Speaker Change: And then your comments related to the value and the customer throughout the call how does that intersect with your private brand development as well as we think about merchandize margin and promotions on a longer term basis. Thank you.

impact that's about the competitive environment that we're in that we spoke to a little bit earlier and in terms of the delivery expense from an operating standpoint we do see improvement in how we're managing the expense profile and the quality of execution on the delivery side. But keep in mind, Tony, myself, the team are very much focused on the fundamentals, focus on managing our profitability and we do have a lot of sites to our goal of achieving profitable growth as we look ahead.

Speaker Change: So Oliver it's great to be with you this morning.

Speaker Change: The guidance range on the top end shows year over year growth and as you look at our performance in the fourth quarter of last year, we reflect on a good quarter last year. So on the high end having growth year over year, we're quite encouraged by on the low end of the range, it's about 1% decline year over year and were talking about this.

And Jay and I would just add that the comparability because of the conversion to cost accounting, the reference you made to the 2nd quarter beat the gross margin.

Uh, was benefited from cost accounting conversion and the 3rd quarter miss uh was uh impacted by the conversion across the county. We couldn't be, you know, more excited to get to 2025 so that we have these conversions and changes behind us so you have a better view into the natural margin of the company.

Speaker Change: On a 13 week comparable basis and so we're quite encouraged I think the most important thing that we've seen as we've progressed through this investment year is sequential improvement in performance as Tony spoke about in the opening remarks, our quarter to date trends are better than what we saw in the third quarter and so we're encouraged by how all this is.

Thank you.

Speaker Change: Really coming together with it within the business.

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

Speaker Change: Private brands and I would add Oliver we're using 2019 as the analog year because of the five fewer days between Thanksgiving and Christmas and the fact that you have a later hanukkah that year.

Hi, happy holidays. Um, what's assumed in terms of the guidance at the higher end of your comp range relative to the lower, uh, and then your comments related to to value and the customer throughout the call. How does that intersect with your private brand developments as well as, as we think about merchandise margin and promotions on a, on a longer term basis. Thank you.

Speaker Change: Another reinforcement for the quarter to date trends versus the third quarter and why we are cautiously optimistic on our opportunities to improve our revenue performance.

Speaker Change: Private brands is absolutely a part of being able to respond to the value.

Speaker Change: The equation and the desire of the consumer to have choice and be able to invest.

So, uh, Oliver, it's great to be with you this morning. Um, look, the, the guidance range on the top end shows year over year growth. And as you look at our performance in the 4th quarter of last year, we reflect on a good quarter last year, so, you know, on the high end, um, having growth year over year we're quite encouraged by. On the low end of the range, it's about 1% decline year over year and we're talking about this on a 13 week comparable basis and so we're quite encouraged. I think the most important

Speaker Change: Where they see fit and to be able to have more value, where theyre looking for it and we see that in our cashmere program in charter club. This year is having a very strong response, even with the inconsistency and whether we're seeing that with the growth in style and co. We're continuing to see that with the.

Speaker Change: Strength within parts of our private brand business within.

Speaker Change: The mens pyramid so.

thing that we've seen as we progress through this investment year is sequential improvement in performance. As Tony spoke about in the opening remarks are quoted to date trends are better than what we saw in the 3rd quarter and so we're encouraged by how all this is really coming together within within the business.

Speaker Change: Area by area and 85% of our businesses market brands. So it's obviously.

Speaker Change: Equally important or more important that we get that right too for both a breadth of assortment and a breadth of price.

Speaker Change: Availability, so the customer finds their definition of value across our suite of brands.

Yeah, and I would add, Oliver, you know, we're using a 2019 is the analog year because of the 5 fewer days between Thanksgiving and Christmas and the fact that you have a later Hanukkah that year, that's another reinforcement for the quarter to day trends versus the 3rd quarter and and and why we're cautiously optimistic on our opportunities to improve our, our revenue performance. Yes, private brands is absolutely a part of being able to respond to the value, uh, equation and the desire of the consumer to have

Okay, and you made really nice progress with first 50, which aspects of course, 50 will be easier and faster to implement versus aspects that will take a little bit longer. Thanks a lot.

Speaker Change: Well I think if you breakdown Oliver the first 50 into the things that we did differently I just want to remind.

Speaker Change: The community that it's an asset light strategy. So if we really did not put a lot of capital into these stores the focus was on.

and to be able to invest.

Uh, where they see fit and to be able to have uh more value where where they're looking for it and uh we see that in our uh cashmere program and in charter club this year is having a very strong response even with the inconsistency in weather we're seeing that with the growth in uh Sty and Co. uh, we're continuing to see that, you know, with the uh strength within parts of our private brand business within um the men's pyramid. So, you know, it, it's area

Operating expense and merchandising strategy. So certainly less density on the floor is very easy to replicate the visual enhancements are easy to replicate based on the dedicated visual team that we have in the stores the.

Speaker Change: The ability to have a common set of relevant brands is easier to execute once we have a go forward fleet that is compelling to the vendor community.

Speaker Change: The additional staffing is the one that we will have a variable strategy for because if we're talking about a $20 million box versus a $150 million box that incremental staffing will obviously be different based on the rate of sale.

area and 85% of our businesses market brands, so it's obviously, uh, equally important or more important that we get that right too for both a breath of assortment and a breath of price, uh, availability, so the customer finds their definition of value uh across our suite of brands.

Speaker Change: Interestingly, what we're also learning as some of our lower volume stores are having our largest increases which gives us confidence in the next wave of first 50 that we will have as much or more opportunity for improvement in the Macy's fleet.

OK, and you made really nice progress with 1st 50 which aspects of 1st 50 will be easier and faster to implement versus aspects that will take a little bit longer. Thanks a lot.

Speaker Change: Thank you best regards.

Speaker Change: Thank you thank you Oliver.

Well, I think if you break down Oliver the 1st 50 into the things that we did differently. I just want to remind uh the community that it's an asset light uh strategy. So we really did not put a lot of capital into these stores. The focus was on, uh, operating expense and um merchandizing strategy, so certainly less density on the floor is very easy to replicate the, the visual enhancements are easy to replicate based on the dedicated visual, uh, team that we have in.

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

Michael Binetti: Hey, guys. Thanks for taking our questions here.

Michael Binetti: So just a couple for me to get to the high end of the guidance in the fourth quarter comps up about 3%. When we think about the multitude of different same store sales lines. You report to US today beyond the first 50, which speak for themselves, which one of those comps in the presentation. We will see the biggest change in fourth quarter to get to the higher end of the.

Michael Binetti: Of the 3% guidance relative to the third quarter.

And then I guess using the first 50 as a leading indicator as you spoken to Tony what do you think about the timeline to close the gap between the first 50 and consistently in the positive low single digits in that two 5% decline for the non first 50 go forward and then as we think about 2025 and you think about closing the 65 doors, assuming those are unprofitable.

Once we have a go forward fleet that is compelling to the vendor community. I think the additional staffing is the one that we will have a variable strategy for because if we're talking about a $20 million box versus a $150 million dollar box that incremental staffing will obviously diff be different based on the rate of sale.

Interestingly, what we're also learning is some of our lower volume stores are having our largest increases, which gives us confidence in the next wave of 1st 50 that we will have um as much or more opportunity for improvement in the Macy's fleet.

Michael Binetti: And lower four wall margins like you've pointed to a few times all else equal and we consider some of the other forward looking comments you gave today do margins go up next year.

Speaker Change: So why don't I start and Tony I encourage you to add anything that I may Miss Mike It's great to be with you. This morning, and thanks for your questions. Let me talk about the high end first of all in terms of the sales guide when we think about what we've seen quarter to date, we're seeing sequential improvement across many dimensions of our.

Thank you, best regards. Thank you. Thank you, Oliver.

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

Hey guys, thanks for taking our questions here, um, so just a couple for me to get to the high end of the guidance in the 4th quarter comps up about 3% when we think about the multitude of different same store sales lines you report to us today beyond the 1st 50 which speak for themselves, which one of those.

Speaker Change: Business, we're seeing sequential improvement in digital we've seen sequential improvement in stores, we've seen sequential improvement in macys nameplate, we've seen sequential improvement in luxury both bloomingdales and Blue Mercury, we're seeing sequential improvement in that 50, we're seeing sequential improvement in the other go forward stores that have not received the investments yet so the way that we.

Thompson, the presentation we'll see the biggest change in 4th quarter to get to the higher end of the of the the 3% guidance relative to the 3rd quarter, um, and then I guess.

Speaker Change: <unk>. This is we want all boats to rise as part of a bold new chapter we've distorted investments in things like <unk> 50 in digital and we definitely are seeing a lot of that those investments now begin to harvest. So when we think about the high end of the range. What we're encouraged by with the sequential improvement is really the momentum that we're seeing building.

Using the 1st 50 is the leading indicator as you've spoken to Tony, what do you think about the timeline to close the gap between the 1st 50 it's been consistently in the positive list single digits and that's 2.5% decline for the non 1st 50 go forward and then as we think about 2025.

Speaker Change: And as you know these things work together and create more than the sum of the parts. So we're actually quite encouraged by that.

You think about closing the 65 doors, assuming those are unprofitable and lower for for Walmart and like you, you pointed to a few times all else equal when we consider some of the other forward looking comments you gave today do do margins go up next year?

Speaker Change: When we think about the first 50 to all stores as Tony mentioned these are capital light investments and we're encouraged by what we're able to very quickly replicate.

So why don't I start and uh Tony, I encourage you to, to add anything that I may miss. Um, Mike, it's great to be with you this morning and, and thanks for your, your questions. Uh, let me talk about the high end, um, first of all, in terms of the sales guide, when we think about what we've seen quarter to date, we're seeing sequential improvement across.

Speaker Change: A portion of these changes from the <unk> 50 to 100 stores, we wanted to understand how replicable how quickly the impact would show up and how do we do this at a level of scale as we think about our go forward business into next year now as we think about 2025, we're going to continue to manage a healthy balance sheet, we want it.

Many dimensions of our business we're seeing sequential improvement in digital. We're seeing sequential improvement in stores. We're seeing sequential improvement in Macy's nameplate, we see sequential improvement in luxury. Both Bloomingdale's and Blue Mercury. We're seeing sequential improvement in that 50. We're seeing sequential improvement in the other Goor stores that have not received the investments yet. So the way that we approach this is we want all boats to rise as part of a bony chapter. We've distorted investments and things like 1st 50 and digital, and we definitely

Speaker Change: Sure that we have the appropriate dealmaking, we're monetizing underperforming stores as well as right sizing our supply chain network. So we see opportunities for further monetization, but we will share more about what that looks like on our fourth quarter earnings call as we talked about earlier, we're focused on the fundamentals. That's the top line. That's the bottom line that's the margin pro.

Speaker Change: File, but we recognize that in the discretionary environment, we have to be thoughtful about how we're competing for share of wallet relative to our competition and navigating that as we progress but look we're encouraged.

are seeing a lot of that, those investments now begin to harvest. So when we think about the high end of the range, what we're encouraged by with the sequential improvement is really the momentum that we're seeing building and as you know, you know, these things work together and create more than the sum of the parts, so we're actually quite encouraged by that.

Speaker Change: We still have a road ahead, but as we think about when we entered the year, we talked about investment we talked about learning we talked about experimentation as we exit the year, we've gotten a lot done we've learned a ton theres more opportunities, we're going to lean into but the proof points are much clearer to us now than it was nine nine or 10 months ago.

When we think about the 1st 50 to all stores as Tony mentioned, these are capitalized investments and we're encouraged by what we're able to very quickly replicate a uh a portion of these changes from the F50 to 100 stores. You know, we wanted to understand how replicable, how quickly the impact would show up. And how do we do this at a level of scale as we think about our go go forward uh business into next year.

Speaker Change: I'd only add that the penetration Mike of the categories that are performing best goes up in the fourth quarter. So some of the guidance in the fourth quarter is also related to the penetration of those businesses. Some improvement some is related to the penetration and that also has an impact on the margin forecast as well.

Now as we think about 2025, we're going to continue to manage a healthy balance sheet. We wanna make sure that we have the appropriate deal making. We're monetizing.

Speaker Change: Okay. Thanks, a lot guys.

Speaker Change: Thanks, Mike.

Speaker Change: Yes.

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

Uh, underperforming stores as well as right sizing our supply chain network so we see opportunities for further monetization, but we'll share more about what that looks like on our 4th quarter earnings call. As we talked about earlier, we're focused on the fundamentals. That's the top line, that's the bottom line, that's the margin profile, but we recognize that in the discretionary environment, we have to be thoughtful about how we're competing for share of wallets relative to our competition and navigating that as we progress. But look, we're, we're encouraged, you know, we still

Speaker Change: Hi, good morning too.

Speaker Change: Two questions from me the first one just in the shoe and handbag locations can you just talk do you have the brands you need are you getting new brands is it or is it a labor support can you just expand a bit more in terms of the initiative and some of those trends and then the second question is on inventory levels.

Speaker Change: You said I think you said youre going to end the year flattish and you've made some adjustments on the sort of order books going forward how far out are you.

have um a road ahead, but as we think about when we entered the year, we talked about investment. We talked about learning, we talked about experimentation. As we exit the year, we've gotten a lot done. We've learned a ton. There's more opportunities we're gonna lean into, but the proof points are much clearer to us now than it was 99 or 10 months ago.

Speaker Change: Making adjustments to your order book and as you think about 25.

Speaker Change: There might be needs to make adjustments. Thanks.

Speaker Change: Let me take the couple of questions and then <unk> can add anything I Miss.

Speaker Change: The changes in the 100 stores between those shoes handbags are predominantly about people.

I'd only add that the the penetration mic of the categories that are performing best goes up in the 4th quarter. So some of the guidance in the 4th quarter is also related to the penetration of those businesses so I'm is improvement, some is related to the penetration, and that also has an impact on the margin forecast as well.

Speaker Change: So we're certainly making changes to assortments, we are reducing the duplication within those stores to try to make shopping easier for the consumer but the lion's share of the impact that we're seeing is by having somebody to run to get the back can get choose from to the floor and to unlock the <unk>.

OK, thanks a lot guys.

Thanks bye.

Thank you. The next question is coming from Bob Drruble of Guggenheim. Please go ahead.

Speaker Change: Handbags that are not easily accessible by the customer and so I think thats.

Speaker Change: Given us some.

Hi, um, good morning, um, two questions for me. The first one just in the shoe and handbag locations. Can you just talk, do you have the brands you need, you know, are you getting new brands? Is it a is it a labor support just expand a bit more in terms of the initiative and and some of those trends then the second question is on inventory levels, um, you know, just you said I think you said you're gonna end the year flattish and you made some adjustments on the sort of order books going forward. How far out are you, you know.

Speaker Change: Cautious optimism that there is more that we can do as we are able to actually impact.

Speaker Change: More of the.

Speaker Change: Menu inclusive of the assortment in those stores.

As it relates to inventory levels were already without making significant adjustments to our order books for 2025 at the forecast of flat to slightly down on a restated basis. So I don't I don't think that inventory.

Speaker Change: We'll be our issue going into 2025, I think we want to continue to see the green shoots we're seeing in our revenue performance continue so that we have the opportunity to as we said expand first 50 get past the kind of private brand reinvention expand on some of the brands that we've added this year to more locations and get greater.

making adjustments to your order book and as you think about 25, um, you know, where there might be needs to make adjustments. Thanks.

Let me take the, the couple of questions and then Adri can add anything I missed. Uh, the changes in the 100 stores between the shoe and handbags are predominantly about uh people.

Speaker Change: Distance between the performance we're seeing in the other go forward stores.

So we're we're certainly making changes to assortments. We are reducing the duplication, uh, within those uh stores to try to make shopping easier for the consumer, but the lion's share of the impact that we're seeing is by having somebody to run to get the back and get shoes from to the floor and to unlock the handbags that are not easily accessible by the customer and so I, I think that's, you know, giving us some uh cautious optimism that there is more that we can do

Speaker Change: Thank you.

Speaker Change: Thanks, Bob.

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

Paul Lajoie: Hey, Thanks, guys curious if promotions have been running higher in the quarter to date period and if so how much.

Speaker Change: The higher sales do attribute to the higher promotions year over year, and then second just thinking about the 65 closings.

we are able to actually impact uh more of the uh menu uh inclusive of the assortment in those stores.

Speaker Change: By the end of the year, what do you typically see in your E com business in markets, where you closed stores is that a comp drag.

Uh, as it relates to inventory levels we're already um without making a significant adjustments to our order books for 2025, uh, at the forecast of a flat to slightly down on a restated basis, so I don't, I don't think that uh inventory um will be our issue going into 2025. I, I think we want to continue to see the green shoots we're seeing in our revenue performance continue so that we have the opportunity to, as we said, expand 1st 50, get past.

Speaker Change: Look out to next year or is that a comp driver efficiencies and sales transfer.

Speaker Change: Hey, Paul Thanks for the question.

Speaker Change: I'll take the first part of that Adrian take the last part.

Adrian Mitchell: Quarter to date, the promotions are approximately comparable to last year. So an interesting factor is that our discount rate is year over year about the same as it was the difference when you get into the impact to margin is the mix of business and then the liquidations that may be necessary.

The kind of private brand reinvention, expand on some of the brands that we've added this year to more locations and get greater consistency between the performance we're seeing in the other Goor stores.

Adrian Mitchell: On aged inventory. So we have a small proportion that is aged inventory more so within the mix of business that we're selling and again the impact of not selling as much cold weather product.

Thank you.

Thanks, Bob.

Thank you. The next question is coming from Paul Leshway of City. Please go ahead.

Adrian Mitchell: And hopefully again, we see even colder weather kind of come in the latter part of the quarter and that only help us get a stronger margin performance, but I actually feel pretty good about the regular price sell through we are seeing and the overall discount rate given the promotional environment, we're operating in but as you know Macy's as a promote.

Hey, thanks guys, um, curious of promotions have been running higher in the quarter to day period and if so how much of of.

The higher sales you attribute to the higher promotions, uh, year over year and then second just thinking about the the 65 closing.

Adrian Mitchell: <unk> Department store to start with there isn't a lot of room on the calendar to be able to add a lot of value. We think it is one of the reasons why in an environment like this.

Um, by the end of the year, what do you typically see in your ecom business in markets where you close stores. Is that a comp drag as you look out the next year or is that a comp driver because you see some sales transfer thanks.

Adrian Mitchell: When people give gifts they come to brands and stores like Macy's and so I think we have opportunity to be able to deliver our guidance for the quarter and position ourselves for improvement in 2025.

Hey Paul, thanks for the question. I'll take the first part I'll let Adrian take the, the last part, um.

quarter to date, the promotions are approximately comparable to last year, so you know an interesting factor is that our discount rate is uh year over year about the same as it was. The difference when you get into the impact to margin is the mix of business and then the liquidations that may be necessary on uh on aged inventory so we have a small proportion that is age inventory more so within the mix of business that we're selling and again the impact of not selling as much.

Speaker Change: Good morning, Paul Let me talk a bit about the closures the thing to keep in mind with the closures is that these are underperforming stores and so these are places where the economics are not as favorable. These are places where customers have shifted away from those centers to shop and these are stores that are just incredibly.

Speaker Change: <unk> to run so just start with that fundamental premise very few of the stores are actually in single store markets and the reason that's important is because in an omni business. We continue to see that when we have a physical presence and a digital presence by far we have the best economics and the best.

cold weather product, uh, and, and hopefully again we, we see even colder weather kind of calm in the latter part of the quarter and that'll only help us get a stronger margin of performance. But, but I actually feel pretty good about the regular price Eltra we're seeing and the overall discount rate given the promotional environment we're operating in, but as you know, Macy's is a promotional department store to start with. There, there isn't a lot of room on the calendar to be able to add a lot of uh value. We think it's one of the reasons why in an.

Sales per customer sales per capita however way you look at sales per customer, we actually see the best economics, there given that the vast vast vast majority of the closures are in markets that have other buildings are the Macy's buildings within that market. We think that the impact on <unk> is going to be limited and we look back 10 years.

environment like this, um, when people give gifts they come to brands and stores like Macy's, and so I, I think um we have opportunity to be able to deliver, uh, our guidance for the quarter and position ourselves for improvement in 2025.

Speaker Change: Or is it closer to really try to understand it but most importantly, we're taking a different approach to retaining any customer in the market. So whether it's a digital only customer and omni customer a store only customer we have a very specific strategy that we've already been working on developing to retain as many of the customers by introducing them to us.

Good morning, um, Paul. Let me talk a bit about the closures. The, the thing to keep in mind with the closures is that these are underperforming stores.

Speaker Change: Stores with unique communication et cetera, et cetera. So we're encouraged we recognize that it's important to get to a healthy fleet and so that's our focus because that healthy platform Omnichannel platform is what's going to be able to drive profitable growth going forward.

And so these are places where the economics are not as favorable. These are places where customers are shifted away, um, from those centers to shop, and these are stores that are just incredibly difficult to run, um, so I just start with that fundamental premise. Very few of the stores are actually in single store markets, and the reason that's important is because in an omnibusiness, we continue to see that when we have a physical presence and a digital presence, by far, we have the best

Speaker Change: Thank you.

Paul Lajoie: Thanks, Paul Thank you.

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

Speaker Change: Thanks, a lot maybe first for Adrienne can you just elaborate on why digital was a pressure point in the third quarter relative to stores and and maybe how that should change into the fourth quarter and beyond and then for Tony just big picture understanding you're not giving any formal guidance for next year, but as you think about 2020 five.

economics and the best um sales per customer, sales per capita, however way you look at it, sales per customer, we actually see the best economics there. Given that the vast, vast, vast majority of the closures are in markets that have other buildings, other Macy's, uh, buildings within that market, we think that the impact on com is gonna be limited and we've looked back 10 years at closures to really try to understand that. But most importantly, we're taking a different approach to retaining any customer in the market.

Speaker Change: Just curious what strategically top of mind for you that's perhaps different from this year. Thanks a lot.

Speaker Change: Good morning, Alex and thanks for your question.

Speaker Change: Look we have.

Speaker Change: We've really been challenged in our digital business for a number of years.

So whether it's a digital only customer and Omni customer, a store only customer. We have a very, um, specific strategy that we've already been working on developing to retain as many of the customers by introducing them to other stores with unique communication, etc. etc. So, you know, we're encouraged, we recognize that it's important to get to a healthy fleet. And so that's our focus because that healthy platform omnichannel platform is what's gonna be able to drive profitable growth going forward.

Speaker Change: And as we had new talent come into the organization, we really focused on how do we fundamentally improve the digital experience and the omni experience. That's contributed by digital what we're very encouraged by our the material initiatives that were introduced particularly in late summer kind of August timeframe into October weather.

Speaker Change: SCO enhancements, new category pages, better lay out greater stability greater upload speed, we look at a variety of operating and customer facing metrics.

Thank you, good luck.

Speaker Change: We're seeing a number of things that are better conversion is better traffic is better experiences better.

Thanks, Paul. Thank you.

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

Speaker Change: Sat scores are better NPS scores are better and so from our perspective and we've spoken about this in earlier conversations we needed to invest in a better shopping experience for our customers from the research that Tony and myself and the team navigated a year year and a half ago is rebuilding the strategy something as simple as quality search results.

Thanks a lot. Uh, maybe first for Adrian, can you just elaborate on why, uh, digital was a pressure point in the 3rd quarter relative to stores and, and maybe how that should change into the 4th quarter and beyond. And then for Tony, just big picture, understanding you're not giving any formal guidance for next year, but, but as you think about 2025, just curious what, what strategically top of mind for you that's perhaps different from this year. Thanks a lot.

Speaker Change: We really underperformed on.

Speaker Change: Something as simple as in stock speed of delivery and all those different dimensions. We've improved on this year and the sequential improvement we're seeing in digital gives us a lot of encouragement that the changes that we're making both operationally and on the customer facing side is really getting traction because the customers know noticing and actually spending.

Good morning, Alex, and thanks for your question. You know, look, we have, um, we've really been challenging our digital business for a number of years and as you know, we had new talent come into the organization we really focused on how do we fundamentally improve the digital experience and the Omni experience that's contributed by digital. What we're very encouraged by are the the material initiatives that were introduced, particularly in late summer, kind of August time framing to October, whether it's SEO

Speaker Change: Yes, I'd only add Alex.

Speaker Change: Digital also includes our merchant organization and our marketing organization and I think the work together across the three pyramids is as strong as I've seen it in my time with the company. So I think that also is a good segue into what I feel good about in 2025, and again without getting into our guidance and the particular specifics.

en h ance ment s new category pages, better layout, greater stability, greater upload speed. We look at a variety of operating and customer facing metrics, uh, we're seeing a number of things that are better conversion is better, traffic is better, experience is better. Um, CSAT scores are better. MPS scores are better. And so, you know, from our perspective and we've spoken about this in in earlier conversations we needed to invest in a better shopping experience for our customers from the research that Tony and

Speaker Change: How many of what but think about it this way.

Speaker Change: The delivery expense that we just went through that is behind us cost accounting conversion, that's behind us the private brand reinvention without home that's behind us.

Speaker Change: Not in a year of testing we're in year of scaling.

Speaker Change: You have the opportunity to have more new brands as people begin to visit and see the changed experience as they begin to see the site experience be more about product and just about price we have more opportunity for growth. We know we will have more first 50 locations. How many will talk about on the fourth quarter call and we're also excited about <unk>.

and the team navigated a year, year and a half ago it's rebuilding the strategy, something as simple as quality search results, we really underperformed on, um, something as simple as in stock speed of delivery, and all those different dimensions we've improved on this year and the sequential improvement we're seeing in digital gives us a lot, a lot of encouragement that the changes that we're making both operationally and on the customer facing side is really getting traction because the customers noticing and actually spending.

Speaker Change: <unk> to expand bloomingdale's and Blue Mercury, both are contributing to the corporate results and both have opportunity for significant growth.

Speaker Change: If I could just add one additional thing Alex.

From a capital allocation standpoint, we've really been pivoting into this notion of harvesting our investments.

Yeah, I'd only add Alex that that, you know, digital also includes our merchant organization and our marketing organization and I think the work together across the three pyramids is as strong as I've seen it in my time with the company so I think that also is a good segue into what I feel good about in 2025, you know, again, without getting into, you know, our guidance and the particular specifics of uh how many of what but think about it this way.

Speaker Change: And so to Tony's point a lot of these investments are beginning now to really yield fruit. So if you kind of look at the history back in 2022, we invested about $1 3 billion of capital to really improve the fundamentals of this business last year, we invested $993 million. This year, we're projected to invest 800.

Speaker Change: And 95 million. So we talked very clearly when we implemented our capital allocation strategy that this business needed investment some of it was capex investments and this past year. The investment has been capital light investments. So is all of this is coming together harvesting and really focusing on scaling next year as Tony described as what excites.

The delivery expense that we just went through, that's behind us cost accounting conversion that's behind us. The private brand reinvention without home, that's behind us. We're not in a year of testing. We're in a year of scaling. Um, you have the opportunity to have more new brands as people begin to visit and see the changed experience as they begin to see the site experience, uh, be more about product than just about price, uh, we have more opportunities for growth. We know we'll have more 1st 50 locations. How many we'll talk about on the on the 4th.

Speaker Change: As we think about 2025.

Speaker Change: Yeah.

Speaker Change: Thanks, a lot good luck thanks.

Speaker Change: Thanks, Alex.

Speaker Change: Thank you. The next question is coming from Jay sole of UBS. Please go ahead.

Speaker Change: Great. Thank you so much maybe Tony could you just talk about the furniture business little bit and how much of a drag that is on overall comps and then at the same time, maybe a little bit more color on handbags, you mentioned youre seeing some improvement there and then lastly, just give us a little update what you've seen since cyber Monday and the trends in the business and what you expect for the post.

recorder call and we're also excited about continuing to expand Bloomingdale's and Blue Mercury. Both are contributing to the corporate results, and both have opportunity for significant growth.

If I could just add one additional thing, Alex.

Um, from a capital allocation standpoint, we've really been pivoting into this notion of harvesting our investments.

Speaker Change: In January sort of post the holiday season, and how do you expect comp trends to develop once you get through the peak season. Thank you.

And so to Tony's point, a lot of these investments are beginning now to really yield fruit. So if you kind of look at the history, you know, back in 2022, we invested about $1.3 billion of capital to really improve the the fundamentals of this business. Last year we invested 993 million. This year we're projected to invest 895 million. So we talked very clearly when we implemented our capital allocation strategy that this business needed investment. Some of it was Capex Investments.

Speaker Change: Thanks Jay.

Speaker Change: Furniture business is softer than the mattress business overall, the big ticket business is stable, but certainly a better trend in mattresses than we're seeing in furniture.

Speaker Change: I think as others in the big ticket visit reported until we get to a slightly lower interest rate environment.

That business is probably going to still be under pressure, we have a new team in big ticket who's working feverishly on our assortment I am pleased with some of the progress but longer lead times on the big ticket business in terms of our furniture, so that will be an opportunity for us as we get into the latter part of 2025.

And this past year, the investment has been capital right investments. So as all this is coming together, harvesting and really focusing on scaling next year as Tony described is what excites us as we think about 2025.

Thanks a lot. Good luck.

As it relates to handbags, we mentioned on the call a bloomingdale's business really seeing some nice strength now in handbags being driven by newness as well as some historic.

Thank you. The next question is coming from J So of UBS. Please go ahead.

Great thank you so much. Maybe Tony could you just talk about the furniture business a little bit and how much of a drag that is on uh overall costs and then at the same time maybe a little bit more color on handbags you mentioned you're seeing some um improvement there and then lastly give a little update what you've seen since Cyber Monday in the trends in the business and what you expect for, you know, the post, you know, in in January sort of post the holiday season, how do you expect Comtrends to develop, you know, once you get through the peak season. Thank you.

Speaker Change: Traditional brands like coach and.

Speaker Change: Tory Burch and long shop.

Seeing some some nice business and beginning to see that also on the macys side as well.

Speaker Change: The crystal ball of what happens after the holidays and.

Speaker Change: The nature of the consumer in an environment, where is inflation a little higher a little lower we saw the reports a little higher now.

Thanks, Jane. Um, furniture business is softer than the mattress business overall, the big ticket business is uh stable, but certainly a better trend in mattresses than than we're seeing in furniture, uh, I, I think as others in the big ticket business have reported, you know, until we get to a slightly lower interest rate environment, um, that that business is probably gonna still be under pressure. Uh, we have a new team in big ticket who's working feverishly on our assortment. I'm pleased with uh some of the.

Speaker Change: This morning, but I think the consumer has shown.

Speaker Change: Post the election.

Speaker Change: Real interest in shopping and so we only quantifying it we're not talking about post the post side, we're talking about on a quarter to date basis, but I see a consumer that although remaining choice full and looking for a value who is interested in shopping Christmas Hanukkah Kwanza everything is still going to come and IC.

Progress, but longer lead times on the big ticket business in terms of uh furniture, so, uh, that will be an opportunity for us as we get into the latter part of 2025, um, as it relates to handbags, you know, we mentioned on the call of Bloomingdale's business, uh, really seeing some nice strength now in handbags being driven by newness as well as some historic, uh, you know, traditional brands, people like Coach and.

Interested in a variety of categories, which bodes well I think for all three of our nameplates.

Speaker Change: Got it okay. Thank you so much.

Thanks Jay.

Speaker Change: Thank you.

Speaker Change: There are no further questions at this time I would like to turn it back over to Mr. Tony Spring for closing comments.

Tony Spring: Just want to thank everybody for your questions and your time. This morning, we have a good solid trend coming out of the third quarter with the start of the fourth quarter and we will work hard as a total team to deliver on the remainder of 2024 as we look at the opportunities in 2025.

Uh, Tory Burch and Longchamp really seeing some some nice business and beginning to see that also on the Macy's side as well, um, I, you know, the crystal ball of what happens after the holidays and uh the nature of the consumer in an environment where inflation a little higher, a little lower. We saw the reports a little higher now, uh, this morning, but I, I think the consumer has shown um

Tony Spring: I want to wish you and your families a very happy holiday season, all the best and talk to you in the new year.

Speaker Change: Ladies and gentlemen. This concludes today's event you may disconnect your lines of lock off the webcast at this time and enjoy the rest of your day.

Post the election, you know, a real interest in shopping. And so we, we only quantifying it, we're not talking about post uh post cyber talking about a quarter to day basis, but I see a consumer that although remaining choiceful and looking for value, who is interested in shopping. Christmas Hanukkah, Kwanzaa, everything is still gonna come and, and I see uh people interested in a variety of categories which bodes well I think for all three of our nameplates.

Got it. OK, thank you so much.

Thanks Jay.

Thank you.

There's no further questions at this time I'd like to turn it back over to Mr. Tony Spring for closing comments.

Just want to thank everybody for your questions and your time this morning. We have uh a good uh solid trend coming out of the 3rd quarter with the start of the 4th quarter and we will work hard as a total team to deliver uh on the remainder of 2024 as we look at the opportunities in 2025. I want to wish you and your family a very happy holiday season. All the best and talk to you in the new year.

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.

Q3 2024 Macy's Inc Earnings Call

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