Q1 2025 Macy's Inc Earnings Call
Greetings and welcome to the Macy's, Inc. First quarter 2025 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star two.
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, the Ono VP of Investor Relations. Pamela you may now begin.
Pamela Quintile: Thank you operator, good morning, everyone and thanks for joining us.
Speaker Change: With me on the call today are Tony Spring, our chairman and CEO and Adrian Mitchell, our CLO and CFO.
Speaker Change: Along with our first quarter 2025 press release, a form 8-K filed with the Securities and Exchange Commission and the presentation. That's been posted on the investors section of our website Macy's Inc. Dot com, that's being displayed lives during today's webcast.
Speaker Change: Unless otherwise noted comparisons we provide will be versus 2024.
Speaker Change: All references to our prior expectation outlook or guidance refer to information provided on our March.
Speaker Change: Earnings call.
Speaker Change: On today's call, we will refer to certain non-GAAP financial measures reconciliations of these measures can be found in our earnings presentation and SEC filings available at Www Dot Macy's, Inc. Slash investors slash.
Speaker Change: All references to comp sales throughout todays prepared remarks represent comparable own plus license plus marketplace sell and own plus license sale for our store location unless otherwise noted.
Speaker Change: Go for Macy's, Inc. Comp sales includes the approximately 350 Macy's go forward locations in digital and Bloomingdale's and Blue Mercury nameplate increases our stores and digital.
Speaker Change: Go forward Macys Com sales includes the approximately 350 Macys go forward location at Macys digital.
Speaker Change: All forward looking statements are subject to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Speaker Change: These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today.
Speaker Change: A detailed discussion of these factors and uncertainties is contained in our filings with the SEC.
Speaker Change: Today's call is being webcast on our website.
Speaker Change: A replay will be available approximately two hours after conclusion of this call.
Tony Spring: With that I'll turn it over to Tony.
Tony Spring: Yeah.
Speaker Change: Thank you Pam and good morning, everyone.
Speaker Change: Today, we'll begin with a discussion of our first quarter results will then share our thoughts on the current environment and how it's informing our view for the second quarter and the remainder of the year.
Speaker Change: First quarter net sales comparable O plus L plus M sales and adjusted diluted EPS were all above our previously issued guidance.
Speaker Change: Results benefited from better than expected Omnichannel performance at each of our nameplates and continued progress on our three pillars of the Boulder chapter strategy.
Speaker Change: At Macy's, our re imagine one twenty-five locations outperformed the remainder of the fleet.
Speaker Change: Our luxury businesses Bloomingdale's and Blue Mercury, both delivered another quarter of positive comps.
Speaker Change: And an end to end operations, we improved our in store inventory allocation and leverage generative AI to further modernize our supply chain.
Speaker Change: Macy's Inc. Achieved net sales of 4.6 billion compared to guidance of 4.4 to $4 5 billion.
Speaker Change: Parable O plus L plus EM sales declined one 2% compared to the guidance for a decline of 4.5% to 2.5%.
Speaker Change: International tourism negatively impacted comps by about 30 basis points.
Speaker Change: Go forward business comps outperformed total declining 9%.
Speaker Change: Momentum built in the March April period, which we look at it on a combined basis given the later Easter and has improved quarter to date.
Speaker Change: I am proud of how our teams are navigating the current environment.
Speaker Change: We are working closely together and maintaining a high level of flexibility.
Speaker Change: We're sharing ideas and leveraging relationships across departments nameplates vendors and channels.
Speaker Change: And as a result, adjusted diluted EPS of <unk> 16 cents was above our guidance range of 12 to 15 cents.
Speaker Change: We entered the second quarter with inventories down 0.5%.
Speaker Change: We have ample open to buy for the remainder of the year and remain committed to providing a healthy flow of high quality relevant assortments at a compelling value proposition.
Speaker Change: Now, let's discuss progress on each of the pillars of the Boulder chapter strategy, starting with strengthening of re imagining Macy's.
Speaker Change: In the first quarter Macys N P. S continued to improve year over year.
Speaker Change: Customers appreciate our renewed emphasis on the shopping experience and a commitment to providing relevant fashion and newness at a compelling value across the good better and best price spectrum.
Speaker Change: Recently introduced contemporary apparel brands, good American theory of Nickens, though have been well received and coach and Donna Karan continue to resonate.
Speaker Change: Our off price concept backstage and our Macy's marketplace remains strong.
Speaker Change: Backstage outperformed the full line stores in which they operate by several hundred basis points, while the marketplace achieved approximately 40% GMB growth.
Speaker Change: Backstage and marketplace still white space on our Assortments and help us retain customers seeking more price and brand variety, while we maintain our commitment to limit redundancy.
Speaker Change: During the quarter the re imagine one twenty-five posted a negative <unk>, 8% comp versus a negative two 1% comp for the total Macy's nameplate.
Speaker Change: These locations outperformed across all categories, and we expect momentum to build as the year progresses.
Speaker Change: The second pillar of our strategy is accelerating and differentiating luxury.
Speaker Change: In the first quarter, both bloomingdales and Blue Mercury continued their positive comp trend.
Speaker Change: <unk> posted a positive three 8% comp benefiting from brand launches such as proud of shoes, and handbags online Reformation ready to wear and burberry men's in ready to wear as.
Speaker Change: As well as improvements in availability and pricing.
Speaker Change: Bloomingdale's continues to emphasize special capsules and exclusive partnerships that align and reinforce its core identity.
Speaker Change: Including the White Lotus and Aqua collection.
Speaker Change: Tokyo's Carousel, Alice and Olivia as flagship takeover mothers Boogie Woogie boardwalk and the farm real wedding capsule.
Speaker Change: It's an exciting time at bloomingdale's as strategic initiatives bear fruit and the competitive landscape continues to shift in our favor Theres. No question, we are taking share our aspirational luxury positioning compelling on trend Assortments and service orientation, because you can attract new customers and new vendor partners.
Speaker Change: In addition, our bloom is and bloomingdale's the outlet concepts are allowing us to enter new markets and expand our presence as well as share of wallet in existing markets.
Speaker Change: Our other luxury concept blue Mercury achieved a positive one 5% comp its 17th consecutive quarter of gains results were driven by the 24, new and remodeled locations opened last year.
Speaker Change: Ongoing strains and dermatological skin care.
Speaker Change: Our recent brand launches and a more targeted approach to loyalty and communications and offers.
Speaker Change: The third pillar of our older chapter strategy is simplifying and modernizing end to end operations.
Speaker Change: Our efforts to drive meaningful change to our customer and for our operational and financial performance remain on track.
Speaker Change: We are challenging the complexity of our business model containing the cost to serve the value chain and streamlining our asset portfolio to deliver profitable sales growth all while reinvesting the benefits captured to self fund improvement and customer experience.
Speaker Change: I like where Macy's Inc. Is positioned today, the bold new chapter continues to gain traction in our multi category and multi branded model provides a high level of flexibility to read and react.
Speaker Change: Our three nameplates span off price to luxury and catered roughly 40 million active consumers.
Speaker Change: When combined with our strong balance sheet and limited near term debt maturities. These serve as positive differentiators and discussions with our vendors.
Speaker Change: Now, let's turn to tariffs.
Speaker Change: Our teams and partners are in active dialogue as we navigate this uncertain environment together at.
Speaker Change: At the end of last fiscal year, roughly 20% of total Macy's inks product originated in China.
Speaker Change: National brands, which represent the majority of our sales sourced approximately 18% from China.
Speaker Change: Private brands, where we have more direct control of the supply chain. So arps roughly 27% from China. This is down from 32% last year and over 50% pre pandemic.
Speaker Change: We are confident that we can continue to diversify our countries of origin for both our private and national brands with the recent announcement of these tariffs we've renegotiated orders with suppliers, we've canceled or delayed orders, where the value proposition is just not where it needs to be.
Speaker Change: Beyond China, we're closely monitoring South East Asia in Europe, and we've had limited sourcing exposure to Canada and Mexico.
Speaker Change: In this evolving environment, we are controlling what we can control.
Speaker Change: Based on actions taken through today, and our assumption that current tariffs remain in place we estimate a combined tariff impact to Macy's, Inc. Annual gross margin of roughly 20 to 40 basis points.
Speaker Change: This incorporates inventory previously bought under the 145% China tariffs those bought more recently shared cost negotiations vendor discounts and selectively raising tickets.
Speaker Change: It does not include a potential increase in tariffs from the EU or any other country.
Speaker Change: As of today, we have a good handle on the tariff related costs, but we're cognizant of the environment is fluid.
Speaker Change: The impact on demand is less clear quarter.
Speaker Change: Quarter to date Macy's, Inc. Comps are above the March April period.
Speaker Change: We believe this reflects improvements in product and experience more seasonable weather and some pull forward of demand.
Speaker Change: We are encouraged by the first quarter and May results, which are another proof point that the bold new chapter initiatives are working and that we remain on a path to achieving sustainable profitable growth.
Speaker Change: Yet the majority of the second quarter sales volume is still ahead of us.
Speaker Change: Given uncertainty regarding the tariff impact on consumer health and demand. We believe it's prudent to incorporate a more choice full consumer into our outlook for the quarter and for the remainder of the year.
Speaker Change: Our second quarter and full year guidance ranges, which Adrian will discuss in more detail assume that the promotional landscape intensifies as the year progresses international tourism does not rebound.
Speaker Change: And we continue to reinvest savings from closed stores and distribution centers and the initiatives that support our long term growth.
Speaker Change: Reflecting these assumptions we are being disciplined with our inventory commitments if trends remain at the may levels inventories available and we have the flexibility to chase.
Speaker Change: Looking specifically at the second quarter. There were two unique factors impacting gross margin first we're taking markdowns on early spring product that arrived late in the fourth quarter and in February. This will ensure we continue to provide newness throughout the summer and are well positioned for the fall and holiday season.
Speaker Change: Second a meaningful portion of the product board under the 145% tariffs flows through the quarter.
Speaker Change: Yeah.
Speaker Change: Regarding our full year guidance. The low end assumes sales trend softened from first quarter levels and we take additional actions to maintain a healthy inventory to sales ratio, including canceling receipts and taking deeper markdowns.
Speaker Change: The high end assumes a continuation of the March April sales trend and only moderate gross margin pressure.
Speaker Change: In this environment of uncertainty we remain focused on navigating the near term, while executing to our long term goals.
Speaker Change: We are in a unique moment and we will not be complacent. This is our time to take advantage of the disruption in the market and capitalize on the opportunity to further build share of wallet across all of our nameplates.
Speaker Change: At Macy's customers, responding well to our redefined product and experience the re imagine one twenty-five locations are outperforming the rest of the Macy's fleet.
Speaker Change: Backstage provides an off price offering.
Speaker Change: While marketplace and concession allows greater inventory flexibility.
Speaker Change: Finally, we closed 64 underperforming locations under the Boulder chapter last year.
Speaker Change: At our luxury nameplates are customers responding well to the accessible through a premium product and.
Speaker Change: And we have proven growth strategies firmly in place with small format Bloom is bloomingdale's, the outlet store and updated blue Mercury store format.
Speaker Change: Yes.
Speaker Change: And in our supply chain, we've become more nimble leveraging knowledge and relationships across the business to increase our responsiveness, while creating a more efficient diverse and productive operation.
Speaker Change: We are resilient, we have successfully navigated macro and geopolitical uncertainty in the past and we will do so again.
Speaker Change: Aided by our guiding principles, we plan to one.
Speaker Change: Be flexible so that we can react to the consumer demand and make purchasing decisions as late as possible.
Speaker Change: To maximize gross margin dollars through strategic pricing decisions being mindful of the price value relationship between our market brands and private brands and the broader marketplace.
Speaker Change: Three partner with our suppliers on alternative sourcing and pricing options.
Speaker Change: And four manage inventory to protect against markdown risk set us up for success and ultimately return to sustainable profitable growth.
Adrian Mitchell: With that I'll turn it over to Adrian.
Adrian Mitchell: Thank you Tony and good morning, everyone. Today, we will begin with a detailed discussion of our first quarter results before turning to our assumptions for the second quarter and full year guidance.
Adrian Mitchell: First quarter Macy's, Inc. Net sales were $4 $6 billion down five 1% to last year.
Adrian Mitchell: As a reminder, approximately $170 million of the year over year decline was due to last year's 64 non go forward store location closures.
Adrian Mitchell: Total enterprise comps were down one 2%, while Macy's Inc. Go forward business comps declined <unk>, 9%.
Adrian Mitchell: By nameplate Macy's net sales, which includes all Macy's locations and digital were down six 5% and comps were down two 1%.
Adrian Mitchell: Macys go forward business comps, which includes approximately 350 gulfport locations and digital were down one 9%.
Adrian Mitchell: At Macy's rematch in 125 comps were down 0.8%.
Adrian Mitchell: States continue to outperform the total Macy's fleet and a full line locations that they operate in.
Adrian Mitchell: At our luxury nameplates Bloomingdale's net sales were up two 6% and comps rose three 8%, while blue Mercury net sales were up 0.8% and comps rose one 5%.
Adrian Mitchell: Net credit card revenues were $154 million or $37 million higher year over year.
Adrian Mitchell: Increase was driven primarily by higher profit share, reflecting both our strong credit portfolio and continued active management of net credit card losses, driven by strong underwriting.
Adrian Mitchell: Macy's media network revenues were $40 million or up 8% year over year due to growth and advertiser spend.
Adrian Mitchell: Gross margin was $1 $8 billion or 39, 2% as a percent of net sales flat to the prior year.
Adrian Mitchell: On a rate basis merchandise margin improved 40 basis points inclusive of favorable shortage and lower liquidations. This improvement was offset by higher delivery expense as a percent of net sales reflecting increased digital penetration.
Adrian Mitchell: We continue to take a disciplined approach to receipts with end of quarter inventories down 0.5% year over year.
Adrian Mitchell: SG&A expense dollars were relatively flat to last year at $1 $9 billion. During the quarter. We continued to self fund customer facing initiatives through our end to end operations work and savings from closed locations that support our bold new chapter strategy.
Adrian Mitchell: As a percent of total revenue SG&A was 39, 9% or 170 basis points higher than last year, reflecting lower net sales.
Adrian Mitchell: During the quarter, we recognized $16 million of asset sale gains as we continue to monetize store locations and rightsize our supply chain network.
Adrian Mitchell: First quarter, adjusted EBITDA was $324 million or six 8% of total revenue.
Adrian Mitchell: Core adjusted EBITDA, which is adjusted EBITDA, excluding asset sale gains was in line with our guidance at $308 million or six 4% of total revenue.
Adrian Mitchell: First quarter EPS of <unk> 16 cents exceeded our guidance range of 12 to 15 cents and compare it to 27 cents last year.
Adrian Mitchell: For the quarter operating cash flow was an outflow of $64 million and free cash flow was an outflow of $203 million with capital expenditures of $177 million and monetization proceeds of $38 million.
Adrian Mitchell: We returned approximately $152 million to shareholders, consisting of $51 million in quarterly cash dividends and $101 million of share repurchases.
Adrian Mitchell: During times of uncertainty the strength of our balance sheet and ample liquidity are critical to supporting our business and are a source of resiliency.
Adrian Mitchell: We remain committed to exercising our prudent fiscal discipline, which is centered around free cash flow generation and a healthy balance sheet as we continue to thoughtfully invest in our business for long term growth and return capital to shareholders.
Adrian Mitchell: Now turning to guidance, we assume our customer will become more choice full as the year progresses, our full year and second quarter guidance provides flexibility to respond to an uncertain promotional environment and competitive landscape.
Adrian Mitchell: Guidance also assumes that our current tariffs remain in place and that we're able to mitigate a meaningful portion although not all of the increased costs. It does not incorporate the potential for higher EU or other country tariffs.
Adrian Mitchell: For the year, we expect Macy's, Inc. Net sales of 21 to $21 $4 billion.
Adrian Mitchell: Keep in mind that fiscal 2024 store closures contributed roughly $700 million to net sales.
Adrian Mitchell: Even with the first quarter beat we believe it is prudent to maintain our prior net sales outlook given the uncertain environment.
Adrian Mitchell: Yeah.
Adrian Mitchell: Macy's and comps to be down roughly 2% to down roughly 0.5%.
Adrian Mitchell: Macy's, Inc, Gulfport comps to be down roughly 2% to roughly flat.
Adrian Mitchell: Other revenue of $815 million to $825 million with credit card revenues of $620 million to $630 million.
Adrian Mitchell: Gross margin as a percent of net sales to be roughly 30 to 70 basis points below the comparable period last year tariffs account for roughly 20 to 40 basis points of the difference to last year or 10 to 25 cents of annual EPS.
Adrian Mitchell: The remainder reflects planned actions to strategically capture customer share of wallet, while navigating a more competitive promotional landscape.
Adrian Mitchell: SG&A to be down low single digits on a dollar basis as a reminder, our SG&A growth investments are purposely planned to grow below the historic rate of inflation.
Adrian Mitchell: As a percent of total revenue, we expect SG&A to be up 80 to 110 basis points.
Adrian Mitchell: We are reinvesting savings from simplifying end to end operations and store closures into customer facing growth initiatives that enhance omni channel shopping experiences across our nameplates.
Adrian Mitchell: We expect adjusted EBITDA as a percent of total revenue up seven four to seven 9%.
Adrian Mitchell: Our adjusted EBITDA as a percent of total revenue of seven to seven 5%.
Adrian Mitchell: Adjusted diluted EPS of $1 60 to $2, which does not contemplate potential share buybacks.
Adrian Mitchell: We continue to anticipate capital expenditures of approximately $800 million as we are committed to investing in our business supported by our healthy balance sheet to position Macy's, Inc. For long term profitable growth.
Adrian Mitchell: For the second quarter, we expect net sales of $4 six five to $4 $75 billion last year's store closures contributed approximately $170 million to sales in the comparable period.
Adrian Mitchell: Macy's and comps to be down one 5% to up <unk>, 5%.
Adrian Mitchell: <unk> adjusted EBITDA as a percent of total revenue to be 6% to six 2% with SG&A dollars roughly flat to last year.
Adrian Mitchell: And adjusted EPS of <unk> 15 cents to <unk>, 20 cents, which does not consider potential share repurchases and assumes $10 million of asset sale gains compared to $36 million in the same period last year.
Pamela Quintile: Before turning it back over to Tony I want to take a moment to thank the Macy's Inc. Leadership team the board and all of the colleagues I've had the pleasure to work with over the past four and a half years.
Adrian Mitchell: It has been and enriching and rewarding experience personally and professionally.
Adrian Mitchell: Based on the talent in place across the organization and all of the work we have accomplished together I am confident that Macy's, Inc. Is well positioned to return to sustainable profitable growth with that I'll turn it back over to Tony.
Tony Spring: Thank you Adrian before we begin Q&A on behalf of the board and the entire Macy's leadership team I want to thank Adrian for his leadership and contributions to Macy's Inc. I. Appreciate his personal support over the last few years and I wish him the best in his future endeavors.
Speaker Change: Operator with that we're now ready for questions.
Speaker Change: Thank you we will now be conducting a question and answer session.
Adrian Mitchell: We would like to ask a question. Please press star one on your telephone keypad.
Adrian Mitchell: Formation tone will indicate your line is in the question queue. You May press star two if he 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, you do ask that you. Please limit yourself to one question and one follow up.
Adrian Mitchell: Once again Thats Star one to register a question.
Adrian Mitchell: Our first question today is coming from Blake Anderson of Jefferies. Please go ahead.
Blake Anderson: Hi, guys. Thanks for taking our question. So I just wanted to start off on the sales guide it sounds like Youre holding that constant for the year you talked about some consumer pressure and promotions. So just wanted to get your thoughts on maybe.
Blake Anderson: Confidence in the sales guide for the rest of the year and how to think about the cadence of Q2 versus the back half.
Blake Anderson: Compared to Q1, where it sounds like you outperformed.
Speaker Change: Thanks Blake for the question, we reaffirmed our annual guide for the year as you noted with the first quarter beat.
Speaker Change: We did see a stronger performance in March April versus February, which was more weather affected and come into the second quarter with a stronger performance in the month of May I think the guide appropriately reflects the level of uncertainty that we're navigating controlling what we can control, making sure that we're well positioned with the flow of inventory.
Speaker Change: Tori with a thoughtful approach to our marketing calendar investing in both top of funnel and bottom of funnel activities and making sure that we're well positioned across all three nameplates. So I would look at as being cautiously optimistic we're taking the beat in the first quarter and we're making sure that we are prudently planned for the rest of the year.
Speaker Change: Yeah.
Speaker Change: That makes sense and then the follow up was on the strategic pricing decisions any more commentary you can provide on what.
Speaker Change: What kind of categories or items or magnitude you would be looking at for pricing to offset some of the tariffs.
Speaker Change: But like I would just say, it's a work in progress that I feel really good about how the team is action what we've had to action now based on the shipment in the current tariffs that are in place, but remember as a as a multi brand multi category retailer we have a lot of optionality, if something isn't priced fair.
Speaker Change: Really we're not going to buy it if our price point is important we're going to hold it we're gonna negotiate fairly and aggressively with our partners as well as with our with our factories and right now I feel good about how we've positioned our pricing and our inventory for the remainder of the year, but we got a lot in front of us and we're going to take it kind of pay by bank.
Speaker Change: Month by month.
Speaker Change: Sounds great. Thanks, so much thank you.
Paul Kearney: Thank you. The next question is coming from Paul Kearney of Barclays. Please go ahead.
Paul Kearney: Hey, good morning, Thanks for taking my question.
Paul Kearney: Two parts to what degree is pricing already been impacted from the higher tariff codes that are flowing into Q and in your view what is the consumer ability and willingness to accept those higher prices.
Paul Kearney: Two under the current tariff outlook can you talk about what exactly is your expectation for pricing for the fall season.
Paul Kearney: And are the negotiations with vendors on sharing those costs largely completed thank you.
Paul Kearney: Yeah.
Paul Kearney: Thanks, Paul.
Paul Kearney: First I would say the pricing is working its way into the system slowly. So you certainly saw little to no pricing in the first quarter Youre seeing some limited pricing in the second quarter and so that's why we've taken a more cautious approach to our outlook for the remainder of year I feel good about.
Paul Kearney: The negotiations with the marketplace and obviously with our suppliers. It. It is a shared approach and mentality. It is not a one size fits all across the board approach to anything we're really trying to make sure that we are sharpening our value where necessary. We are looking at the elasticity of pricing across the.
Paul Kearney: Entire enterprise and leveraging marketplace backstage bloomingdale's Macy's bloomer here to make sure that we're using the Folsom. This of our entire retail portfolio to capture share of market. We really believe in this disrupted time period, the health of our balance sheet the quality of our team the focus of our strategy.
Paul Kearney: Is a competitive advantage.
Speaker Change: Paul if I could just add just a little bit of commentary to the question that both you and Blake added I think it's important to understand that we are not just broadly increasing price, we're being incredibly surgical about the situation with tariffs. Let me give you a little bit of color of the kinds of things that we're doing given the tariffs that we see today and that are.
Paul Kearney: Currently in place, we've reduced our exposure to China as Tony referenced earlier in the call. We've renegotiated orders with vendors to make sure that we have the right brands and styles available for what customers are actually going to buy meat even cancelled.
Paul Kearney: Certain orders and delayed other orders as we're just navigating all of the Choppiness and uncertainty that we're dealing with and we've been able to gain some vendor discounts, which has been helpful to us but were absorbing some of that price as well. So we are making selective price increase in selected brands selected categories, because we believe.
Paul Kearney: The value equation for the customer is still very relevant so some of the impact on our gross margin. This year is going to be around the tariffs. We're also investing in getting market share because we really do believe as we get into the back half of the year that price value dimension is going to be very critical.
Speaker Change: Excellent. Thank you.
Paul Kearney: Thank you Paul.
Speaker Change: Thank you. The next question is coming from Brook Roche of Goldman Sachs. Please go ahead.
Brook Roche: Good morning, and thank you for taking my question, Tony You've mentioned a couple of times about the opportunity to strategically capture market share. While you navigate this uncertain environment beyond some of the pricing decisions that you've made to be more relevant to the consumer what other actions are you taking to capture that market share throughout the rest of the year whether that's.
Speaker Change: Promotional calendar marketing calendar et cetera, and then a follow up for Adrian Adrian can you help us understand the magnitude of the gross margin pressure in Q O Q from more transitory factors such as the spring product markdowns and the tariff on the 145% tariff rate versus what might be a little bit.
Speaker Change: More sustainable in rate. Thank you.
Speaker Change: Thanks Brook I appreciate the question. It is a disrupted marketplace. We all don't come into this environment and an equal position Macy's Inc. Has done a lot of work over the last couple of years are.
Speaker Change: Setting up the bold new chapter doing a lot of research with 80000 consumers understanding the power of a bloomingdale's blue Mercury and macys closing under productive stores. So I don't think that's comparable to what other departments.
Speaker Change: Department store retailers have experienced we have a strategy that we are in the second year of we're excited about the improvements that we've made in the re imagine one twenty-five we're equally excited about the continued growth in bloomingdale's and blue Mercury, but to answer your question specifically number one is product we are flowing newness into all three.
Speaker Change: Brands, we are seeing opportunities because of the competitive landscape to add brands to macys add brands to bloomingdales add brands to Blue Mercury, we have a healthy balance sheet, which means to the vendor community. We're gonna be around are we going to pay our bills. Secondly, we're improving the quality of our marketing we have a better balanced today.
Speaker Change: Day that we had a year ago in top of funnel and bottom of funnel investments that means we are equally committed to having a higher brand relevance as well as better conversion in our digital tactics third we.
Speaker Change: We are improving the experience inside our stores. We have added colleagues, we are getting a different net promoter score at Macy's and bloomingdale's, because the store experience as measured by the customer feedback is improving and so the stores are well merchandised. There was better storytelling there are colleagues of.
Speaker Change: <unk> to assist the customer in the fitting room. Those are all reasons why I believe we can take share in this moment in time.
Speaker Change: Brook Good morning, just to address your question around the gross margin what we're trying to accomplish is really managing the health and level of our inventory and being responsive and.
Speaker Change: In terms of the customer experience that Tony just described we haven't shared the gross margin impact for Q2, but here's what we're doing in terms of our actions as Tony mentioned, a little bit earlier, we are going to be taking markdowns based on some of the volume of inventory that we received at the end of the fourth quarter into the early part of the quarter, but also responding to the <unk>.
Speaker Change: Salt sales that we saw in February because they help to the inventory is actually quite important. In addition, we do have some receipts that came through under the 145%, China tariffs and a meaningful portion of that will actually flow through the second quarter. So we're just being very judicious around that if I take a step back and look at the year. There are really two factors that reman.
Speaker Change: On the gross margin. The first is the 20 to 40 basis points of impact based on the current tariffs that we see that are in place and how we believe that will impact the second quarter and the fall season, but we're also investing in price and value. It because we do believe that we have an opportunity to take share we have an opportunity to be competitive.
Speaker Change: Especially in an environment that we anticipate will be more competitive in discretionary as we get into the back half of the year.
Speaker Change: Great. Thanks, so much I'll pass it on.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you. The next question is coming from Alex Straightened of Morgan Stanley. Please go ahead.
Speaker Change: Perfect. Thanks, so much.
Speaker Change: Just on the re imagine 125 group that that comp still being negative can you just talk through the path to that turning positive is it possible. This year and then also what will more stores to be added to that group this year.
Speaker Change: And then just the second question is on the widened SG&A guidance range can you just talk about the drivers of that for the year what would put you on either end. Thanks, so much.
Speaker Change: Thanks for the question Alex the re imagine 125, we still feel really good about and the stores are not immune to the kind of macro pressures that we're seeing across the the landscape, but the good news is the March April trend in the re imagine 125 was better than February as the weather improved.
Speaker Change: May trend is better than the February March or the.
Speaker Change: March April performance, So I can't comment on where we're going to see any individual segment of stores and the year, but I feel very good about the rollout of the initiatives into those stores. The additional staffing the improvement in presentation. The additional brands to better in stock position the localized marketing.
Speaker Change: All in flight like.
Speaker Change: Like last year as the year progresses, we'll talk about what are the opportunities to test additional ideas and additional stores and what the expansion might be in 2026, but.
Speaker Change: So far I would say the improvement in the 125, we continue to see the differential between the rest of the Macy's stores and I'm cautiously optimistic that we have opportunity to improve that trend as the year progresses.
Speaker Change: Alex Good morning to you you know as we look at the SG&A. The thing that I would highlight is that we do expect it to be down low single digits versus last year. So that's an important dimension. When we look at the breadth of the range. What we're really doing is giving ourselves the flexibility to be able to navigate a variety of scenarios as we think about.
Speaker Change: The uncertainty over the course of the next several several quarters. So as we really look at it from our perspective, we have a track record of achieving SG&A reductions, we have a healthy pipeline of initiatives. That's already in flight and we're just getting excuse me ourselves some flexibility in terms of a range to be able to navigate multiple scenarios.
Speaker Change: Could unfold in the upcoming quarters.
Speaker Change: Thanks, so much good luck.
Alex: Thanks, Alex.
Speaker Change: Thank you. The next question is coming from Matthew Boss of Jpmorgan. Please go ahead.
Matthew Boss: Great. Thanks, So Tony on the sequential improvement have comps in may improved to positive territory across nameplates, and maybe more specifically could you walk through customer behavior that you're seeing in your re imagine doors that gives you confidence in bold new chapter.
Matthew Boss: Into year number two and maybe just opportunities you see to accelerate initiatives and new stores.
Speaker Change: Sure Matt Thanks.
Speaker Change: I'm not going to get into the specifics of the May performance, but I will tell you that the consumer is continuing to react differently than the sentiment. So while sentiment I guess yesterday improved a little bit the demand is still better than the sentiment. So the consumer remains under pressure, but is responding to newness is responding to good value.
Speaker Change: She is responding to improve presentation is responding to inspiring marketing.
Speaker Change: I think we can control some of these elements and I can't control how much discretionary spend the consumer is willing to lay out but I can control the quality of our execution I feel like in the re imagine 125 and in the digital experience at Macys, we are better positioned today than we were three months ago, and certainly better than we were.
Speaker Change: A year ago, you feel the difference in our stores a year and a half into this strategy you feel the colleague engagement you feel the consumer sentiment as they shop for regular price merchandise, so where we have.
Speaker Change: Reduced the amount of clearance sales that we have as we improve the quality of our inventory, we're seeing better regular price performance and the re imagine 125 that I think is a good indicator along with customer sentiment about what the future potentials of these stores I think the store execution continues to get stronger the density on the <unk>.
Speaker Change: Lower still looks impactful, but we're not over inventory the stores well beyond what is necessary in any given quarter or season, and finally I would say the turnover amongst colleagues in these stores is down so we're getting the benefit of being able to provide the product knowledge and education.
Speaker Change: And the customer is getting the benefit of seeing those colleagues are in those same stores.
Speaker Change: Okay.
Speaker Change: Great color best of luck.
Speaker Change: Thank you Matt.
Speaker Change: Thank you. The next question is coming from Dana Telsey of Telsey Advisory Group. Please go ahead.
Dana Telsey: Hi, Good morning, everyone. As you think about inventory, which I believe was down a half a percent. How are you planning inventory going forward in light of all the tariff planning a pull forward for holiday.
Speaker Change: And then the competitive landscape is definitely changing whether it's the turmoil at Saks the privatization of Nordson as you think about the landscape colony, both for Macy's and Bloomingdales, what are the opportunities that you see for each for each of the banners go.
Speaker Change: <unk> felt like Okay. I just have a quick follow up thank you.
Speaker Change: Thanks, Dana for the question on inventory, we know we've got a good track record of really being disciplined about how we flow inventory and we're going to continue to be disciplined and that means that if.
Speaker Change: Pricing as opportunistic and we're trying to mitigate or avoid the nature of tariffs in certain markets. We're going to do that we've got the liquidity. We've got the balance sheet to kind of move inventory, but I'm not gonna by six months or a year worth of product just to avoid tariffs that may or may not materialize and different parts of the world.
Speaker Change: I do believe again I'm not going to speak to an individual competitor, but I think you sized it up exactly right that we were in a market environment, where both Macy's and bloomingdale's have opportunity to take share. We have vendors that are more committed to our brands and to our partnership than I've seen in my time with the company.
Speaker Change: We have new brands that we've added at both Macy's and bloomingdale's that are resonating with the customer we're seeing feedback from the customer that is acknowledging the different experience that theyre seeing in a department store environment that they haven't seen in years, we have to remain committed to our investments we have to remain committed to this strategy and we.
Speaker Change: To take advantage of this moment in time, and there's opportunity to get our fair share of the business.
Speaker Change: Thank you.
Speaker Change: Thanks Dana.
Speaker Change: Thank you. The next question is coming from Oliver Chen of TD Securities. Please go ahead.
Speaker Change: Hi, Tony and Adrian This is Julie on for Oliver Chen with a comp speed across all nameplates, how did your comps performed relative to your expectations and what were the main catalyst relative to what you expected aside from the calendar shift which categories and levers were stronger and then what is assumed in terms of category dynamics throughout the year. Thank you.
Speaker Change: Thanks Julia.
Speaker Change: We again saw a better performance in March and April than in February February was disrupted with Oh.
Speaker Change: Softer I would say weather environment, we hate to use weather as a as an excuse but it is helpful at defining why seasonal categories performer don't perform well.
Speaker Change: We certainly saw a better performance in the March April time period, and now we see that continuing into May I think we've talked about the fact that we're in an apparel cycle. So we're continuing to see categories like denim perform well denim dressing whenever there's a change in silhouette or fabrication, we see a benefit to the business.
Speaker Change: And we're certainly seeing that at both Macy's and Bloomingdale's, we're seeing improved performance in categories like fine jewelry, certainly defined watch and fashion watch business has been healthier we're seeing a better performance in parts of the home furnishings area, particularly in the big ticket, we have a good mattress business at both.
Speaker Change: Our brands and we're seeing category like textiles sheets, and towels improved as the quarters progress. So I think what I'm underscoring is the fact, we have a diversity we have a variety of products and because we're not limited to any one category or any one segment, we can pivot and adjust our receipts in our market.
Speaker Change: <unk> to where we see the business materializing.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question is coming from Michael Binetti of Evercore ISI. Please go ahead.
Michael Binetti: Hey, guys. Thanks for taking my question here.
Speaker Change: Hey, this is there was there.
Speaker Change: Anything one time in the SG&A dollars in <unk> Im trying to go.
Speaker Change: I'll go back in time here as you kind of guide us forward on what the SG&A per store was with some of the closures I guess the dollars were up just a little bit in the quarter I'm trying to think if theres anything we should adjust out as we think of the rest of the year with the stores closed and then may be lapping it next year.
Speaker Change: And then also I'm curious as you I know you guys focus on recapturing sales from the store closures as you measure. It can you talk to any evidence that you've seen of transfer from some of the stores that have closed or anything we should try to keep an eye on there. Thank you.
Speaker Change: I'll go ahead and get started Mike I mean, the simple answer to your question is no. When you think about a lot of the adjustments we typically take those in the fourth quarter, but nothing unusual in the first quarter.
Speaker Change: Tony.
Tony Spring: Yeah, I would just say in terms of sales from store closures you have the interesting impact just to frame it for folks that when the stores are closing you have a slight depression of sales in the existing stores because of the going out of business.
Tony Spring: Communication in that environment, and then following you start to see the recovery and our opportunity to recapture what I would say is we're slightly ahead of our expectations in terms of what we thought would happen with close doors recapture and I think that remains an opportunity for us to kind of lean in kind of by category and by geography to make sure that we're getting.
Tony Spring: Adding our fair share of that business.
Speaker Change: Alright, that's great if I could sneak one in on beauty could you see blue Mercury positive I'm curious.
Tony Spring: Maybe just a comment on the beauty business in total as you look across all your banners any any comment on total category trends prestige versus mass or important shifts between the categories that we should think about as we model forward. Some of the center core in the Blue Mercury another stretch of the year.
Speaker Change: Sure Mike I think the you know the category has had a lot of distribution expansion.
Speaker Change: And we are certainly fighting for our fair share of the business what I feel good about is that Macy's bloomingdale's and Blue Mercury are great holiday destination, so coming off of mother's day heading into father's day being a great destination for Christmas and Hanukkah. So we have more competition I.
Speaker Change: Good about our reaction to the environment, making sure that we are doing everything in our control to show up well for the customers that can include the value sets that we negotiate in the marketplace to make sure that we have a value day in and day out in the fragrance and cosmetics.
Speaker Change: Cosmetics area to the quality of the staffing you know maintaining a full service environment and beauty across all three of our brands. They're nameplates. We think is very important to making sure that we offer both value and great service in that zone of business.
Speaker Change: Okay. Thanks, a lot guys best of luck. Thank you.
Speaker Change: Once again, ladies and gentlemen that is star one if you would like to register a question at this time.
Speaker Change: Our next question is coming from Chuck Grom of Gordon Haskett. Please go ahead.
Chuck Grom: Hey, Thanks, Good morning, and best of luck Adrian.
Speaker Change: Great working with you.
Speaker Change: I wanted to just focus on the on the first quarter, a little bit and talk about the health of the consumer across income cohorts also category performance during the first quarter, particularly in March and April and into May If you could and then.
Tony Spring: Tony you talked about demand pull forward in the month of May.
Speaker Change: And I was curious if we could just dive into which categories. Do you think you saw that pull forward. Thank you.
Speaker Change: Sure Chuck Thanks for the questions.
Speaker Change: The consumer health I would say remains.
Speaker Change: Under pressure in a discretionary spending is something.
Speaker Change: Something that I think we've seen from the middle of last year kind of forward that you know as our inflation subsided, a little bit as gas prices became more affordable the consumers still felt the pinch of other costs that were rising and so were maintaining our.
Speaker Change: Aggressive position in trying to make sure that we're capturing our fair share I would say at the high end. The consumer is not obviously pressured but they remain short choice full and they don't like uncertainty. So there are fits and starts I would say at times to the way in which they respond they love newness. They obviously love a good.
Speaker Change: Value they like a compelling presentation and storytelling. So we're leaning into that I think you heard.
Speaker Change: Bloomingdales all of these pop ups and Activations are really well received the vendor community is very interested investing in bloomingdale's to bring their brands to life and I think that's just a winning strategy in terms of categories.
Speaker Change: It's hard to say what part is pull forward, but I would just acknowledge that you can't tell you there isn't any pull forward. So as we're all acts as consumers kind of watching what's happening. There. There is this mentality that I've I've got to buy something now maybe that's a part of some of the growth we've seen in fine jewelry for instance, maybe some of the big ticket areas where.
Speaker Change: There's more uncertainty around the size of the impact of pricing changes that that may come over the course of the year, but but I I continue to be very bullish on the fact that we have a better distributed model today than we even had a year ago and what I mean by that is we have a better balance across categories of business, we have a better balance between March.
Speaker Change: Place and one P. We have a better balance between off price and full price when we have a better balance between Macy's bloomingdale's and blue Mercury that just helps us with 40 million active customers to be in a position to while others are disrupted take share and so it doesn't we don't have a right to it we don't get it automatically but I think if we.
Speaker Change: We remain you know surgical and aggressive on the things that we do well, we're going to get our fair share of the business.
Speaker Change: Okay, great. Thank you and then as you as you toggle between investing in value.
Speaker Change: To <unk> point, and then and then raising prices can we dive into I guess, maybe which categories you would expect to see the largest price changes as you progress throughout the year.
Speaker Change: Again, I don't think Chuck it's about any one category I think there are brands that have more elasticity and there are items that have more elasticity and others that don't and the benefit that we have as a retailer is we don't have to buy those things, where we think the pricing is too big a pinch on the consumer and Conversely.
Speaker Change: And other items are within categories within brands.
Speaker Change: We will surgically take prices up because the customer votes and says the product is worth it and so again I'm not pointing names, but between coach and Ralph Lauren and there are plenty of names out there that have talked about surgically adjusting prices, where they think the product commands.
Speaker Change: And the value is apparent Conversely, where we're going to be aggressive on pricing and make sure that you know.
Speaker Change: Those things, where the customer is highly attuned to price, we're going to be very competitive.
Speaker Change: Great answer. Thank you and then just one quick one for greater interest on capital allocation you bought back it looks like about.
Speaker Change: About $100 million of stock first time in a couple of years I just wanted to understand that.
Speaker Change: The guide does not assume any more additional share buybacks. It looks like your your diluted share guide is about $708 million lower than what it was back in March.
Speaker Change: Yeah, absolutely checks so.
Speaker Change: Really the buyback of shares is really a signal of the confidence in the business and as we reflect on the past year and the momentum our momentum that we see coming into this year, even with the uncertainty of tariffs.
Speaker Change: We're pretty excited about the health of the business and we're also excited about how were managing our cash managing our inventories and managing multiple dimensions of the business now our practice is not to provide guidance on future buybacks. That's just not something that we typically would do so as we think about the balance of the year, we're not assuming any further buybacks, but that being said.
Speaker Change: We have $1 3 billion of authorization still left on our on our approvals and we're actually quite pleased that we resumed share buybacks in the first quarter. So again, it's really a reflection of the health of the business and to help this company and so we were pretty encouraged to be able to return $101 million.
Speaker Change: Back to shareholders in buybacks and an additional $51 million in terms of dividends.
Speaker Change: Yeah.
Speaker Change: Alright, thank you.
Speaker Change: Thanks Chuck.
Speaker Change: Thank you this brings us to the end of the question and answer session I would like to turn the floor back over to Mr. Tony Spring for closing comments.
Speaker Change: Thank you to everybody for your active participation on the call today. Thank you again to the Macy's Inc. Team for your leadership during these unusual and uncertain times and I want to wish everybody a very happy summer holiday season, and please make sure you tune in and check out the macys fourth of July fireworks.
Speaker Change: We have a great show planned for this year have a great day everyone.
Speaker Change: Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect your lines and log off the webcast at this time and enjoy the rest of your day.
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