Macy's (M) 14 Aug 192019 Q2 Earnings call transcript

Good morning. And welcome to Macy’s, Inc.

Second Quarter 2019 Earnings Conference Call. Today’s hour-long conference is being recorded.

I would now like to turn the call over to Mike McGuire, Head, Investor Relations. ahead. go Please

me Good Price, on Operator. quarter And for and outlook. thanks results Jeff today Thank our CFO. Gennette, conference morning, call us Chairman With XXXX year this our and second the to joining call and are Paula you, CEO; full everyone. on our discuss XXXX our

a share, will open we and have question-and-answer Jeff session. which Paula several after prepared up remarks for to it

participate, of the a that we time to constraints who Given questions quick with ask number please one people your the up. limit you want and to follow

addition press The well regarding additional facts a section posted In our summarizes call our this the our as some operating of to in and as presentation release, we Investor remarks, figures on guidance. presentation our and the have and macysinc.com. performance website, information slide prepared

filed will website on few Form time. be and our that available at in Additionally, be too our that a will XX-Q weeks

and adjusting I is release do have Thursday, that earnings quarterly our timing our beginning will the call, we with earnings be next that typical one November will on administrative quarterly of note to which share XXst. be

thumb rough going we for minor end. to any As rule forward, the results third and the after release conflicts our quarters through quarter the a plan first on of Thursday barring third

timing of planned not the However, change. the fourth is quarter to call

publishing be quarterly our hour one all release will earlier up earnings Time we X to call of our o’clock the moving addition, time now a.m. In results. for and Eastern

accordingly. So your calendars please mark

company’s assumptions A from with these are Securities to XXXX. filings the the the discussion that could cause and the are to Harbor the Safe provisions These is uncertainties expectations materially of actual subject contained Litigation forward-looking and uncertainties Securities Commission. mentioned risks in Act Private statements that Reform differ Exchange mind in to of all today. forward-looking and factors statements Keep of and detailed results subject

adjusted costs. of that net be our impact other per operations, income and we the the earnings providing share amounts will diluted and exclude discussing results In impairment of

information others used in non-GAAP You the measures, section call find and these on as additional Investors financial website. can regarding of our release this our during earnings well as

webcast available year. a two A is website. hours it being after today’s approximately call will of this and be our the replay on call will the there archived As one for conclusion reminder, call following be

like to Jeff. I’d this Now, turn over to

thank and Well, you, morning, joining everyone, Mike, thanks us. and good for

you will the through So, then Paula quarter we up our results take open and Q&A. for I and will second line

our We delivered in comparable morning, plus another X.X% an sales Inc. basis. owned comparable increase sales of press this As release Macy’s, on you license quarter growth. saw achieved a in

below per earnings $X.XX, expectation. Our share our was well

call, we inventory. earnings communicated on into elevated walked As quarter we with our spring quarter second the first

slow a got off The very to second quarter start.

clear it decline As brands, accelerated apparel of a a deeper business. we fashion became private was into sell-through weather miss sportswear international moved problem a combination quarter, and tourism amounting that our inventory in factors, the key due in warm the women’s our of slow on to

clear by customer to respond inventory right to with impacted margin and second our full freshness the for to unanticipated to almost level inventory. markdowns the We trends. mix season the quarter liquidity with now in-season The We necessary took meet fall the point. anticipated and improved markdowns enter one gross demand, fall

or asset to full gains. for $X.XX to light That of $X.XX, are guidance in $X.XX expect sale the lowering in guidance gains sale of flat said, of to our results, now per X%. $X.XX comparable We confident minus the up our by adjusted range adjusted in we second asset quarter remain earnings year. annual earnings We sales $X.XX including share

second the had we at step well. business When challenges and many performing quarter, of there areas the our are business more while back broadly, seasonal look that in I the inventory are

business led Backstage our expansion. healthier, Our stores is and GrowthXX by brick-and-mortar

consecutive growth. comparable back on growth delivered good them. year to double-digit business and our half digital contribute XXth Our We to review track quarter the its sales XXXX of expected of in initiatives. strategic to made quickly progress the so All are on

out Work GrowthXXX, the stores receiving advance of the Growth are year’s XXX additional Macy’s be GrowthXX of these ahead last season. complete holiday treatment. stores will on and in roll well

lift see in are We XX% of the being original These sales. XX completed. ones and that Macy’s similar a Growth from performance the continue where the work stores up strong brick-and-mortar to is stores expect approximately XXX XXX make sales

XXXX XX mid-single now We and in digits. XXX XX of country Macy’s than to Backstage the it’s across Backstage encouraging expanding another them months we that continue Backstage see Macy’s to open a have more than complete. with the comp to within stores store locations more XX for Backstage, are already within

better are off-price We at getting every day.

on Our center platform, the Google of to and Backstage cloud This the operates Columbus, speed up efficiency, improved getting off-price is support continued distribution growth running. in us our DC scale and Ohio business. now

roll As providing out and cloud centers network part chain additional supply other we to Google flexibility strategy, speed both for our of and distribution this our Bloomingdale’s. will Macy’s platform XXXX, in

offer we customers through Vendor Third, Vendor grow Direct, brands and the we aggressively on to are to Direct. SKUs our continue able macys.com

halfway million now SKUs to of our X are this adding goal We year.

love selection. customers the expanded Our

both upside. site. for rate. make It ROIC and margin, satisfaction very a has capital customer inventory adds to zero sales The only increases investment and high traffic gross and and Direct the Vendor

and omni-channel customers, to Mobile, experience online. both better more frequently Mobile shop them us create enabling our easily and helps for a our in stores

with valued customer’s usage we and Our to in and Bloomingdale’s increases interacting significant conversion. for and app our see continue is the brands, assistant Macy’s

My will we a experience, features My recommendations of Many and localized pickups have to regular cadence in-store online new orders, exclusive quick of the app. Mobile channel Wallet, our product and like that remains Stylist. with improve Store, customer My in-store fastest-growing and rewards the of barcode these are

at strongest jewelry, men’s businesses. destination a total businesses women’s shoes. the Macy’s quarter, and account XX% as sales six six The group nearly for six performance were and businesses, with fine for X% higher destination all are AUR And our destination businesses of in up tailored lastly, the our second

being improved All six of balance see profitability, market drive environment one to these to brand business drive the we putting through to department and and cross-shopping, competitive we product, entry enhanced and opportunity resources top-performing return on six These continue are categories, which great the advantages the behind destinations growth of point investment are and to store. of on additional marketing. outperform the colleagues, is Macy’s of a the significant share,

to-date, be satisfied market market these won’t overall until in with with there pleased growth have is and taking businesses starting Macy’s are we six. While share seen will share these get that we we we business-by-business

them with hard important and are So we these will work be at performance. we at are to the implementing confident that our back contributors initiatives, team half

and The in additional Bloomingdale’s had tourism. and by be in are going opening largely stores. Women’s were quarter, men’s a we shoes in Bloomingdale’s declines international outlet the quarter two to more standouts quarter, and Outlet challenging driven the third

strong had Bluemercury quarter. another

have quarter, showing We digits. stores both within considerable have stores new Macy’s growth. continues a free-standing to the across shop-in-shops and double in three sales Bluemercury opened for stores significant XX the with stores total grew XXX states. Bluemercury.com shops growing runway, of

of brand. strengthen channels customer are Outdoor into the with innovate far. so In to second our we generation at with and we across STORY, bring STORY launched new customers existing relationships response July, to and to all pleased continue Macy’s, will our We customers the

well brands, new gives with as new to STORY local customers in often. reason niche partnerships more another customers brings also and visit players. It as and current to opens doors major

collaborations Outdoor us Sporting allowed customers STORY, partnered these experiences. unique to Goods Dick’s and our offer For we Scott’s Miracle-Gro product and with and

across are Z behavior, consumers. a among opportunities tap into pilot This to and thredUP, world’s the country. in Macy’s Gen XX fashion in We rental also and resale month, both we testing changing millennial with the the customer marketplace largest especially e-commerce began doors

about know to and styles customer shopping consumers fashion an carry. coming are selection opportunity ever-changing we shop don’t that back the passionate resale. This We us keep gives a typically new and to partnership them many reach of and brands sustainable

rental rental, fashion of discovery. customers that in Macy’s rental the Learnings at similar know variety future. from near launching this, and we development Castle. Bloomingdale’s subscription our into a inform with partner Bloomingdale’s relates it a want service service will As is My the List, to Tapping our

we right plans as the we second the place to in ahead look of So half continue grow have confident that XXXX, our to are to we business.

The now right second quarter we have tough, but the gross was the margin at inventory levels.

have to we holiday as entire and down in need be today’s we must-win laid environment. the organization have We levers for a the XXXX competitive

environment. significant prepared and to tariffs, the remains in to declining the few. respond It’s consumer fluctuations, noise there is a While the international spending currency in changes consumer healthy, to tourism a dynamic situation is name team macroeconomy,

from related tariffs, tariffs U.S. to currently Representatives that Trade tranche the to specifically of fourth relates released Office it As are goods details China. the yesterday assessing imported the we on

us confidence though that earlier work mitigation for that our price appetite customer leverage from strategies that of suppliers find have We the for tariffs our today’s have tranche in our partners vendor We China. and us, doesn’t gives much increases. scale to know the

work first but has drive So closing, of course-correct needed. environment external XXXX the the in the in half to challenging, done team and business I dynamic of this when am proud been the has

year. back We are in the committed to half the of delivering

in of base. and initiatives. importantly, growth of on have we market productivity our as and details these line clear Paula top on the touch growth on more line We also remain share hard together are into will we sight will and at profitability growth, focused a continued growth September. customer share our But work early shortly

we affordable plans. is sentiment on we demand negative our strong consumer are know sector, quality our high for is While confident there in fashion. There

our brand. strengthening new customers our are bringing customers into relationship We and the current with

shop we deliver convenience anytime the anywhere, consumer omni-channel as we and Today’s can an that retailer. to demands ability and know

business the strong a and aligned stabilized have We team. and have

is shareholder resources we invest balance Our create to to have the value. sheet and healthy long-term

Paula Now on hand it and detail to going review am over quarter our second the to for to more year. the outlook provide I

Jeff, you, and good Thank everyone. morning,

comparable fully benefits consecutive Future second said, Our season with of our we program. and While overall performance. fall half sales, the year our expect Funding in quarter to deliver focused productivity a are on initiatives That not and in positive achieved another we successful were our pleased the we strategic confident of from we the

basis. sales quarter, the X.X% second increase In license of of owned comparable $X.X on we an billion, delivered an

We saw home we businesses. strength all continued to the softness of be a destination category mentioned, while our within ready-to-wear some Jeff experienced As in challenge.

the growth. down performance the sequentially. solid strongest in North our the in digital Central to continued and were accelerating saw region International quarter, headwinds sales X% tourism deliver We approximately

on units encouraging key Average transact quarter. the as positive units importantly, when is that a and growth see X.X%, in but transactions to average driver comp transaction X.X% with continues continue per aggregate. our to purchased be sales of to down spend in up our we platinum customers of us, It fewer they with total us more are were

heightened unit performance XXXX. average by retail of quarter very our quarter, a was as Our strong growth well driven down markdowns as the in challenging the AUR comparison X%, second to a the in of Backstage,

We down million, last with revenue the X.X% our $XXX in generated and of line quarter from expectations. credit in year

program XX.X% points to credit Star credit quarter. to momentum with drive our up loyalty card Our Rewards continues basis revenue, in penetration the good in XX

However, there bad debt. slight were fraud in upticks and

our revenue We monitored balance unchanged. remains annual in place mitigate remain credit strategies our which of closely confident exposure We in range, the these year. are over metrics the and guidance to

the XX.X%, markdowns vast Gross was to quarter margin of points decline. in Jeff down delivery growth basis additional the drove year. the this majority for last XXX second and Combined mentioned the

cost growth we what quarter. to and online Star their in margin on were program the Rewards roughly anticipated was The our supporting first saw our increased in equal delivery impact

for of we that responsible additional largely the margin the gross than the markdowns quarter. was decline at it the start However, were in much-steeper expected

the With a our quarter excess than tougher start clear that overhang environment anticipated, an took to to necessary markdowns we the spring inventory. inventory sales and teams

we in X.X% these first the X.X% gross the resulted markdowns ended inventory up versus lower nearly quarter in at While quarter. a the comp margin in significantly up flat quarter, with

fall the was Taking was certainly enter and that it the inventory medicine, but with important sales aligned season plans. markdowns tough we

confident to plans normal our We the that are markdowns of we more back have half levels the in in of year. and achieved deliver

factors. Our confidence several in by protecting margin is supported

and demand as well-positioned fall planning leaner, much allowing dictates. opportunistically us is maintain liquidity is use inventory First, received to customer our to

managed the quarter of second which inventory with sportswear we in a markdowns related being improved and This can women’s control. brands, private majority greater position the discipline. now problem much a is is to is that were Second, much unanticipated

sportswear the will areas in to But put it of doing have and a take We growing aspects get this business. of of leadership new as deep place other business are time some ready-to-wear. healthily examination all as

our allocation and being marketing. in are inventory we Third, strategic more

media, challenge efficiency and this improving with continued partnerships in strategic we to includes and less. our offers, drive simplifying effectiveness and more of example, our This leveraging status quo our to For segmentation customers. targeting doing

to already incremental of effective million have basis. several marketing simplify EBIT us an saving taken promotion, We annualized dollars or actions less few a eliminate on

And fourth, based dynamically hold making we and we us One initiatives. resulting reallocate progress our inventory need, on times on that in enables discussed is fewer and markdowns many to are good productivity season flow, which in out-of-stocks. initiative

flow The of and that basis. annualized test program as a a than significant fall products each that translate We This and initial us found into and incremental expect of cost to $X more our on of at benefit confidence $X could of gives encouraging. the incremental $X, than scale result. operating more of average margin great an on benefit results millions been the generated of tens that have hold we see at during EBIT in dollars EBIT of

are data our we getting Additionally, analytics a which our enhancing pricing more and decisions, enhance understanding markdown granular also margins. to will of and capabilities

pricing our EBIT sizable spring rolling following capabilities expected. benefits also now out are our new with scale successful We test, at

in on basis points last basis The the SG&A, driven recorded Moving a expense our strategic in XX $X.X on we in to by primarily rate million $XX an initiative. of over of SG&A increase billion or was dollars investment increase quarter, year.

towards year-over-year we and spring expect season. season fall given to weighted reminder, that be cost we weighted the front-loaded of to SG&A a in more ongoing nature $XXX reductions investments, growth discussed restructuring As the normal benefits in to of and the the towards these continue million the the be previously

debt benefit balance to lower and sheet continued levels healthy. our expense Interest remains from

While that discrete the it second in XX.X% and for our tax caused effective unevenly to be benefits by expect normal quarter, XX% The tax we through variance is rate the certain occur year. year. the was

sale we $X net the year. up, last million all delivered asset $XX respectively. $XX net $XXX Included figures of adjusted gains quarter million of income it million and Summing versus in these income are in million

respectively. asset EPS to was Adjusted and compared the last quarter, of year, $X.XX, gains about $X.XX $X.XX sale represented in $X.XX which

compared Year-to-date tax payables to flow last lower cash operating activities from to adjusted by The lower million, payments. million was merchandise offset $XXX due is and $XXX variance year. EBITDA

of to billion remain to last $X our $XXX of achieve year. capital Capital $XXX expenditures compared were million, million expenditures. We on track guidance existing approximately

than financing was a million by than did as $XXX down activities last less year ago, used paid Cash less we debt we this year. year

our is Here guidance.

we of year, plus total X% on full owned an the For basis. growth comps expect to approximately and sales up license to flat continue flat

the that We we range. upper end sales in are deliver of the can confident

our will initiatives. We be full strategic at with strength

and learned be have consumer from to during We of holiday continues challenges XXXX spending the healthy. our season

Although, contemplates. mindful as macro are range up being some Jeff noted, guidance we full against which of our uncertainty,

third greater necessaries temperatures to due Looking of comp. we comp from benefit saw last fall at third comparison will the than in toughest be fourth quarter year, meaningfully the the expect specifically, sales comp part quarter the the our quarter, we large cycling season the October. we to be cooler In

be the down cycling margin flipside, in fall a by season slightly quarter, disruption expected be of will Gross On underperformance the and event. the year in promotional fourth is the center our in our ago. we West to the pre-Christmas Virginia fire the mega to caused

is inventory productivity confidence provision our based promotions team this and the fall in on program. I enhanced mentioned improvement factors Our merchant liquidity, parity, trend earlier, in four our

still the to and early to holiday year to intentionally of rise by sales November as we the are season. below a fall end are support quarter we the truncated expect inventory, it in be last season. end bringing third as Regarding We receipts we expecting

our $X.XX sale As when in gains. asset to we range to sale look fourth year, asset now adjusted for excluding million at of to the half EPS $X.XX the We or we gains the of quarter. $X.XX be anticipate planned the back guidance $X.XX occur balance of the in to expect $XXX

processing from released guidance details fourth as Any are our tranche as the Jeff still not yesterday, tariffs is a we in potential of impact contemplated noted.

minimize in in are mitigate impact with and and our we active coming much will vendors as We weeks. suppliers customer and XXXX possible more in know tariffs, to as the discussions

guidance, to confident of control. are respect overall the what our With outcome can we in we

of are control with what cannot are mindful current we cognizant also We providing we and of guidance ranges that the uncertainty. are prudent macro

posted our on morning. our earlier this find can You presentation we the guidance in slide complete website

more our on be layout five Hal and and savings streams President, will in details September. committed, years the detail anticipated sharing early Future As more total our along three to over our Funding six I program strategy productivity will we Lawton, we fully, work productivity in Jeff with years. the Our including next

confident To wrap we objectives. second our sheet allows to indeed our up, in was are on through retirement is us a I We strengthened while am the long-term debt healthy that additional both track and quarter a challenge, the it steady right that balance position and flexibility. accomplish short-term

in We right growth. are investments are making the hyper profitable business on focused and the we

on are initiatives will making both progress We the that customer good shareholder enhance value. and

Our will and and the way top sales, our of inventory strategic program growing day we capital out. in, work mind, productivity allocation are day management initiatives are diligent our transform

we day improving better are every data and day. processes tools win that strong disciplines every together our to We have team with and is analytics, management a better working

happy Jeff I your that, be will to take With and questions.

JPMorgan. take Thank from with our first Matthew you. We will [Operator question Boss Instructions]

Thanks.

GrowthXX seeing you stores are from Jeff, comp lifts So, and Backstage.

spending what’s higher-level, preventing destination your also in your down of despite that sustaining the and half take in I aggregate year mid-single cross back if of You comps next healthy today, positive year, or digits commented to were a the better six consumer confidence into comps? remains step what’s spending some the consumer today at guess up businesses cited Macy’s comps currents. at the and

business business headlines So, you hit one quite particularly when comps didn’t to home now, ready-to-wear, strong, are what strength was of ready-to-wear winning the we of other categories think, about at look challenge right that you now. pieces Matt, the mention is of really in and are quoting. our the soft definitely by the right a But The I Mobile. those the categories you the is led sportswear depressed good some overall digital that the

you on to early and we to a definitely didn’t through are look you June. that sell-throughs strong into off as us we that that led that see seasonal happen at quoting the got when decision that So we start product, factors of the the stronger slow combination sell-through, the May expected quarter-to-quarter way all and where worked in

made take decision we mid-June So appropriate to markdowns. the the

that we season flow able fall. our inventory of summer were that on we and our and are going all So we products right levels a to of have the the with confidence entered for ready us spring fall lot to the get all of fall that

have inventory line. It now margin point did a full by took we in our quarter. So We the medicine. affect gross our in second overall the

take the about Now confident back year. half are the of let you me we why through

first X. a we full the half off, the above to We So, up with are flat entering at guided year the X.X%. back of comp year

is do just better going said, what the We quarter. Paula mention fourth to be expect to we third than meaningfully just quarter the

a we month for Third in the very of strong cold October. quarter the mostly October and our The by that we buoyed was -- last month had us. month was strongest year of that weather was was quarter

fire, we we a mean, well the change degradation on to the flipside, so disruption made. as fourth last we event that quarter was it cycling comp XX-basis-point about the are all as I that that promotional fourth what year the quoted that. year, as last quarter And the you the are we remember lapping we of But saw, was from

aligned content. for very a is So at the that. have are we we looking our holiday must-win focused confidence The in lot and to that and XXXX engaged on make entire It’s organization of a happen. us

important take to our we be fourth at what’s the in test promotions, opportunity Looking every to quarter. going

item to So price were Black got the make We built. now of sure really that testing our just have velocity, in in using all items analytics we right capabilities you the saw Friday July.

and We in are entire very with fulfillment What engagement. confident events our are doing seasonal hiring, our customer network. we

three that of our worth We fourth a also quarter the penetration other in comp the is business digital It’s in about know the quarters. quarter. It than points higher. fourth higher XX penetrates much basis

Matt, that will that the and to confidence into lastly, are in are is have building all positive add just, us we building fall October, that have us a fall XXXX why complement we are positive had and been of so comp And to strategic the bringing and the by the complete of comes with to spring in be end give that’s full initiatives that in season. we confident going the we that the to of season comp the we

take [Operator question our Morgan Greenberger with will Instructions] from Kimberly We next Stanley.

so Great. just you it. much. Thank Good Jeff, about are thinking about to how store the ask morning. you wanted I base and

look additional you. with fleet, digital You store need to being store seem that. business as what you it are it double-digits, growing the by eye seeing healthier. your brick-and-mortar but that seem to closures? potential you still fleet that’s the still a I’d talked you look are the and the would negative, towards stores some Thank if love maybe that do at another healthier base is you It take is hear would about what at mean

Yeah. Kimberly, about just so let’s general. stores in talk

repeat store So strategies. just our segmentation to

have our Herald we So flagships, which include Square.

on our growth our initiatives. our by stores which we which live localized then important touched our fulfillment got in areas. stores convenience have customers for very those We and And are that really have are for magnet neighborhood

the really stores by the GrowthXX strategy points. those those We confidence in looks how stores Those comping. of magnets So talked outperformed we full flagships. getting have the The positive in what led our stores sight have growth us out all for really are gave about line a of GrowthXX on and by other growth like buildings. GrowthXXX growth X

fleet. is other store in much customer particular The stores higher than our engagement those

all XXX have of which those stores, and we will the call applied complete by the learning sales. of the be which our are of what about GrowthXXX what to is we is next touches XX% what done that have all October, you quoting, So GrowthXXX, brick-and-mortar of we end

initiatives from classified are those XX%. need we add have many of sight is Clear to these of thredUP of of do that differently like these to so market we new what adding Separate Beta lot that with stores, and make what STORY, we in better have and with our what new to are that like by got that are many doing you new Backstage. trying concepts opportunities that experiences line flagships about all stores are a touched

I to through higher those square a are less handling stores, fulfillment, are to efficiently but percentage sales of are using are them neighborhood so moving continue The comp, expect we would profitable, more customers big with footage. more operating them fulfillment, because their really negatively stores. for particular becoming in expectations we The are those they their

sense. make portfolio are it does looking at look to our at We always

we are we But We that say are servicing we done. when customer. store. know a do believe We going national we that the close to we never are this have footprint national

lose business online. customers. firing are We We their

those will decisions all We carefully. make very

strategy her about in be we So how needs. shops store omni-channel the It digital we building our that will a and stores, careful are this very customer segment’s dictation between future so also and do through Mobile any we business exodus satisfies satisfying that closures. serves really

Great. Thank you.

of America. Bank Your Hutchinson question with next from Lorraine comes

consumer increases. wanted see comment price about to Jeff, wanting I follow-up, not you to on the made morning. Good Thanks. the

Yeah.

little the us give What you are more on just tariffs? And strategies? around bit a your mitigation the information can expectations

Yeah.

And or are try price for do you will table you off selectively? increases to the some

what been. tell So has experience let just me our you

was significant when was at impact. that very went So, XXth, obviously, there tranche and May but it was And two, XX%, impact on one three, tranche limited XX%. there no to

adjustments. the And parts so appetite that categories we did housewares increases luggage, make those from in play price furniture, in of like had had to customer and learned so for little we that increases we and with cost very in selective experience

more How when working I are Lorraine, vendors? into you So XX% you to tariffs answer because with prices? think, those then goods about your you do to talking you your you products get perspective of what from and are gives how do? looking you at the customer’s to those question, How do going value get a are that into make value raise permission the of they

into in from by tranche which touching when thinking tranche four September touched have we at So time morning, I of content XXth. some we even digest had pieces four, as you this our we the are come remaining looking on is that are that this are business versus are to looking that about being tell December increases would are of price we Xst no that at any effected four. tranche

got way different the that other being XXth. Xst So is being as one then looking at been, same effected September now fiber December based category, is the what categories of but for our are we have risk its you on for because some that by on fiber that’s taxed or

and nickel. to So think in one more than looking annual no that guidance would XXXX that we at be of I risk recognize all our

believe think that I we on XX%. on a through we solutions basis, will long-term work

partners. closely with are manufacturing We working our

strong our of our with as out source are partners, relationships as and our vendor well scale our who partners, We sourcing leveraging China.

in short and that is the So I long think XX% term. manageable

you think dealing I we goes a are have not of to I when it other say to XX%, dynamics that prices. raise with whole wouldn’t would series

Thank you.

Trussell with from Bank. Paul next question Deutsche comes Our

thank Good performing question. morning digital circle wanted business, on back I to which is well. you and for our to the taking

$X did year. billion You over business mentioned the that last Mobile

website XX% terms type of accounting the Direct the through are total to adding versus taking are I you you growth and sales, of Thank detail whole top is as update size you. the on how Vendor Direct, for on the now much the us how take business on more in now also driving Direct Vendor sale bit and help been product driving SKUs of on is understand assortment that any curious mean, your the also and e-commerce that in line? a rate that that e-commerce? Vendor maybe you And Just discuss the a you have expanded in

Paul. All right. Hi,

fastest-growing in $X So first. XXXX surprise let year, in told billion. sales get to so me what $X.X we Mobile and our it you you take XX% is last we No we expected billion Mobile through will channel grow to

We that for half when the about first of performance are on year. track in you our think the

Direct, one, are adding is So what into this Vendor when we we we track, of we said million SKUs. have X a get goal on on

so goal We added new new SKUs, are halfway to the that XXX,XXX $XXX,XXX vendors, have SKUs. XXX new of of we

are really home we started we and So implementing broadly. more now primarily at

catalog full the of brand to expanding are We our partners.

searches we really us. failed We look expect categories of our at are also new what customers and that adding

We this giving ratio satisfaction. set all benefit hitting mentioned, store, at and think in the are us But that aisle. always of we a ways I online we customers of look SKUs Macy’s to our is by go. have our driven it’s and have make larger we endless competitive have we is SKUs a data what peers driven high This really so to as our customer standards personalization, it’s quality of an given and to sure is,

Vendor you the on to nothing I I -- yearly we objectives. track I I to will going where our am to speak kind increments. we But long-term. tell in it going in but all achieve upside aggregate Direct. don’t of I see over with of think not see are

the it really for sales, and I it high satisfaction adds investment, adds minimal a it think ROIC to no traffic capital makes inventory so increases it There’s that rate. profit, and site.

being and can as Vendor business up what includes digital in includes big growth continued with doing we Direct we double-digit, with see with we being that Mobile. accelerants. channel are our That when digital Vendor the we are so the what two Direct quote entire doing of Mobile And and

Paul, question as This adds it from wholesale it the model adds to perspective gross so an just accounting accounting, so your is clarify a sales, And to margin. on well.

said, you no really and so so good. Jeff just As no a capital depends all again, categories is. quite there It’s But gross margins. comparison ROIC for terms strong is no makes this inventory, It inventory, is owned. very capital, what similar gross say select it’s the of on in good actual margin the to no in that

you. Thank

Gordon with Our next Haskett. comes from question Chuck Grom

Good morning. Hey. Thanks.

And points our in Thanks. markdowns the third margins correct. XXX offsets points oppression hold what second delivery gross that impact you quarter and in quarter, could for that’s fourth you just if for quarter, you basis guess, and have if X-basis-point the delivery, think, wondering basis for XX if could the could us wondering I Just it’s I for headwind? hand against just around

Yeah.

as to we So that as growing just our on business just again clearance the last our around little pressure excess stock spring expense, step Rewards program, bit of time. the at the the in back a May, factored to talked margin our expectations digital margin, you the in from related guidance when had well gross and that delivery to the Star we

season. slow for the we to As private fashion factors to the brands, sportswear, became due quarter, we fast sell-through needed he us moved the the women’s into that the in in mentioned, mentioned, international accelerated it clearer, warm good in product fall action deeper Jeff weather take as to decline the miss shape tourism key the put that

these that on improve dates when to took in really keep the out just as had and basis, this we not apparel we needed was hit then a nearly good additional which fall mind into quarter really head And on, as that fashion so to sell-throughs be, comp markdowns got did we the place flat season. down the is to that in went and inventory our that a

you basis the the additional That point. a points. almost Again on So Gross margin numbers. points, basis to seasonal related markdowns. little noted bit that’s about XXX a down just full was XX was as

of the rest is expectations. with in with relates was it the and And we consistent headwinds, consistent first to our saw which delivery what quarter, primarily

our line what took in we demand customer entering we with to and are we fall expect levels mix thoughtfully be. are inventory our as season, markdowns So and the the

we while the fall. me on the just thoughts Then give on are topic, let how at looking we are the you

I reiterate that confidence made So in the that points gross four us the earlier fall improvements. I will just gives margin

and we tools with merchant brand we and in We will through leaner we into is season. head liquidity better as we are have women’s that. we planning is So the private position to feel see opportunistically allocating about so more season sportswear good strategically move as buy and much fall fall the a inventory better

with scale that as ready productivity they sharing have to more better promotions coming we well. hold point anticipate and Again, up are the and and precise. and there, fall benefit to tools those this testing in you are been the markdown so Our really and optimization, projects fall from like we flow

our Jeff regarding the then before, just know, continue fall finished X.X%, we comp We didn’t in mentioned trend. And you guidance, the with the season confidence above just general, sales to in we have strategies as positive and change our spring as guidance.

range, our as to be of then we the are slightly. of So end are gross hit expect worse. rate the the if at the upper have margin bit to a be confident in sales sales plan. we said, I lower-end we we And if see fall prudent, But margin would gross down our range,

a Thanks lot.

Next with question from UBS. Sole comes Jay

don’t comment more risk Great. algorithm I get XXXX Thanks there to see about said you the annual the be you. offset SG&A, you nickel for so you maybe help is than to all from around that or be an but one little if pressure, about that, think there the your the prices you basically much. of margin can being guidance of Jeff, element that, Could under absorb bit the no talk you I would increases asked great. with it price tariffs. Thank that any change to gross vendors a

Yeah.

are that. and own at of we make bear So looking we that our brands are full we have the where got we we that, so changes risk -- any on Jay, private looked at

very the some tariffs whole are for talking really have obviously been all now. intensely time of We subject of on partners with vendor our and

place from us, are a in or concessions So their are on believing hoist increases getting we of are to are they what good into terms they sourcing what what they gotten going absorbing themselves have they partners. price own

So looking are of at those in kind three I that the, parts. are think in we

brands, looking we appetite customer are going found in doing price what that. do what mentioned, no for And increases, own means. have is what to are we mitigate there’s at private our that I we are to as We so what

in XXXX. be the and our a of additional learned when brands, might for taken short we brand private to that nickel And the up believe would on of risk have already our we what mitigation at partners we based strategies, you look our so where run, between balance have yesterday. we That

all hard are XX% we work with as tariffs We at of mid-December onward. the if that continued landing that of are

beyond, all opportunities at scenarios. that looking through in and keep work are everybody to We we and will XXXX those posted as we mitigate

Thanks it. so much. Got

Thanks, Jay.

Citi. Paul with Next Lejuez from question comes

growth as half, secondly big talk is a Vendor percentage guys. comp? off comments the could last start. in for was sales I e-comm of to much just year? any the slow the You be second of how Hey. you Thanks, what to about due if results am this and how a quarter Can Also Direct quarter make finished versus the of about it was second quarter that second mention plan Thanks. a that started? driver got XQ can you how did how XQ curious what

the I’d of year. Paul, half the first through not quoting are Direct is on, say we What what Vendor

at guide the We year. you will end definitely the give of

which bigger previous the It caller, of is overall for rate it was is growing at As than of mentioned business average double-digit. with the about XX% e-comm the XXXX. a

out on don’t in break we So kind of midstream that. that

sales characterized slow very flow the started the in As the month I May. within to out how of quarter, it

month in it and May particularly of the it it and across And was entire month we country. May don’t of often was talk so was the the but particularly was about wet weather, cold

was you the Board. with than out. others generally particular and they across that warmer weather of it are kind weather, of pockets this tough experiencing In month, get cancel each the country pretty some So other

fashion important deliveries. deliveries, in types tanks, those like, tees, shorts, that’s spring whole seasonal of goods, those conversation the sell-through, So particularly about really are in really weeks and summer

important that responded So to we that. very

better get did and the June the in of positive July. continued month into the month of It

I is got to what remaining which course quarter. for would tough the tell So through months, better you led the of May, the comp total our two positive

Thanks. Anything on XQ?

sorry? am I

you about Can XQ? talk

on know, as you comment don’t We Yeah. Paul. results in quarter

meaningfully that earlier What third do I’d from a than that the said better quarters be expect say, can that perspective. the Paul, we is four comp we quarter

Thank you, guys. Good luck.

Thank you.

Sachs. Walvis Goldman question with Next Alexandra from comes

for had much so I a on the question. Good morning. tourism. Thanks question taking

to Is last function and more been are or over down mentioned has in you a size a if whether shape foreign more quarter. X% the and the spend color a of give that You few it of function basket that little more the expecting trend? quarters? on that sales that changing traffic how tourists wonder to are there tourist I of could you

Alex. Hi,

business. me on give context so and affects it tourism our Let some how international you

in and a Bloomingdale’s of our is volume it Macy’s So driver of stores. significant XX

really So many are growth initiative. cities. all virtually In of stores, them our the touched gateway it’s of by these

in Macy’s we and So built are for Bloomingdale’s those ready and both markets.

they you full some are high best of virtually tourist When because international are price to look at these returns. sales, our there’s buy no apt AUR, really more they transactions, and

that dealing So very are sale you with high it’s here. margin a

our trend across mentioned, business were quarter from was in acceleration X% Macy’s was an we our down X%. as Bloomingdale’s where and that from the So the down and we second first quarter

against We see against pretty get are four as I than going unprecedented. we flows. easier of at what we so in up are and good negative this. we has always we lapping its quarters And think, not -- now are This compare we consecutive an were up tourism Now international ebbs comps, decline fall that spring. is

through We before. this have navigated

But the we just pulled second expectations, all side, our quarter fall the just through be on to we be and from took our the way to that prudent prudent. comp

even that to though So a back up pull just a through, comp half, prudent. are be in we against easier the did we much negative,

to in are XX what that these international is offset stores we really tourism. focused do what And can we then

teams on really those win with focused how domestic our important in really more teems are how very we tourists and corporate doors. local and more get we these we So customers

there’s country, and depressed, it at look certainly depending I by country. now. ins China Brexit on outs calling right it affecting am us, see is you I when always composition as But the then So, is what

that We second the back quarter the from carrying are through taking trend the and half.

New that am tourism could wonder sure few Thanks. market. Great. you there’s I context? then on trends New is comment wonder here York up, But in some ways you openings one are also there’s it’s areas, incremental supply more market new in an retail the market you helpful. York that having more the I as could That’s you a super impact that if And the related, this in there. about if in for comment on of how thinking been coming I

the expectations, new the am look As coming Macy’s in and change if seen Bloomingdale’s result there. competition in sorry, of Manhattan, in at business I a little you as our we have

metro being and the in up, We to our of some would customer in stores I initiatives growth scores best are being that area performing satisfaction have attribute place.

country. versus those different communities we and not or City Metro winning New of New have in in hard York parts the we York other that’s are fought So

in effect quarter, Street. while of are we So New that that they had Manhattan XX have City, in Bloomingdale’s is Street all little Bloomingdale’s the they XX they happy see a more where with it the areas investments great having difficult the York very making in store they with seen are Bloomingdale’s you renovated, competition increasing strength very

say describing. area would I the you So metro by are unaffected is what

so Thanks much.

question Next Evercore with Saad from comes ISI. Omar

inventory, the run seen also the efficiency is -- the that in to something you And inventory, more returns talk a wanted we and taking Macy’s forward to business maybe from little with ask Jeff, then could talk bit some but can build benefits using I a future model it, technology where they Thanks you to own why look omni-channel to that up inventory? Direct, technology mentioned for could maybe another from on morning. in following you to to you have follow question. hasn’t standpoint. to inventory more structural Vendor don’t markdown my Good capabilities, about need the inventory. of less ups clear around

more of your create well, owning working marketplaces address business the you things. your as inventory Thanks. and can well. is big as an run least vendors physical for can the run, way about concessions, business could to do with opportunities you some at you think in where there opportunity capital that those Macy’s As they Maybe

and start will this can Jeff, on do add, wants go and then, ahead to he so. I question, Omar, So if

tools developing is our we things our in biggest chain future a inventory efficient the of with are funding and One smarter, supply to more more much doing way. manage our

technology. by powered much very it’s So

advanced We centers, the to combination to the products for efficiently our our of get a the move mega with the And at use cost offer fulfillment and while their time us the and inventory strategy. stores, of use partners, customers effectively. we most lowest-cost already inventory amount customers experience, logic us vendor quickest best effective in to allowing

decisions taking using are data into we And fulfillment as consideration by further that a and inventory risk position markdown step we taking make analytics.

So we the are we chain and really about excited that our seeing. are supply transformations

also the fulfillment peak logic to right using and getting high We of volume holiday ahead distribution and capacity season the inventory and allocating now at centers are by more operate full options effectively. store our of more

stores shipping And costs. we consolidating are also to sort box reduce shipments to of efficiently

of Future supply chain sort that lot Our think we of productivity Funding that. are and initiatives under different transformation when a So there fall the about

manage science In in we the and pricing, so inventory. applying -- to at what price management, we inventory really prices very in and about that our is really our analytics data addition, velocity, can smarter how moving markdowns data of measure smart terms very, the get we how inventory are

a big So this for opportunity really us. is

just thing, Paula one And to what said. Omar, to add just

do think is to excited fall about in that I the optimization most thing we at with season a are the markdown ability store level.

the it we doing zone So been have at level.

or all are where is levels where to level of to we a to and prudent. now different you help our need you take do to certain technology able going at it go that that’s markdowns have which tested don’t be on really to We store with ready SKUs

overall both margin as as going to in well markdown us gross improvement, that’s optimization. with sales So help margin with

with is the your or hybrid you of question into that. about, of from then shifting and part looking always That some Direct lease economic second we are -- what for definitely learning are opportunities Vendor burden the And always models.

any you we as when of own we look at inventory. learned retail service, a the so of that market, kind don’t And from what

our basically Beta different coming space and are that running retailers doing into really renting platform that are be to new that opportunities, is kind see, to that We and basically a space. we and that them with new with customers fee, no for of basically us. so are part that’s risk partnership things of through all the giving to pay but They a

think than time, of we overall percent Macy’s lease always the different opportunities at are go is higher that their you about looking there. will business know lease, I looking When lease Macy’s. over Bloomingdale’s options, and higher for

we us although, to lease gives that definitely, making customer are we always may focused. are that commitments, opportunity want be with go, whatever long-term not and sure, shifts We where ourselves that make so tying make customers sure not the into to doing

this and So always we continue. this are at to expect looking

lot a of Thanks. makes That sense.

and Oliver The next question comes from with Cowen Chen Company.

Thank you. Hi.

been and subscription. Jeff, about have e-commerce innovative, thinking You in really

traffic right fair against follow just in sometimes You time what relationship items would Matrix fall have thredUP be get you challenge with when your looking done risk? thredUP. the a and are are alter balancing precision for Castle and and the now a on balancing can your against the your your the how and the with opportunity? vendor also thinking Paula, cannibalization about thinking thoughts your on lot and against share Why work consumers traffic Thank up, and you the of And of you. love promotions, new balancing that, about the making you still is the thought precision quick risk promotions that sure

Oliver. So, hi,

a have her about developed with our kind and with e-commerce loyalty we questions when is brand core just a on of stickier Let think who program. that This with decisions your got acquisition of us loves strategies, you me our about rental. first we very kind customer basically about go shopping -- and

call We base an have get is in strategy. got that I our spend occasional we up acquisition an which customer have what then entire are got and we migrate in would a customer two, trying to to them bucket

our acquisition, doing of has customer, case well sustainability real what of look customers is as thredUP at the been And is love that they when as what the you prices, that, for so time. at the at in there content e-commerce and new really some perspective, having rental many doing great or is and world a heart from love just

our a this said, when connection James looking was what’s and at met he for us his with together. we so okay, with opportunities and come really partnerships brick-and-mortar was or good And to opportunity, and own

rolling So in. doing we now. It’s it are

back-to-school doors it starting. XX time for it’s is We and doing are the really frame when

I products carry. are tell those that with are And that that turn the will you don’t we best selling

to that do additional vendors it’s So don’t concern carry in-line brands about you question how it, customers feel we or your just at giving these prices. about great

So I am very encouraged.

We different received. are testing the it’s of it in where best, store, parts it’s best how

have will I So as -- we be am fall are this. analysis it a to full but encouraged very through by season, we get going of the we

half. year I and As here what is Tony a has a game. partnership this and our Denise, announced, we what you with really play it List what their teams needed Castle, been which just rental to to My development and this see in about with Bloomingdale’s with relates am and happy and for created under and

think are unique characteristics. strengths of themselves I But Bloomingdale’s. got vendors complement takes it’s of of some be to part it The full at thrilled contemporary vendors a the this.

opportunity So would what does a be this inform and broader do in the similar play to Macy’s then future.

Instagram. on What respect the reinventing of strategies. population our doing with kind digital-first Crew, with on that are we are staying to really own acquisition, colleague focused Style influencers. with What beauty means So with we

these I acquisition. help with us really think initiatives So

question terms so, traffic your And regarding and in risks. balancing of precision

better are promotions working what’s what’s better data all using and understand what I that our So in tools, that of of to meant is really by we terms less effective.

we we are data and customers our it’s they get to of different promotion, are promotions. kinds are around effective those results better segmenting where deliver, we looking are of delayering outcomes our promotions, our promotions, we how in And appropriate we outcomes so with how simplifying the target the measuring are we are, partnering customers at what different

piece outcomes. a are that we mean with precision traffic, are like we greater this and doing the what balancing drive. these when ultimately, Outcomes promotions I that sales say that’s and I with So

data better at of getting are to are decisions. our that. just way how another support So data we and using analytics It’s we

you. Thank Best regards.

you. Thank

Oliver. Thanks,

from Our Bob next comes with question Guggenheim. Drbul

morning. Hi. Good

on square thredUP Just you guess bit thredUP the more that? pressure you on then, but And how questions, you and question and brands, category? allocating about versus a like national in wondering would you brands maybe are the are relationship, talk And stores doing. a some private that just little I overlap was footage the on could your much if with had couple brands, as just if XX Backstage denim in a comment national the I even you Thanks.

Bob. Thanks, Okay.

of these So of it’s Very XX discrete. square each in square thredUP is approximately of stores. the you content content little impact, footage Macy’s, when XXX of is look the feet at in mostly the thredUP, content Backstage,

as So when products got expressed last you act in have of portfolio. thredUP, obviously look a we because we of regular them them at our we need Backstage and or don’t list or vendors gave that part either

pre-owned inventory just So really so to with we e-commerce customers, in was but it not our approach that. attractive that price, also because and how the idea is are of this because where holes play many merchandising of we we into this the that’s sustainability, sell very

right their national their winning brands they customer you some pulse adjustments. that and having they perspective, or have and content are you on brands, of about the When anything, talk way they from totally national the that of and decisions others are a all shifted are made their finding have to value and are a got and like, customer make

really when is really I where that’s quarter would strength second own were in of you characterize how tell -- What they wouldn’t then business a denim there and from evolution I’d It one and areas. upon number you in the with I of one to depends or vendors at are so that seer So way the that in are their of it denim. I look another. and respect positions

area half is When our was kids year the and some apparel women’s one mixed denim of in of a and men’s. that the look outs doing our is in at denim and of the stand kids business, our in then result you first business well of quite

you Thank much. Great. very

Your Binetti comes question from next Credit Suisse. Michael with

for the I ask, Thanks for on guys I Can comps morning. what confidence confidence detail about all categories to can about, there Good here. Paula. of comps just the about be think spoke the help what’s flat should the the us of sticking full new you or more then guess, XQ guys. I assortment between that year different is within negative in, to switching I range the understand Hey, in and again, you you want on out confident are boost see X you you helps know apparel figure of positive to ask the second, just up inventory. Should spring thinking traffic? your we that with trying a and to And that to the are fall am XQ just I clean women’s improved trends said the drive XQ, some topline we dimensions. like comps what

Michael, let me start.

of have tell in are piece showing those strengths aggregate I half all the way about healthy of is ready-to-wear back see the is is coats, what been they ready-to-wear Macy’s. continuing growth classifications in which those and So through activewear, the really pieces. that dresses, year. the swim, kind really of suits, two There’s We

we When is which the sportswear, problem season. expectation of is of our where is sportswear we that position good What sportswear brands for the are inventory fall bulk is that business, really you private brands. in right private bulk look with which for at had you the I’d of tell business a

expect to the create of So what through rapid back turnaround. that problem the for is I overhang going year a I a without that half the margin continue would not that’s sportswear inventory business in we trend have it. would expect this the the would experienced

I So characterize that’s would how ready-to-wear.

the earlier, guidance that we better you the the said quarter to than about expect our Mike, range, say guide would I’d third think is about as I quarters, But be what that the annual I and know. be meaningfully could so quarters, quarter we of in And as fourth it do outside way. so don’t QX so

half. have after leverage one half. through, cost that a easier ask Okay. an have And some initiatives the flowing over investment up the know second better SG&A control follow in some I maybe just I little in a first you got could on the if

and running if to other in you plan, light, back guidance Thanks. fixed think some if a come guess above downside about there still I So sales in from SG&A make we sales costs it inflexible the if room pull on your there SG&A the or the come do of are more initiatives can in bit that the little to relative how should do have sales plan? are you

would I our just Sure. at repeat guidance. --

as performance you of because are expenses we know our first we later our from SG&A the fall terms at began expect the benefit in expenses investment in the the again year will heavily and in to of more our In be half spring. weighted the end year, the high guidance, the better the than in to earlier year. of And would

Sales are see If what would about leverage. sales higher, there. and SG&A are expenses that we scenarios that then think in do our you different and manage sales we our prudently would always yes, lower,

we can environments. our sales in in or that environments our And sales demonstrated flex have different flex we expenses different sales so,

Thanks detail and help for of there. all the

Thanks, Michael.

Thank you.

from And question with our of Cowen last Bank comes America. Brian

getting back sheet be reduction or Debt peel don’t XXXX of could that with on be the line like ratings, Hi. being grade end strong, Good the, credit looks you consider near-term we yield, so above been your balance perspective on for your to it at should balance sheet available high XX% but I so seem investment options leverage you. has dividend altering health. range, guess, dividend what target keep just you Thank morning. wanted consider the in I would to payout?

that prudently. allocation We continue we flow So, cash generate flows hasn’t strong changed. which again, would to just I our strategy, capital do and use cash reiterate

and priorities to we are, we about that And is year. foremost this what and have so our first in $X so to reiterate guided just business invest billion invest the will

and within into XXXX, have to us leverage plan as maintain balance We to in that use look face been -- we we before, gains and asset as being sale debt. well at reducing to further to any target said important a excess we range and and so economic sheet X.X debt, gives X.X our Second is our as significantly this cash reduce environment healthy times well. with to in without our significantly range of that’s are be times we we flexibility

And shareholders. a next our cash to to will competitive we return dividend continue

that. and continuing to do are to We doing we that committed are

And along is our resuming as then cash share position last our our we the thing repurchase will warrants, with consider Board that program.

changed. capital think how hasn’t strategy about that’s allocation So our we it and

you. Thank

like It or your are turn conference appears host for questions remarks. I’d there no additional back at closing to any this time. further to the

everybody. Thanks,

everyone. Thank you,

you. Thank

your today’s for participation. Thank concludes presentation. That you

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