Macy's, Inc. Q4 FY2024 earnings call

Strengthening and Reimagining Macy's - Total Macy's nameplate comps declined 0.9% in Q4, a 380 basis point improvement from prior year; First 50 locations had positive 1.2% comp. - Closed 64 of approximately 150 non-go-forward Macy's stores ahead of annual plan. - Merchandising team continued assortment matrix evolution, digital improved site navigation etc., marketing reallocated dollars to live events etc. ### Accelerating and Differentiating Luxury - Bloomingdale's had positive 6.5% comp in Q4, opened three stores including first women's-only location. - Bluemercury had 16 consecutive quarter of positive comps, kicked off 25 anniversary celebration with remodeled website and store prototype. ### Simplifying and Modernizing End-to-End Operations - Improved percentage of orders delivered in five days or less and replenishment in stocks by about 400 basis points, shortened days from order to ship by roughly 1,100 basis points. - State-of-the-art China Grove distribution facility on track to open mid-2025 to leverage automation and streamline inventory fulfillment.

In the fourth quarter, Macy's Inc. had a total comp gain of 0.2%, its highest of the year and best in 11 quarters. Macy's nameplate comps declined 0.9% in the fourth quarter, with the First 50 locations achieving a positive 1.2% comp. Bloomingdale's achieved a positive 6.5% comp in the fourth quarter, the strongest fourth quarter volume in its history. Bluemercury achieved its 16 consecutive quarter of positive comps. For the full year, Macy's Inc. adjusted EBITDA as a percent of total revenue was 11.3%, and adjusted EPS was $1.80, which was above the guidance range. Total enterprise comps were up 0.2%, and Macy's, Inc. go-forward comps rose 0.6%. Year-end inventories were up 2.5% year-over-year, with roughly half due to the conversion to cost accounting and the remainder reflecting the timing of spring receipts.

Net Sales - Expect Macy's Inc. net sales of $21 billion to $21.4 billion in 2025. ### Comps - Macy's Inc. comps to be down 2% to down 0.5%, with Macy's Inc. go-forward comps to be down roughly 2% to roughly flat. ### Other Revenues - Other revenues expected to be $835 million to $845 million, up roughly 75 basis points as a percent of net sales. ### Gross Margin - Gross margin as a percent of net sales to be roughly 10 basis points to 40 basis points higher than fiscal 2024. ### SG&A - SG&A to be down low-single-digits on a dollar basis, but as a percent of total revenue, to be about 100 basis points above last year due to lower total revenue. ### Adjusted EBITDA - Adjusted EBITDA as a percent of total revenue of 8.4% to 8.6%, core adjusted EBITDA as a percent of total revenue of 8% to 8.2%. ### Adjusted EPS - Adjusted diluted EPS of $2.05 to $2.25. ### Capital Expenditures - Anticipate capital expenditures of approximately $800 million.

External Environment - Uncertainty in the external environment, including consumer spending pressure, inflation, and weather affecting sales. ### Inventory Management - Challenges in inventory management, including potential disruptions to global trade and tariff activity, and the need to balance inventory and promotionality. ### Promotional Environment - Uncertainty in the promotional environment, with the need to carefully manage inventory composition and respond to changing market conditions.

Q: Matthew Boss of JPMorgan asked about areas of strength relative to same-store sales constraints in 2025 and drivers of SG&A rate pressure.

A: Tony Spring mentioned progress in year one of Bold New Chapter like First 50 stores growth, store closures, growth at other brands, and progress in end-to-end operations. Adrian Mitchell said SG&A is higher due to lower total revenue and reinvestment of savings from store closures into customer experience.

Q: Brooke Roach of Goldman Sachs asked about engaging customer demographics and recent trends.

A: Tony Spring talked about the power of Macy's Inc.'s portfolio, multi-category business, and leveraging events. Adrian Mitchell mentioned investments in customer experience, scaling initiatives, and improvements in assortment and execution.

Q: Ashley Helgans of Jefferies asked about consumer health and promotional levels.

A: Tony Spring said consumer is under pressure but retail therapy opportunity exists. Adrian Mitchell mentioned correlation between inventory and promotionality and good inventory position.

Q: Oliver Chen of TD Cowen asked about Macy's go-forward comps trends and category dynamics.

A: Tony Spring talked about trends in ready-to-wear and home business, and plans for marketplace growth. Adrian Mitchell emphasized focusing on go-forward Inc. comps.

Q: Dana Telsey of Telsey Advisory Group asked about private label penetration and store closures.

A: Tony Spring discussed private label reimagination and progress. Adrian Mitchell said committed to closing approximately 150 stores by end of 2026 fiscal year.

Q: Tracy Kogan of Citigroup asked about credit trends.

A: Adrian Mitchell said credit card revenues stabilized, expected growth in 2025 due to healthy credit portfolio and initiatives, with no meaningful changes quarter-to-date.