Macy's, Inc. Q1 FY2025 earnings call

• Progress on the Bold New Chapter strategy: Strengthening/reimagining Macy's with improved NPS, well-received contemporary brands, and strong performance from Backstage and marketplace. Accelerating with Bloomingdale's and Blue Mercury posting positive comps. Simplifying/modernizing end-to-end operations with inventory allocation improvements and use of generative AI in the supply chain.
• Omnichannel performance: Better than expected across nameplates, with momentum observed in the March-April period and continuing into May.
• Tariff management: Reduced exposure to China, renegotiated orders with suppliers, canceled or delayed certain orders, and are monitoring sourcing in other regions like Southeast Asia and Europe.

Macy's, Inc. achieved net sales of $4.6 billion. By segment: Macy's net sales were down 6.5% with comparable (O + L + M) sales declining 2.1%. The reimagined 125 locations within Macy's had comps down 0.8%. Bloomingdale's had net sales up 2.6% and comparable sales rose 3.8%. Blue Mercury had net sales up 0.8% and comparable sales increased 1.5%. Macy's go-forward business comps declined 0.9%, while total enterprise comparable (O + L + M) sales were down 1.2%.

• For the year, Macy's, Inc. expects net sales of $21 to $21.4 billion. Second-quarter net sales are expected to be $4.65 to $4.75 billion.
• Assumes the customer will become more choiceful, current tariffs remain in place with some mitigation of costs, and does not incorporate potential higher EU or other country tariffs.
• Adjusted diluted EPS is expected to be $1.60 to $2, with adjusted EBITDA as a percent of total revenue ranging from 7.4% to 7.9%.

• Tariff uncertainties with potential for higher EU or other country tariffs which could impact gross margin.
• Competitive promotional environment that may intensify, affecting sales.
• Consumer choicefulness and discretionary spending pressures that could influence sales performance.

Q: On the sales guide and confidence, A: Tony reaffirmed the guide, stating it's cautiously optimistic with prudent planning for the rest of the year.

Q: On strategic pricing decisions, A: Tony and Adrian discussed surgical pricing, renegotiations with suppliers, and leveraging the entire retail portfolio to capture market share.

Q: On Q2 gross margin, A: Adrian discussed surgical approach to tariffs, inventory management, and selective price increases in specific brands/categories.

Q: On the reimagined 125 group, A: Tony said the trend is improving and cautiously optimistic about progress throughout the year; Adrian discussed the SG&A guidance range and flexibility to navigate scenarios.

Q: On comp beat and catalysts, A: Tony discussed better performance in March-April, strength in categories like denim and fine jewelry, and continued improvement in category dynamics.

Q: On the beauty business, A: Tony discussed distribution, value, and service in beauty categories across Macy's, Bloomingdale's, and Blue Mercury.

Q: On consumer health and category pull forward, A: Tony discussed consumer pressure, discretionary spending, and some pull forward observed in certain categories.

Q: On capital allocation, A: Adrian discussed share buybacks as a signal of confidence in the business and remaining authorization for future buybacks.