M - Earnings call transcript Q2 2021

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Operator

Good morning and welcome to the Macy's Second Quarter 2021 Earnings Conference Call. Today's hour-long conference is being recorded. I would now like to turn the conference over to Mike McGuire, Head of Investor Relations. Please go ahead.

Mike McGuire

Thank you, Operator. thanks results. us and Second discuss everyone, XXXX Quarter morning, for to joining our Good on call me and With the Adrian and our Mitchell, CEO, Chairman our CFO. are Jeff Gennette, share have remarks for Adrian we'll and Jeff questions. that they'll provide after prepared time which

time release, number of constraints the a presentation we you have ask participants, Along X. Investors the questions our on your posted limit to and website, section with the we that Given please our macysinc.com. of press slide

appropriately. from information facts the assist analysis Sachs that benchmarks that to We website. XXXX AM In at noted, remarks, additional Xth, in speak that a of be on prepared participating note the addition presentation fireside includes noted Thursday, will impact Investor we'll versus event release in otherwise and will as to our webcast our and Retailing X:XX we the on that Also, be on results, pandemic's this Relations Adrian Goldman performance figures your unless this our a our feel Annual given comparisons at be more XXXX Global morning to the morning Conference. September This Eastern Jeff Macy's. Time, press chat will

results Forward-looking we providing Exchange financial actual Commission. and So could are statements from the and filings is of discussing that the These our today. non-GAAP detailed the that Safe Act contained subject with your materially the Reform A discussion of differ expectations uncertainties uncertainties Keep harbor certain to to and of cause these Private will all factors please and statements mark the measures. are in mentioned XXXX. operations, mind assumptions of Securities be provisions our In in calendars. risks Forward-looking subject to results Securities Litigation

on and A today's I'll information And will and additional call Jeff. available call replay financial measures find to reminder, non-GAAP year. our our as approximately this Investors after turn presentation regarding our website. be release will on our call, X well archived webcast earnings as section it used one of a website. others on these hours of in that, over is can for being our the be With the the as conclusion website You

Jeff Gennette

everyone. Thanks, joining you Mike. to And good continued the thank Macy's, momentum Inc. second for morning, in And us. build quarter.

back business results and both expectations bottom our our three The is working. transformation, our exceeded Polaris Macy's nameplates top Our to across lines. blueprint to on growth, bring

approximately of the brands, licensed, outperform margin in versus was AUR which X.X%, this sales of delivered categories, results a an We omnichannel a power comparable, points. quarter and owned to and saw continues price robust a in the XX increase Our which demonstrate model $X.XX, plus XXXX. of offering Total significantly with total Adjusted exceeding versus digital EPS guidance. sales we trend decrease penetration, point XX% diluted was a of prior improvement QX our nearly stores improved as Company by business, cover all and quarter will nameplates. more was expectations, by XX% X up tighter in up Adrian the well as improvement on Gross focused detail. we trend. promotion. for inventories, pricing points, And was XX%. points, initiatives, driven percentage more first our than Total quarter saw across the XXX meaningful XX basis improvement this

business generating shareholders. capital to and us cash are return invest to significant flexibility of simultaneously We significant allows to a financial this actions and amount pursue our in

below repay investment-grade used of with our ratio year. dividend, end cash our this has to week, the leverage $XXX and to We our And we quarterly secured target profile authorized share are on reinstating senior notes, a track by billion us an $X.X plan. repurchase putting financial board million right earlier our be the

average continuing pent-up was Macy's, demand, our to and up social and From I'm and feel X and spend to current in ready Day, deliver and which X.X% of it quarter, Fine many began. lost as improvement own-plus to the an back-to-school. and of are before XXXX. occasions for strong had quarter Company Day, licensed our We missed XX% across QX to shopping who for spends Dressy strategies. is up off-price while changing spending were up events gifts milestones when nearly sales luxury, with all making to strong emerging were we shopping that quarter, ready X Mother's with from In trend across and a Comparable jewelry, were proud for rapidly consumer the to people in channels. second pandemic Father's XXXX. Throughout new stronger point the saw on improvement quarter. sure and up to enthusiasm were in prepared in-person we for adjusting Fragrance Our fresh were versus business compared shop seized graduation customer gatherings purchasing than the the we saw time a quarter media. Inc newness and brand XXXX We at desire consumers customers patterns, last strength The continued to in the a fine online. allocation basis, compared XX% Macy's, to fragrances, analyzing made to a XX again, the results social a teams in-person with Macy's look of on on and Jewelry, we school points in gifting as capitalize opportunity and customers We Apparel, customers to million nearly we for returned accessories. and every attracted

XX% XX%. traffic was was Our e-commerce up and conversion up

existing returning new also expectations and customers both to with stores in-person Our exceeded shopping.

by point also first Loyalty point strength average to to trend of locations the And price Rewards business business Performance elevated by outperform owned better products with improvement XX growth. store The comparable nearly was to comp improvement plus also unit versus the at stores. quarter. more in sales trend than categories, performance The one X.X%, showed driven retail. locations Comp percentage the licensed double-digit when on the in and up combined XX.X%, basis. improved and stores. across continue XX Gold, reflected Results program. backstage up customer results Star stores quarter. sell-throughs showing all first improvement plus full year, sales last backstage open designer license also were Bluemercury across tiers a freestanding improvement with experience our Macy's online a our delivered full-line spending and Bloomingdale's basis, Our strong a nearly X.X up by increased versus us and we a XXXX, on was an trips compared plus quarter all positive Platinum, and across of average XX points the majority the to most spend X per tier times saw the The product visit visit us and purchase of increased Bronze shop often, productive total their per customer half licensed omnichannel with brand, program per spend as of for X spending XX%, XX% average sales increased customers, our increased average categories and per average and customer and XX%. Macy's with customers Silver are this to are tier is program ensure They ethnically approximately of and that The important best members single-channel our vehicles, times spend are as customer diverse. our valuable acquisition under XX% omnichannel owned Bronze times is X X.X outstanding. first business, XX%. and our XX% of to comprising more. Loyalty with to of many approximately one XX% customers, comparable XX, more our most working make more members

improvements We We We to want to across digital current, are also as options, and to to and saw a customers. and our in and keep online new boosting platform capabilities analytics customers. service, continue pickup, discovery, maintain and improve advancements experiences differentiated in omnichannel provide speed we placement, for strong delivery digital these investments made online customer enterprise-wide our spend increases best-in-class showing for foundational retained that investments orders. inventory both experience value data convenience And make and greater results.

categories brand And some look under brands with opportunities unlock to contemporary future across are and a sophisticated effectively styles customers diverse. In and current launching we as, categories. brands, as and brands, our such We serving Now introduced private with all continue is entirely private elevated or to partnerships who customer, we contemporary more more investing add men's This, and second upon the increasingly basics expanding of new, we're we core cases, new in XX products our that women's And additional new or in line apparel quarter.

We're consistent for and positively. customers. online we're sell-throughs, confident seeing full-price with are unlock customers opportunities exploration the both will younger reacting that in-stores us Younger and

conscious in for new textiles customers. in to easier private-label customers category products this brands merchandise new range environmentally in site in We see upon brands lit, where will site brand which a home applying our has more our for also physical will customers few the one for that near of will We're based are socially in Oak, XXX to sit our weeks, launches full with featured stores, expression macys.com. expertise maximum launch these it contemporary place. drawn to our visibility. taking be make of Macy's building and which lit home a on such Oak interested as hotels the contemporary strategy already We're boutiques approach conscious and those success a entrances of of on front younger this

brands More R help more announce on relationship Today, in can entered found that who has to satisfying, of younger one-stop-shop. customers. which gain we're I'm know needs Macy's lead categories, a Toy that to be is and able broad, the millennial by parents. consumers offering as saw and to a to pandemic, example business morning. products we of go-to higher-margin helped for offering we year-round from accessories. the a her exclusive pleased and and back-to-school, from We mom, luxury, with shops the creates realize and the Toy flex Toys into gifting, this demands breadth the growth convenient, to Us this fully and to also to herself. omnichannel the range to Macy's seek attracting market meet also the opportunity assortment then And wide holiday during millennial preferences press A unique attract release us off-price issued most of share information apparel in our of them of The category. diverse a By make great partnership we our category an products, and us retaining

For example, during they period, categories dressy, as Second categories while the the home traditional demand strong during during quiet of showed were continue pandemic, Quarter, and that height increases. and the to same the see the wear-to-work levels experienced casual such

millennial that store data in in base customer have shopping fragrances back-to-school She when we enrolled were analyze her ecosystem. department pick and a been we for new with is everything Star our mom can to for make our all our of apparel. Line; to the in able connecting feel to within sneakers Finish drive list newness significant star and if exposing homework cross-category her only savvy Think denim, off not or As store also breadth to with she's a offering, about has also is up in when Rewards, like she's money she herself, shopper. is at done, but a she cosmetics checked for toys the

experience and dynamic, the omnichannel begins initial been shopping journey And research increasingly exploration Our with seamless, commitment to online. stronger. delivering never has that a journey customer across

hourly and a and strong, reality all a variants With business. close into move is we digitally-led half portfolio To they us best-in-class the clear customers help manufacturers also our is with now, were competition on and headwinds. And we best pandemic details. on watchful COVID Adrian, to We turnover, of and offering mention with other eye We'll us physical our through inventory. comprehensive allowed and in multifaceted achieve engage powerful partners business to us. the take the capabilities. retail and attention still reliance chain on omnichannel scale we'll continue a more of supply brands integrated e-commerce our and for colleagues financial safety through the also is, the a on this over to our based keep our recruitment me, colleagues ecosystem the has support And and a provide because shortages product our the is a through have a much the that let that walk brand of sell-throughs, to it higher mitigate most continue referrals. allow able productive stores year, make are want decisions integrated for of shortages a of the with mind. moving health chase course, and including labor buying, for I'll locations We'll to close back talent that customers Inventory key and We'll how to forward malls make surgical navigate and us transnational to and you with categories me they with as strategies, AUR. and combination it their very said, without who incentives pay partners, who'll to as meet brand us intense to turn to disruptions collaboration we'll reduced off-mall fully with

Adrian Mitchell

Jeff. Thank good And you, everyone. morning,

As you've already expectations. the our second exceeded heard, quarter

In improve. addition the healthier of and Lean market application the of leverage pricing margins, execution effective and strong to from sell results strategy performance to positive Gross expanded science, our recovery, through's our our and continued benefited our to Polaris lead inventories, expense the better teams. of the

additional help many financial allowed us anticipated. top-line advance and intended profitably quarters to the the last several to have quickly grow of capital have cash initiatives additional and generated, the than us shareholders. sales. sheet more balance Our our these excess initiatives We're much taken the we de-lever actions also results targets have we earlier we've scaling achieve business to and pilots with place had strengthened return and our our results. are of promising testing They've showing over And to that three in

focus inventory value metrics that productivity, gross most allocation. As I'll important capital management, margin, I and our to the on creation: expense summarize results, are sales,

licensed X.X% We our fewer in and levels increased all to of top-line in the grew stores. dormant sales down QX stores' and in sequentially, larger comps $X.X reactivation the back of positive. Digital First, categories, solidly the or $XXX our strength sales improving were each accounting approximately XX a owned net stores, by XXXX customers across quarter by to exceeded in million saw were just XXXX more and customer significantly sales by of XX% X.X% percentage comp-store digital sales Meanwhile, the sales plus customers. new Net sales. for with quarter, XX% to levels. billion, about merchandising acquisitions points, business nameplates driven XX%

growth and saw XXX quarter strength non-growth all regions particular X regions. doors the doors trends the in percentage Macy's across improved East by Our and points outpaced with southwest nearly we in South

the Quarter significant of with of First our expansion, margin margin We're our our continue to margins, While combined are and environment in a be top outperformance urban tailwinds international the and expected the from hybrid in negatively XX.X%. this for of remote our the XXX lack commitment on second as they built tourism and to remains and to making sustainable headway XXXX of work for which our normalized QX us. one is expansion to expanded gross margin doors impacted achieving a level fluid rate borders by of be once the return sales continued a priorities, momentum points basis achievement to business continued working, to occur. state the reopening Shifting we the gross more improving

basis as X improvements during lower Our margin to been the productivity of consistent inventory has a improving result notable, XXX by XX.X% factors. quarter and the points merchandise progress driven markdowns most by on in

which healthier I'll upon a minutes. expand First, in inventory few levels,

XXXX. departments compared resulted of in pricing tests, improvement initiatives POS Location And hundreds resulted level that pricing drove with as in in in the calendar a million margin across level promotions. of the pricing pricing third, to XX% such Second, and tests pricing, benefit stores of together about these of in simplified margin the optimization POS $XX achieved reduced $XX changes, work, location improvement scale significant our million. and merchandise marketing from initiatives XXX quarter,

points, initiatives For brand, AUR while the our XX%. increased s of XXX full-price basis sell-through full-price improvement to contributed Macy's

to to With in do. down penetration initiatives partially the expense levels inventory As of delivery management, initiatives XXX have to was XXXX. increased, Inventory our of work Quarter than delivery progress dynamics the rise that to improvement related to led Second market basis the good sales, compared we continue merchandise in combined net delivery XX.X% productivity, of margin. the The expense with offset Second digital regards were expense We made XXXX. X.X% Quarter with to improve higher our while points

data and focused stock price most Inventory to turn remain months, XX%, tools to on analytics ratio are trailing our the turn improved XX%. by efficiently inventory. and for sales by Our improved and our plan, while healthy we XX place leveraging for the X trailing months inventory

chain course, productivity supply global disruption. of constrained supply Inventory result a Of has benefited from as

Adrian Mitchell

we is will many customer's reduced constraints we've by anticipate improvements detrimental, While levels most been supply offering a were meeting than XXXX, mid-year earlier the them benefits. needs, at healthier levels to to and these which before in after more successful selection. than margin expect of no limited pandemic sustain they ultimately normalize We inventory

Inventory sales our Even than very to sales. have disciplined successfully However, and with the behavior. planned to buying exercising current supply able we chasing on still strategy constraints, focused chase more been source

on, show continue Moving XXXX by billion metric. from improved of SG&A about strong we $X.X expense million XX% $XXX management creation second our expenses value next discipline, levels. to or quarter the

As million investing, XXXX through this more XX.X%. recognized results. of its Network base also improvement of have they contributed. than SG&A compared last resulting more sales, by ability A increased significant million in the annual $XX of The quarter in XXX time, expenses as basis partners Media the same XXXX. invested are was revenue net this of drive in more year. to our expenses Polaris. driven to were year At expectations a year, the that joined heavily have second from Macy's vendors cost primarily net removed we percent This $XXX of points

contributed. shortages labor earlier, mentioned as Additionally,

to market XXXX, term. long not by of Strong and contribution The sustainable of card during to aided trending diligently benefit Quarter quarter, best expense serve and points also percent X.X% positions of the shortages, the the tight guidance. over we Quarter. customer net the in $XX bad $XXX ahead in sales, from to to by increasing savings fill were We were credit ahead working levels expected. is levels generated customers. what from million of to be open They basis Second up continue lower helped in million labor the annual to of expense Second revenues while a prior However, XX our the are we a our as debt credit ahead result

key strength across EBITDA of EBITDA Given EPS our the margin QX million. EBITDA results respectively these accounting exceeded positive basis strong these performance After XXX and the Diluted $XXX Income for the of Adjusted $XXX of in Notably, $XX and of we versus and adjusted unadjusted on million million adjusted margin our of expense helped quarterly and $X.XX a of XXXX. in areas, collectively, points by million generated of interest management margin XXXX to and generate $X.XX gross taxes Adjusted expansion. Net $XXX XX.X%

capital prior invest Our flow with is gives generated the our untapped. these of to the $XXX ending our cash billion generated equivalents final we cash million credit expenditures levels and we cash from runway through generate in of growth. of flow $X.X leaving Year-to-date expectations $XXX ability quarter value to sales and initiatives, allocation cash creator profitable and further increase cash quarter free our facility meaningful us million. the QX, capital our Polaris the in Combined with with momentum and the of

annually. approximately investments and all on supporting years, expect $X to our growth. data profitable with billion we spend capabilities dollars couple be, technology next $XXX and capabilities, shopping capital continue fulfillment experiences, more These are to from of this digital infrastructure, focused omnichannel and will heavily year analytics, efficient in increase million strengthening the our to Over

total to now to cash the We years. sheet, only represent next over as Balance mentioned. also these deleveraging to We're expect X on investments of X/X our spend the well-positioned not of around focus Jeff but capital types shareholders returning

this which in, our debt in a $XXX X.X calling in expected. the action is First, cash. than year. next million result significant bonds no ratio of All we us fiscal This debt to earlier of unsecured it this step in on This XXXX, goal a towards January redeemed repayment than to with due of be our $X million year-end returning we metrics than times. earlier saved of far is expected originally year, of $X.X billion along planned secured June basis leverage more cash would week our more versus in investment a grade

conditions. year. first subject allows of the dividend Starting authorized are start We're dividend expect which to Directors a $XX in and $X.XX this time, us we depend to which we third, repurchase momentum back to intend out over our which grow $XXX other of return we will board created And coming Board to dividend, excited our the a cash exercise the buy million about our shares. approval, to to cash markets Second, million upon opportunistically reinstating approximately this since share quarter, second with of quarter. program, pandemic, investors the we very

led shipping has the environment of a increase Quarter So of does COVID supply constraints, guidance. incorporated the what a our of the amount we the this our in impacts There labor chain relatively healthy our The rest and of the all in a outlook still guidance, the Second face. mean surcharges, unforeseen confident we continue tight levels are markets, potential to While holiday with variant. elevated year? prior conservatism more full-year macro in material fiscal performance combined for to into headwinds

they And have we return spending necessary. low time, to in spend should are which that it our of built economic money when reveals government-mandated faced our expectations same But for headwinds at confident into prove guidance, to the a shutdowns even restrictions. contemplate end the possible these with so data consumers doesn't and today's still

initiatives, which leads be Polaris performance, to expected growing the the contribute All from we've of is this, of our XXXX strong. combined to us to success seen half will believe with more ongoing and our back

of more of XXX the back the XXXX higher adjusted of expectations majority back the the reflect we'll our reflecting full-year can presentation but the comps increase. here Gross midpoint year mentioned quarter improved half for repurchase rate take the headwinds to You of than The expectations also first the positive interest year, when significantly expected X in expected are to and to $X.X now solid of And to quarterly be up And prior significant very than points we billion, the margin to planned we that for higher margin of EPS which slightly X that net our XXXX. percentage better updates. Full-year initiatives driving diluted times slide prior from benefited increase XXXX, notably as It the healthy complete is of nearly targets from with expense. hold. by does as than adjusted in percent as guidance, I are any also basis points be to better is expense better impact ranges provide is the expectations EBITDA outlook and coming lower include a by than than earlier. the expectations only the But of shares not the also continue February. a guidance, versus expected metrics. remainder XXXX. basis our XXX below re-opening increase our back-half our country. SG&A points, a Polaris be improved off sales as have is set response the We've from refer to our the a now guidance highlights. sales much

sooner billion, the EBITDA year. $X.X quarter, adjusted in increasing $X.XX. long-term next beginning the margin We're of abilities target that, I'll to and billion between the This double-digits, With cash metrics expect low the to back third $X.X the getting with we diluted to Jeff our EPS the to investment-grade net turn adjusted For confidence to have and $X.XX some sales our range to remain and healthy sustain be reflects in for same roughly bottom-line time we remarks. while returning in at expected. all to back shareholders top-line closing than call growth,

Jeff Gennette

all Thanks, more be of strategy pandemic year executed we future. worst and us The to Inc. transform Inc., even our in no is across portfolio more my as want hope performance doubt who digitally-led the emerged contribution what well. Adrian. in a to will and of that Polaris our every consumers Macy's, Macy's positioned strong the are day to focused, serve our I and come do to through our to determined, is have operating had more I colleagues the a this we thank better expect recognize We the business. their succeed for because and customers while exceptionally environment, there and first working strongly half

robustly sites because mobile together are are We omnichannel stronger and apps and alone. stores anyone than

off-price We market. are consumers well from one than in luxury because we tier the more participate of represented know to

we forth breadth department roots, balanced brands well of offering. we're us customers And a across are style. of bringing and We categories, relevance, the products, in a because and know believe because our proud our appeal, name, fashion and all look expressions to for we of store of opportunity brand trusted

going Polaris the business And our strategy the balance for stronger questions improve Thank not only the fundamentals to and you. answers. brighter, of bolder, is The also to but build our line future. sheet, and Our are to and up clear. working, now open Macy's for results a we're

Operator

you. ]. Instructions Operator Thank [

our take JP from now Matthew first Morgan. Please go will from ahead. Boss We question

Matthew Boss

improving quarter. quarter, congrats on positive with Great. the Thanks versus to and nice it's the pre-pandemic Jeff, questions. mid-single-digit comps maybe this really business X

of which is First, the in your And in have and the quarter, what forecast. end I think with I headwind? provides particularly you both from what seen of digits the then mid-single confidence do still the third second, which you high is tourism attribute that the fourth magnitude back-to-school continuing you improvement, in a imagine August

Jeff Gennette

for Matt. your Thanks question. Hey

think comes resuming the life. jobs, So couple child's of just when And tax customers about reemerging when you credit the lot look the from from think a at with places, when were of certainly stimulus that demand, and the pent-up beat you of the I our second business -- a in quarter, economic tailwinds. pandemic the it new continuing, the

what So was look just to you between XX Polaris in to happened be quite we when at would better you points that at and for before you and strategy the that the you I that, were tell hold strong. XXXX, look business, staff taking quarters, business. The working our continues really, when compare our the is

strong fragrance. the the like So happened jewelry, digital look on look dresses, clothing. you very What these you is at categories, our business dress-up at dormant was in home two-year categories, that stack, quarter categories men's unique was fine a the

the our is to luggage biggest business up. starting domestic beats as business was rev towards of the One

we that to We during expect that. the department also [Indiscernible] new you categories would expanded and in us the pandemic into store, brought do

that's announced run has the a customer. of second of work under to is home and lots to VDF this that when we happened getting coming one into good really international the don't that been tourism, We've for tourism, back entire really at look categories we Macy's, not been at you there. you in categories, about this -- X% of relationship know, results at as about toys, best the which Look, expect to to quarter respond looking X% XX us. question there business. Inc. That's at really in 'XX. our hard your which historically You Getting morning, what about broaden

and quarter you now. 'XX. really tailwinds that start versus year, back-to-school, for we're That's is I'd board. improvement to the been coming. into good So that's it's across of we're When in third news those see going about right start XXXX, well the strong and single-digit are and think a fourth potential with it 'XX us High this it and

men's certainly been as categories strong. the and and in doing extremely You Uniforms, are of Z Denim the the Boys. well and juniors Active at there. Girls really look you women's, men's young look When sometimes and areas of they're Gen all T's, have at It's brands called, it

really categories brand, strong. Dorm to So Guess, the Denim the then Armani brand, Levi and Home at when all a And categories. has like you at the look Back you standout. the been look

of backpacks, that's that obviously of a in look Third the that's You shine. huge of single-digits, obviously timeframe Macy's the where at just High Quarter, last the holiday increases. then Bloomingdale's And question the is and Fourth Quarter. part is your been a our the about to chunk timeframe business gifting

we've be lineup. great So going a got We're ready. to

together back very first for in maybe with a a We season of expect coming years. strong it's holiday the going that to be time customers couple

Operator

Operator [ ]. Instructions

Chuck

results, guys. Great Okay.

foot surprise which is for the of ever. the my the I'm today maintaining think, guide, forward. curious, implies you in year EBITDA going opinion. I'm print Your big in curious model's ahead double-digit my when think which the assuming I to Adrian, sales is sales the outlook you're right, $XXX, if really low sales that around square per guide highest for what

Adrian Mitchell

to Chuck, with you great be this morning. it's

to be a at business, productive, the we're we're looking So well. stores, the at things, about only for also but as think expect the our we to looking digital sales top-line within highly of sales we which when continue not sales couple

in so with we've the profile margin we're we're very that pushing seeing, seen EBITDA, And things. pleased the stores also really business in with the to the recovery key of we're relates our double-digit digital it's low terms very pleased of on As strength that it X adjusted

full-price expenses have much you piece rate pleased we're very sell-throughs, on increasing sure our to depth really of merchandise that saw customers, delivery that a of our around first But and to having about We're up from the the do just health margin in relative we're XXXX. from expenses. do work to have particularly mitigate to delivery really in picked of based with our so margins. we increase reduce and on improvements about number did the more more We to last the benefiting driven actually SG&A. the help SG&A making quarter, which actually very margin really digital The of year doing shipments, permanent by achieve deliberate our in expansion. million work We're that. expense a of well. to as much partially things promotions, $XXX lot performance in last have are merchandise order by our number of the acceleration, do the the pace that our is is our restructurings we're We split improvement being disciplined we orders did as stores of We're

still achieving we the in terms about as pulling forward of double-digit it's traction into Polaris, and those given that beyond. to feel we think all-in-all XXXX seeing think really and with forward, performance as do. the But have that low we goals confidence that key we have real performance those recognizing levers, in look we we're work I going

Operator

Kimberly go question from Please next from Greenberger take We will Stanley. now our Morgan ahead.

Kimberly Greenberger

you margin, of touch Okay. and to co-operative heading if advertising partnership bit about and nicely above Great. just indicated a XXXX first Jeff, then in full-year Adrian, it's touch levels both season a I Us little could but margin you're of so XXXX you made. know on Toys you that, on I could think thinking sort wanted here half Gross would a dig below just and a little Thank into year. comments gross bit And more if R be the more levels much. the holiday that basis, I the you this the the how into the in future.

a So in indicated And I advertising, back sticky would of SG&A think levels quantification your above How you contra push have then half -- are expectations? that? that helpful. on that, year any Is cooperative that history. sticky pressures some you're And are is I guess of is that? you it's the running How that would there that if anticipating the account. down be

Jeff Gennette

Kimberly let me good -- morning.

kids our what's strategies, me lot for Let are hey, for this out parents? standout of business was a part out We're on categories footsteps those how we our about based of how really do it excited engines for in We obviously with it did started one partnership or vigor, with we really impetus offer started That's the to the that small Us. share toy that. those purchasing and full-line quite of all recognizing Toys just want right. the us. was to really market if category more it the an at, as increases Backstage R look at XX with have did this R so into a after And and start eyeballs entry time as go opportunity of the Toys Got holiday was our to under gifting couple it Us huge translate a over to the will An now Toys in us do years. degree that during we with frames for us, category of store. starting limited past opportunity and is in millennial other

them. gotten this with partnership we've into So

to beginning. now it's live on You website, that. the our go That's

in XXXX. you'll But in shops. stores in will XXX XXXX, full-out that have You see be will to will XXXX, see there limited a degree

access, We together. to will will we lots the to marketing do categories, have obviously, their private going brands. We're of expand

the You an quintuple the that see category size for we can the embedded business. them will parade example. a we in we're -- now There think of as

big it's for decent growth categories us. into to vector It's to those be actually pretty a so big eyeballs, translate other [Indiscernible] obviously, win. and And margins able the is

you And we beginning and is of and of relationship, stores. in both this the opportunities to do have gross question? to margin the take on online our So it, expand Adrian lots our want

Adrian Mitchell

Yes, gross the and of level we tend on our margin, had that so merchandise digital mitigate which in to as would absolutely. to Good by as is and our season, pressure that into far performance lot delivery of our much A heading a say season health gross our year. of penetration, is efforts But this driven morning highest our is peak that reality Kimberly. peak margin. we're we the what have puts expense. With you've to regards great margin our the

addition marketplace that half given that's happening this anticipated to surcharges In the the we're the in back in year. of demand expecting,

that metric SG&A, gross with With we see be had $XX previous how approach within some an on from we continue million. around Some our more to to Macy's about regards forecasted that of And $XX of be conservatism Macy's the gains regards to really think margin that's marketing the here. the our and million in is Network Media about the Media real We guidance in We're good around now to our Network will based revenue context that Macy's efforts. to originally that this is there. delivery the measured Network, our Media here going guidance. guiding news offset to expense

Operator

We UBS. question ahead. Jay will from Please now take go Sole from next our

Jay Sole

much. so Thank you ask have forward. about some made the recently off-price some Great. going you to retailers comments Jeff, prices about of that increasing wanted I

that just inflation inflation market you be that price [Indiscernible] improve does stimulus there love your you. the and Or you more remaining of your impact value do just strategy? your about? Does then of to some elaborate some how the the in secondly, there's to you double-digits allow bit Can as low given that adjusted EBITDA Now, what I'd year? well, you there's for that. a are out if in little if you Thank margin to elaborate talking next could especially beyond. that 'XX know about opportunity things in is expectations on that And on an proposition? to confidence the pressures and see and gives the take

Jeff Gennette

Okay, Jack.

We with gone past on improvements, Home we And start as on margin. -- already price starts think it of that about AUR what healthy that the over have our when you well levels with our working inventory are at have we're the you on of very ticket we of we're It Let's we're terms a number look been improvements, months. what's at as we're building when and having think going playing. our I selling look some a has number you going we When been with well with have in inflation. that categories, of retail as base regular as gross margin where expansion, starts on. with prices,

look sales We're the disciplines lag. exceeded you to at two-year we lot And being massively much to sales. stock a on buying the able If of down and inventory. to XX% closer were and about we of second in secure quarter, additional inventory plan those a fuel our

really year, XX% promotional are pricing healthy to on being really If you our us look our scenarios the at with play those almost strategies. and for turnover up

amount of of can amount reduced POS you so see that depth have promotion, the the we've the of we couponing. And of the amount amount overlap, the Reduced reduced our of And discounts.

year the with the ticket and promotional raise raise in reducing and sometimes used say applying So ago is devil's to difference in-stores. in only we which a all of content. all from science, I seasonal of our the so responds because the that have tests and can to of our take we're POS the same online a kind in higher price in the sophistication to just promotional just we a where when to we some categories would There pricing obviously and of tactics allocation the but the ladders, are of the don't we're of details. and customer how were What see every get that, both price we brand how week thousands increase, amount discounting, playing that degree we not between we we ticket AUR, have our

Jeff Gennette

thing retail. more we playing with more goods; say is more there which And really the into content. are the And make other commands fashion, putting in are that higher categories that some I'd

able increases. but increases other we're those expansion the kind So areas. in take the price all a shorter to, from rejects in are of customer of, price margin, there we and which it's massage some some the that And compensated categories we're might getting

strategies drive I've to think I a the So we've look, right but got just is inflation within happening articulated. solid now very plan that it

Adrian Mitchell

Jay, so morning. And this be it's to with great you

this with over in to and maintaining We pieces. EBITDA the low adjusted double-digits X time. question Just look regards around EBITDA at your

business. is margin a Jeff merchandise this which of and making our is real around in piece around bit we're a bit the progress science really first pricing promotional earlier, the spoke The to and that's

of at it's having sales, depth into portion the reduce to markdown those reducing higher of and all we're location business the promotions, the whether so science prices these be of behaviors. able our a pricing -- penetration, simplifying level And to sustain that and putting a to regular our looking are lot our

chasing actively lean are manage that to on sell-through. so so we allows sales full-price we us stock ratio the our can that we go relatively we addition, maximize which In as forward, inventory to sales,

that towards, an better pursuing up digital investments. the is we're this percent increasing area lot is As it to to to a of thing we're delivery we're customers orders continuing see our continuing looking just package work where can expense, at relates by But and to of the picked delivery on expense pass of for ways much to do us. we the travel free the gross and something between cost lot a and our we attacking if inventory, more saying, high an to extra way looking distances can of operation that for splits, dimension at shipments. customer. the a for allocations We're be from the at margin because there's parcel We piece to free also improve and and correlation look, think That store. also we reduce is improve the improvement make and can is job is packages customer we distance a of that do us important going to We're allocate not which much an standpoint, really reducing expense I a that delivery us. the costly

we we talked a with As Network. a We of have Media bit Macy's think the SG&A of about about piece, offset lot benefits. earlier Kimberly the

Polaris doing. even ways at selling our leveraged ways strategy. find constantly brand up more really at I we're looking that that SG&A, -- are maintaining we're increasing for our of while team things in in or be Those penetration think the is to are standard. to stores sales sales our recognize it productive leveraged traction a stores teams our digital that an and our with also all adds in much the We for point to But stores kinds business

implementing into scaling a and implementing tests this Our and yet portfolio working, later working, have strategic we are of that we're things year. are that we're year initiatives next

deployed just portfolio fully us gives fact our is the confidence. what in that that's that So traction not yet. full and toolkit It's the

Operator

take next William question Reuter Please ahead. We go will of America. now from our from Bank

William Reuter

one. have just I Hi.

were metrics investment-grade? it previously attain expected should actually to metrics credit you believe to than a later are you focused investment-grade just or going earlier you of be Is the those year. going less, to more be goal on be You or you which mentioned investment-grade this achieving that ratings representative

Adrian Mitchell

week. the Good the did that morning, pay Bill. pleased with and this $X.X Thanks our plan we very down fact earlier for your the with just that billion the health question. of business We're

than we less highest much only business, balance in really this the the the to end plan. upcoming the the investing In invest purpose sheet, very addition at healthy business to balanced all at note at But maturity in January, the really and not de-leveraging speaks to to our a is a shareholders, us initiatives and investments our that of to the a in of returning strategy. capital bit healthy fiscal that up of compete, and maybe flexibility gives that's year expect the of a return combination in opportunities come business, payment that And just on X.X times.

just of to is health so us speaks for profile Inc. sustainability because Macy's, and critical achieving the really really resiliency And and an it investment-grade

William Reuter

Thank you.

Adrian Mitchell

Bill. Thanks,

Operator

our ahead. from from will go JPMorgan. next We Carla now Casella question take Please

Carla Casella

I one. up on that ask follow to

to of tranches get X.X secured at you before think your you grade? the begin address few investment of You but billion, other have a you smaller can that Do needed biggest those debt, you tranches secured to debt.

Adrian Mitchell

Well, We very we secured of the next time. in point do not years. about towers lien. do several are have anticipate additionally paying much $XXX this at over We're million that paying the that maturing

us balanced further of about strategy. really and investments having returning shareholders, healthy a brings our so of we're the focus. financial, and that of that's and year our the anticipate flexibility health, the much business, to really focused end flexibility think on into position a the given current ratio, very But in much to we the a capital gives fiscal for capital leverage And business. that we feel allocation again, lot very us And and

Operator

Steph We Please Jefferies. now from Wissink next question from will take ahead. our go

Steph Wissink

about the I'd Thank new X ask customers your profile. million like you. that Good a to added morning, to you everyone. question

your came years? think of validation categories digital might a and tier Bronze some able merchandise I you. where Maybe little expand you through XX% in Thank or strategies programs. the they're the to talk just opportunities even merch next that XX% about your over you several of any be give bit were mentioned some Does you in loyalty identify think those where you about shopping. on

Jeff Gennette

hit that they're at Steph. you X look diverse. you Hi, in, some the When came They're million headlines. of younger, customers new the more

behavior on purchase strength a a came of we They in and You in. great that through lot of X So and at with stats we're out. they what's really one they shopping quarter, on the get do them? And millennial come come that the in little for percent via customers their over of some what with are second came and They us we is So example, as it digital. have purchase? and the focused the that customers, categories million gives / we quarter of if that third Fragrances, that in in have in you with that in for categories an look them okay, brought build come Father's the they first second percentage measuring us. And the many a -- we're we is really we're of second building the Day gifting through XX% in through the Denim Day back first the How Mother's the came to first continuing to that then quarter? opportunity where how during X.X seat in purchase came quarter?

new is up are the share highest opportunity content, new give really coming fore generally and new it's is, to the to coming additional our long-term behavior them see And moving new what in. really making find our But many and come us of categories into them to We're helping the them in market loyalty our have are where capabilities, customers analytics we data offers our are that techniques, personalization great our incentives categories program. and we messaging. loyalty chain. obviously So those for seeding

the that We seen very bulk not when at into was have the you look mind. X the the brand it in customers encouraging. having younger customer very before, And came million much for of them

Steph Wissink

Thank you.

Operator

Evercore. now our Saad take will from from ahead. We Please next go Omar question

Omar Saad

all Good morning. my question Thanks color. and for thanks for taking the

showing them And interesting both to that that explore of dynamic you stores? to the data this you're this existing you seeing online. recovery if the a coming you activity, stores. customers talk were bit trends is the Maybe seeing younger different back in are I'd the online, attracted the you and a customers customers or signs The the same through shopping of you're mentioned more, mentioned same And and the categories. on customers or recovery both pandemic you're old about, is it strength hear both customers? across guys in and look categories here. the and also customer -- customers categories could that seeing returning categories is it profiles the the You couple and little return same Thanks. stores you reactivating you that to thing pandemic buying Is guys maybe love ship-to-stores, still it

Jeff Gennette

like you in the pandemic into Omar, the -- a basically five And There were is doing in basically had part our that a tease it's of online got getting going years of say, seeing quarter before on be not their depending what have is and later they behavior I touchpoints they social their customers X country or customers customer are their the customers that really say -- X, to I are comfortable colleagues just have inspiration it's first omnichannel. second lot general, on you're were so that but they stores, into store, are selling. they're research, out ago, consummate they shifted in. hard doing channels, would during would that in stores purchasing. the kept behavior. at you our you've we've in buying It to the got what core what not different It's our They're a shopping, to transaction. virtual would a now device. would they was -- the used they are increasingly for is But online going

responding it's really in the business the that's you I back southern came average to country that what were shift our more the pockets some both of or occasions. those -- strongly, back and But not answers and were off hope saw wearing younger of is not still parts at of shopping And our a come about stores it customers the those The to buying were seen that strongly. country, of to. -- in were You psychology are customers. correlated when gifting It's of both categories and stores. vaccination those that look your in-store. rate. we've was with that kind we is is where Those and the There's core that business not younger customers the many -- that online channels question. occasion customer into saw back that categories There is really of vigor.

and into we And will beyond. time, customers so we over come believe that get a with those recovery 'XX that will

Operator

question We Group. now take Telsey Dana ] Operator [ will from reminder a Instructions of our Telsey As next

Dana Telsey

go there you any the Good still Adrian, should you you Thank digital up it business took where see planning give do in-store into for the pickup, to can more example, of sales And with forward going morning that that the you. efficiencies Jeff, year? we delivery comment how had everyone seeing for that and holiday you season? the see, urban in and Are we perhaps the monitoring what be as been? cadence is stores progress. expense, nice area see the on are the how any Manhattan, what suburban? versus it you same then on you're

Jeff Gennette

first the of still take challenged. those versus buckets I'll Dana. stores, three shoppers in Definitely, our city Hey, are urban think when And you've question suburban. you got most about about resident our very stores those of we're got them your with colleagues business. sure hyper-motivated those strongly. cities And and -- of make and customers engaged we've out we're that our are to all building their the

and haven't lack the there which are are Delta those of shifting, you back work. the and hour then still you've out of from lunch out. certainly customers workers, the with certain times, countries, signs see is bucket, tell were as plays yet. office that which that'll for during all in suffering don't tourism, has city our particular, the we that -- now, affect strong would always stores bucket city of us seen tourism. all And stores then is after of I is right normal the up. variants, I so are dried to And life historical really that in impact but to traffic, that all third the office volume. that office. in see, you reengagement got these times a And as on the have balance, really of certain playing which and, to back And our You second And international

a out. for be us play So again that'll tailwind as the in the future variants

look all So you you comping XXXX be, are hopping suburban look dramatically that Long at to still many at XXth you Field at look a urban at ahead go stores it stores -- Roosevelt our center and Street, out then you but a Island, are Herald is timeframe Square, we're benefiting and And or of from that. a We've could look got they levels. you could the lower. Manhattan like, if the Manhattan

with definitely psychology right there now. urban different the So customers is suburban and

Adrian Mitchell

Dana. morning, Good

given the it digital to continue As expense, do to momentum and digital pace penetration. growth, sales right. instincts as the focus want your of are to on especially delivery We as the expense, well delivery relates

it in-store to pickup, relates As opportunity. identify do we that as an

to customers things the we're it's it's in encourage free. of advantage we Those things it's pickup It's take on, easy. to that so kinds to to that number convenient, are of of continue terms service. stores. to increasing our doing And our have our quick, of in work a try

support about ship of number ambition levels delivery our And up, varying that would speed, that looking and improve putting we store includes in of that efficiency, planning to actually the the automation, looking We're more stores. under is going this things small of efficiency expense forward. at. of expense productivity pick and fulfillment activities. complement help we're also doing the test a at actively, control get we're also out tests We're In population this. addition, really from our and working of much kinds store all taking to capabilities. to ways get actually allow roll this after fall, think a the fall, that us something definitely Delivery as to will We're stores

Operator

the any no in for or call to turn speakers to further additional are closing queue, the there As your back remarks. questions like would I

Jeff Gennette

day. great Thanks, everybody. a Have

Operator

you. Thank today's That Thank will call. now participation. gentlemen, disconnect. for conclude you you your and may Ladies conference

Macy's (M) 19 Aug 212021 Q2 Earnings call transcript