Ladies and gentlemen, good morning and welcome to Macy's, Incorporated. Q4 2020 earnings conference call. Today's 90-minute conference is being recorded, and I would now like to turn the call over to Mike McGuire, Head of Investor Relations for Macy's, Inc.. Please go ahead. Thank you, operator. Good morning, everyone, and thanks for joining us on this conference call to discuss not only our Q4 and full year 2020 results, but also our update to our long-term strategy. With me on the call today are Jeff Gennette, our Chairman and CEO, and Adrian Mitchell, our CFO. Jeff and Adrian have prepared remarks that they will share, after which we'll host a question and answer session. While we've expanded this call to 90 minutes, given the time constraints and the number of people who want to participate, we ask that you please limit your questions to one. In addition to this call and our press release, we have posted a slide presentation on the Investors section of our website, macysinc.com. The presentation summarizes the information in our prepared remarks and includes some additional facts and figures. I do have one housekeeping item to share. Jeff and Adrian will be participating in a fireside chat at the Bank of America Consumer and Retail Technology Conference on Tuesday, March 9th at 8:30 A.M. Eastern Time. This event will be webcast on our investor relations website, so please mark your calendars. Keep in mind that all forward-looking statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today. A detailed discussion of these factors and uncertainties is contained in our filings with the Securities and Exchange Commission. In discussing the results of our operations, we will be providing certain non-GAAP financial measures. You can find additional information regarding these non-GAAP financial measures, as well as others used in our earnings release and our presentation on the Investors section of our website. As a reminder, today's call is being webcast on our website. A replay will be available approximately two hours after the conclusion of this call, and it will be archived on our website for one year. Now, I'd like to turn this over to Jeff. Thanks, Mike. Good morning, everyone, and thank you for joining us today. Today, we're going to share our Q4 and fiscal year results, discussing our outlook and near-term guidance and reviewing our updated Polaris strategy. We also look forward to taking your questions in a Q&A session following our remarks. Because we're coming out of an unprecedented year, one that delivered a series of external challenges that would've seemed almost unimaginable not so long ago, let me start with this. When COVID-19 unleashed its challenges, consumer trends shifted quickly, and we learned a lot about our strengths and opportunities. Our Polaris strategy, designed to allow significant flexibility, was tested profoundly, and it proved durable, allowing us to adapt and innovate with great agility. Facing these challenges, only some of our results show improvement from 2019, but our business performed better than we might have otherwise have expected under these stresses, and we've shown that we are well-positioned to adapt to customers' needs and to new forces in the external environment. Against this backdrop, many of our Q4 results, sales, EBITDA, and earnings per share, exceeded the expectations that we shared with you at the end of third quarter, and we ended the year in a very good cash position. Sales for the quarter were $6.8 billion, with all brands outperforming expectations in the quarter and the back half of the year. This solid performance has continued into 2021. Significant growth in digital sales supported these results, as did a series of actions to win over new customers while some of our core customers paused spending with us during the pandemic. We accelerated our focus on digital shopping, extended our assortment to help customers in expressing their unique style through a growing number of categories, and clarified and simplified our customer value equation. We rapidly adjusted our merchandise mix, reflecting consumers' increased embrace of categories like home, casual apparel, jewelry, and fragrance, and we made changes in stores to make them safe and easy to navigate. We harnessed data analytics to sharpen our offers and outreach to customers. These and other steps attracted nearly seven million new customers in the Q4 alone, many of them under 40. At the same time, we significantly improved our overall customer satisfaction scores. Notably, we saw solid holiday demand in November and December, which continued into January. As a result, we delivered adjusted EBITDA in the Q4 of $789 million, which brought the full year to a positive $117 million. We also saw sequential top-line improvement from the Q1, the weakest point of the year. Our sales momentum and profitability are due to our investments in advanced analytics and enhanced collaboration with our vendor partners to drive gross margin. We also maintained a persistent focus on managing SG&A. We generated free cash flow of $296 million in 2020, which we will continue to improve through the continued execution of our Polaris strategy. As a result, we ended the year with healthy liquidity, approximately $1.7 billion in cash and approximately $3 billion of untapped capacity in the revolving asset-backed facility that we closed in June. All in, a year that delivered unprecedented shocks to our industry, our country, and to our colleagues and our families, it could have been a terrible year for Macy's. Instead, we battled through the store closures and reopened to deliver unexpected wins and some promising tests. Though no one would ask for a repeat, we did, in the end, learn a tremendous amount that has informed us on how to best adapt and improve our outlook. I'm incredibly grateful to the team who got us there. Our experience in 2020 increases our conviction to take bolder actions to drive our business forward as a digitally led omni-channel retailer. Under the Polaris strategy, which we introduced to you last February, we have shifted a large proportion of our current and future capital to digital, supply chain, and technology platforms to better integrate our digital and physical assets and deliver the most relevant shopping experiences. In part, enabled by these shifts, we expect that approximately $10 billion in sales will come from the digital channels by 2023. We also plan to continue our focus on rightsizing SG&A, improving working capital efficiencies, and modernizing our supply chain to support the omni shopping experience and customers' evolving expectations around fulfillment speed. We understand there is much work ahead to capitalize on the opportunities now available at Macy's. However, we have the aspiration, the fortitude, and the agility to successfully transform our legacy business in the months and years ahead. From a financial perspective, we are targeting longer-term run rate sales growth for Macy's Inc. in the low single digits, with sales and profitability growing off of pandemic lows. Our plan is underpinned by a capital allocation strategy that enhances long-term financial stability and returns for our shareholders. We are committed to returning to an investment-grade credit profile by paying down debt as it matures, enabling us to target our leverage ratio goal of less than three times. Today, we'll share more detail on our 2020 financial results and drivers of our performance. We'll also address key pillars of our Polaris strategy and our outlook for 2021. After recapping the key themes, we'll open the call for Q&A. First, Adrian will offer more details on our performance. Thank you, Jeff. Good morning, everyone. Thanks for joining us this morning. As Jeff shared, we're pleased with our Q4 results as they reflect improvement in both sales and margins from the lows of the year. We're committed to updating and accelerating Polaris, taking the actions essential for Macy's to grow as a digitally led omni-channel retailer, and delivering higher levels of profitability and free cash flow. I will start today by sharing the key drivers of our Q4 and fiscal year results. In particular, I will focus on Macy's five most important value creators: accelerating sales growth, improving gross margins, increasing inventory productivity, managing SG&A, and reducing our debt. Later, I'll go a bit deeper on how our omni-channel businesses, from stores to digital to credit, are combining to help us meet our strategic goals. For accelerating sales growth, we saw comparatively strong holiday demand in November and December, and that carried into January, with sales totaling $6.8 billion for the quarter. With the pandemic upon us, this reflects a decline of 17.1% for the quarter on an owned plus licensed basis compared to 2019, and a drop of 18.1% for the H2 of the year. We pivoted quickly to product categories with higher consumer demand, such as active, loungewear, and Home. We benefited from new customer acquisition, and we invested in the digital channel while improving our in-store experiences. We also benefited from the improvement in merchandise return rates and the increased engagement with our younger and more diverse customers, both vital segments. I'll spend a couple of minutes talking about each of these. In terms of consumer demand, our focus on the soft home category, led by textiles and housewares, was a big benefit during the Q4, as sales rose 11% compared to the prior year. Beauty and center core categories also performed relatively well, with double-digit increases in fine jewelry and fragrances. This growth partially offset the pressure from the decline of total apparel, which was down 33% in the quarter. New customer acquisition was strong in the quarter, partially offsetting the drop in active customer counts. Nearly seven million new customers transacted with us, and most of them came to us through the digital channel. We also retained more than six million digital-only customers, a strong 50% increase over the prior year quarter. That said, we recognize we have work to do to retain a larger portion of our active customers. Our investments in improving our digital platforms began to pay off, with Q4 digital sales growth growing 21% from 2019 to $3 billion. In particular, Macy's brand digital platforms saw double-digit increases in site visits and conversion rates. This growth partially offset the overall decline in store sales as mall traffic continued to suffer due to the pandemic. Importantly, however, the work we did to create safer, easier-to-shop experiences began to pay off with improvements in our Net Promoter Score, driven largely by positive customer assessments of their safety while shopping. Lower merchandise return rates also benefited net sales. The return rates in the Q4 were down 220 basis points from 2019. Our shifts in category mix helped this number, along with consumers' more purposeful buying habits. As apparel sales recover and consumers return to prior habits, we expect return rates to go back to historical levels. We also saw some encouraging numbers in customer engagement with a 45% increase in Bronze-tier members of our Star Rewards loyalty program over the entire year. Our bronze customers are, by far, the youngest and most diverse in the program. They are a vital segment in our under 40 strategy. This increase partially offset the overall drop in active Star Rewards members, which was caused by declines in more established tiers that we believe will reverse as the pandemic abates and dormant customers reengage. Star Rewards provides exceptional value to our customers while allowing us to use advanced analytics to personalize product offers and shopping experiences, driving higher and more profitable customer spend. That's a look at sales. Now, on to our work to support gross margin. For the Q4, it was 33.7%, down 310 basis points from 2019. Two areas were particularly important to bolstering this number during the holiday season: supporting merchandise margin and minimizing delivery expenses. Merchandise margin was relatively consistent with the prior year quarter. Some of the underlying drivers include shifts in product mix to lower-margin categories, such as home, at the expense of higher-margin categories like apparel. These were largely mitigated by reducing the intensity of promotions, coupons, and markdowns to boost sell-through rates closer to full price while providing customers the pricing clarity and value they expect. These moves also helped us improve inventory productivity, which I'll talk about in a moment. The investments we've made in analytics to support improved sell-through rates are being accelerated in 2021. In the Q4, delivery expense increased materially above last year. Carrier surcharges were about one-third of this increase. This increase in delivery expense was the main driver of the 310 basis point year-over-year decline in gross margin rate. As digital demand rose, we were able to partially offset the impact of higher delivery costs, for instance, by shifting customers to store pickup channels. Approximately 25% of Macy's digital sales were fulfilled in our stores. We made very good progress on improving our inventory efficiency this year as we aggressively addressed slow sellers and reduced clutter in our stores. We end the year with balance sheet inventory down 27% compared to 2019, resulting in a healthy stock-to-sales ratio. We are hyper-focused on continuing to improve inventory turn, which improved 18% in the back half of the year, giving us momentum heading into Q1 of this year. Now, on to our efforts to reduce SG&A. We recorded approximately $2 billion in SG&A in the Q4, about 18%, or $464 million, lower than 2019. As a% of sales, SG&A expenses in the quarter were generally in line with expenses in the Q4 of 2019 at 30.2%. Given our progress on cost efficiencies, especially from the restructurings in February and July, we exited the year with annualized run rate Polaris cost savings of approximately $900 million, which is permanent in nature. This improvement reflects disciplined expense control, even as sales exceeded our expectations during the holiday season. We continue to be highly focused on maintaining expense control in the future. Beyond what we've discussed already, there are a number of other contributors to our results. Credit card revenue performed well above our expectations in the Q4 at $258 million, up $19 million from 2019, with profit-sharing income a key component. This was driven by the relatively good credit health of our customers, resulting in lower-than-expected delinquencies and bad debt. Asset sale gains were $40 million for the quarter versus $95 million in 2019. That brought our full-year 2020 gains to $60 million, slightly better than our expectations. Asset sales continue to be an important component for funding our growth initiatives as we continue to monetize our real estate assets. As a result, overall, we were pleased to deliver positive adjusted EBITDA in the Q4 of $789 million. This performance on the back of our performance in the third quarter led us to a positive full-year adjusted EBITDA of $117 million, a much stronger result than we had expected six months ago, underscoring our ability to quickly adapt and refocus. Continuing on, during the quarter, we incurred net interest expense of $84 million, an increase of $42 million year-over-year. For the full year, net interest expense was $280 million. That's $95 million higher than a year earlier. These increases were primarily driven by the long-term secured debt we took on during the Q3. Additionally, we recorded tax expense of $154 million in the quarter. The effective tax rate was 49%, primarily reflecting a true-up to our full-year rate due to better operating performance, including the impacts of the anticipated benefits from the CARES Act. For the year, we saw a tax benefit of $846 million, representing an effective tax rate of 17.7%. The annual rate reflects the non-deductible components of the goodwill impairment charge, offset by the impact of the carryback of net operating losses permitted under the CARES Act. As a result of the carryover, we currently estimate we will receive approximately $520 million in income tax refunds during the H1 of 2022. As a result, quarterly adjusted net income was $253 million versus $661 million in 2019. On an annual basis, adjusted net loss was $688 million versus income of $906 million. For the Q4, adjusted diluted earnings per share was $0.80 in the quarter, compared to $2.12 in 2019, which exceeded our expectations. For the year, adjusted diluted earnings per share showed a loss of $2.21 versus 2019 income of $2.91. The last of our important value creators that I'd like to discuss today is our capital structure and debt. Here, we believe we are well on the path to returning to investment-grade metrics by deleveraging the balance sheet. In January, we repaid approximately $530 million of debt at maturity. Just as noteworthy, we repaid this debt with cash on hand and did not have to draw on the $3 billion asset-backed credit facility. At the same time, capital expenditures in 2020 were $466 million, down from 2019 as expected. We improved our cash generation in the Q4. We generated $296 million in free cash flow for the year, driven by the efficiencies we gained with working capital, which improved year-over-year by $560 million, and by focusing our capital spend on the highest priority projects. That's it for our five most important value creators: accelerating sales growth, improving gross margin, increasing inventory productivity, managing SG&A, and creating a healthier capital structure. Now, I'd like to go a bit deeper in discussing the performance of our omnichannel businesses to give you some new insight into the progress we're making towards our strategic goals. This includes the relationship between our stores and digital channels and how they are so vital to supporting each other. I'll also discuss the important and continued contribution of our credit card program. I'll start by reiterating what we shared earlier. Macy's is a digitally led omnichannel retailer. The Polaris strategy is designed to ensure we accelerate top-line growth and increase profitability across all our channels. Through Polaris, we continue to work hard to improve the profitability of our core businesses, digital and stores. We all know that the pandemic has accelerated the use of digital channels, including our own, and that our customers' preference for a digital shopping experience is a permanent shift. We're excited by the opportunity to lean into digital growth. Make no mistake, our strategy revolves around growing omnichannel sales and profitability regardless of which channel our customers use. We created our strategy knowing that having both stores and digital acting in concert is critical to maximizing our sales and relevance with our customers in any market. For instance, we know that Macy's digital sales per capita are two to three times higher in markets we have Macy's stores. Conversely, from our store closures over the past five years, we have also observed that the growth rate of digital sales drops meaningfully when we close a store in a multi-store market and significantly when we exit a single-store market. Stores are providing the critical nodes to our digital customers. One of the important lessons we learned in 2020 was that we need to meet the rising digital demand from our store inventories if we are to satisfy our customers' need for speed and convenience and achieve our inventory productivity and turn goals. We know that channels such as buy online, pickup in store, curbside pickup, and same-day delivery will continue to be critical operating practices for us as a digitally led omnichannel retailer. How do we measure performance across our digital and stores channels? One way is to focus on contribution margin, directly attributing sales, gross margin, and channel-specific expenses to each channel within our financial systems. Channel-specific expenses include selling costs, location-specific real estate costs, and logistics and delivery expenses. On this basis, we are pleased that our digital channel is contributing positively to our profitability and, in fact, is doing so at a higher rate than our stores channel. In 2019, the contribution margin from digital was higher than in stores by mid-single-digit percentage points. The shift to digital is actually a very good trend for us, and we expect to be able to capitalize on this over the short, medium, and long term. One of the biggest challenges to digital margins is delivery expense. Given that digital's cost model is primarily variable in nature while the stores channel incurs more fixed costs, we know that the lower payroll and benefits in the digital channel can help to offset the pressure from delivery expense. That results in a higher contribution margin from digital, as do lower real estate costs. We also know it is vital to improve our delivery efficiency and better manage and reduce delivery expense. One critical focus area to accomplish this is our supply chain. We are therefore working to improve the placement and allocation of inventory across our network. In addition, we're focused on reducing packages per order, increasing the percentage of orders picked up by customers at our stores, and linking our best shipping offers more directly to our loyalty program and Macy's proprietary credit card holders. By pursuing top-line digital growth, we can minimize the impact of digital fulfillment and technology infrastructure expenses. We're doing this in several ways, including driving average number of monthly unique visitors to our site, improving conversion, and raising average order value, average unit retail, and average items per transaction. Now, with all these in mind, in the Q4, our digital sales accounted for nearly 44% of sales, up from 30% in 2019. Now, let's shift to our credit card program. As a reminder, net credit card revenues consists of profit sharing income, in addition to sales royalties and new account bounty. Our acquisition of new customers and our focus on retention and loyalty work in tandem with our credit card program. To accomplish these goals, it is vital for us to increase personalization to drive customer growth and retention. Heading into 2021, our goal is to increase the spend of those active customers with rising line of credit and spend capacity, and to improve new account acquisitions. New accounts dropped significantly in 2020 compared to the prior year, primarily due to temporary store closures, although we did open 14% more new accounts digitally last year than we did in 2019. New accounts in the Q4 were down 34% from the prior year. Our focus in 2021 is to seize upon the momentum we gained in 2020 and aggressively promote new account openings through our digital channels with an easier, more seamless process. Overall, we are pleased with how our credit business performed during the pandemic and its role in strengthening engagement with our customers. Credit card revenue accounts for a large percentage of our profitability, which we expect to continue. Our Polaris strategy will help us engage customers vigorously through personalization and other initiatives that are designed to drive more transactions on the card. We will continue to report out on the progress we are making. To wrap up this discussion on performance, I want to stress that we understand that our business model was challenged prior to the COVID-19 crisis, and that the pandemic has underscored the need for us to rapidly evolve toward a more compelling omni-channel model. We start 2021 with a solid foundation. Our digital business is profitable. We've identified priorities to accelerate growth and profitability in the upcoming years, such as reducing net delivery expense as a% of digital sales. At the same time, we are leveraging our stores to deliver better service and more convenience for our customers by investing in a more seamless omnichannel experience. Finally, we are pleased with the resiliency of our credit card business and our Star Rewards loyalty program, even while navigating the crisis. While we are confident that our initiatives will drive market share gains, we know our competitors are not standing still. We are continuing to realign our costs, our supply chain, and our fixed asset base to ensure that we leverage our expense base to capture the bottom-line benefits of our recovering business for our shareholders. I'd like to turn it back over to Jeff to speak about our strategic priorities. Thanks, Adrian. As I shared earlier, the Polaris strategy that we introduced last year has proven to be a critical enabler of our performance in 2020. Early actions dictated by Polaris help us broaden fashion offerings across categories and improve our digital experience. The cost control that we committed to last year was critical to weathering the pandemic. This year, when we needed to make hard choices on our investments, Polaris gave us the clarity to focus first on the areas most critical to future growth. While we'll discuss mostly Macy's here, both Bloomingdale's and Bluemercury experienced a strong recovery in the Q4, and we believe they are well-positioned to outperform the market as the pandemic recedes. We plan to spend more time on these banners on a future call. In recent months, we have recommitted to Polaris and refined it to achieve our mission to accelerate growth while improving profitability and returning to growing cash flows. This will require us to deliver better fashion and style options for customers and an improved digital and omni-channel experience. We are also boosting our focus on delivering clear value to our customers and modernizing our supply chain to enhance our value proposition and our gross margins. Financial results further improve with initiatives to unlock SG&A opportunities and boost the returns on our capital investments. Polaris also helps us reshape our footprint to meet customers where and how they want to shop, now and in the future. The six pillars that underpin the Polaris strategy: winning with fashion and style, delivering clear value, excelling in digital shopping, repositioning our store fleet and enhancing omni experiences, modernizing our supply chain and technology infrastructure, and enabling transformation through data analytics and a performance-driven operating model. Given its importance to our goals and to our future results, today I'm going to give a little more detail on each of these six pillars. As we discuss these, it is worth noting that we have continued to refine Polaris with a deep understanding of the Macy's customer and how their shopping has changed in the past year. Whether retaining our core customer or acquiring the next generation of new ones, the pandemic has accelerated the shift to digital, with lots more trying out digital channels and a meaningful portion expected to continue purchasing predominantly online post-COVID. Other elements have also changed. Many of our customers have shifted their wallets towards new categories such as Home, while others are increasingly focused on more closely managing their budgets. To win with these customers, we must continue to help them discover their personal style while offering an enjoyable experience that is convenient, reliable, and provides the right value regardless of channel. We have and will continue to adapt the Polaris strategy to win with these customers. This brings me to the first pillar, focused on the one in three American households who shop at Macy's each year, and for some of those who don't yet. The first pillar focuses on winning the customer with fashion and style. Style is how individuals express themselves through fashion choices, including for accessories and Home decor. Helping our customer express and satisfy their style needs across our core and emerging categories will continue to be a prime competitive differentiator for Macy's Inc, from off-price to luxury and from offline to online. In 2020, we made significant progress. In response to the pandemic and consumer behavior it ushered in or accelerated, we rapidly expanded our assortment across Macy's in categories such as home office, outdoor furniture, loungewear, active, and fleece. We also added new categories to meet emerging demand, including baby gear and skincare devices, home fragrances, outdoor recreation, gourmet food. All told, we added more than 1,000 new brands to address the demand. In store, we accelerated the editing of excess assortment, reducing our inventory levels to make our stores easier to shop. We improved our stock-to-sales ratio while realizing better sell-throughs at regular prices. Looking ahead, we will continue to improve our assortment, especially for the under-40 customer, with the right mix of categories. Within each category, we are building a new and relevant assortment across our private and national brands, as well as emerging brands. As we build out our assortment plans, we know that timing and the ability to balance our product will be key. We have a clear plan in place to shift to career and special occasion apparel and accessories when our customers are ready to return to the office, community functions, outside events, and entertaining. This plan includes keeping the appropriate balance with our casual assortments. Notably, Backstage will continue to be a significant element of our assortment strategy. Last year, Backstage outperformed comp sales in Macy's stores by more than three times, and we plan to open about 35 new store-within-stores in 2021. As we improve our assortment, we are also continuing to improve inventory allocation and receipt management to make sure that product is in and is flowing to the right locations as a way to maximize inventory productivity and customer convenience. Concurrently, we are working to strengthen vendor relationships by building new vendor partnership models that help drive improved profitability, product innovation, and best-in-class customer experiences. With these efforts underway, we expect to drive faster category growth plus higher sell-through with faster inventory turns. Our second pillar involves delivering clear values, which we will achieve through simple, easy-to-understand pricing and promotions, along with sharper, hyper-personalized communications to customers through our loyalty ecosystem. Specifically, over the past year, we have made significant strides in improving our customer value proposition. For example, we overhauled markdown capability, including adding a new location-level tool and advanced analytical-powered algorithms, the first of several major pricing capabilities we are adding to our merchandising function. We also saw both sequential and year-over-year improvement in regular price sell-through. In 2021, we plan to continue to simplify and de-layer promotions, optimize our markdowns, and improve and localize our pricing to create better value clarity for our shoppers, all while improving our merchandise margins. Additionally, we are also continuing to build on our customer value ecosystem, which would be loyalty, monetization, and personalization, enabled by our Star Rewards loyalty program. In August, we grew this ecosystem by launching the Macy's Media Network to connect strategic brand partners to our customers, which created a new fashion and beauty publishing model. This venture has already grown to generate more than $35 million annually as a new income stream. Looking ahead, we see a lot of promise in our ability to expand our monetization engine while cultivating greater customer engagement with more relevant and personalized content and offers. Taken together, we believe these actions will drive more customers into our Star Rewards and credit card programs and up to $60 million in monetization income in 2021. Number three, excel in digital shopping. As Adrian outlined, digital is a large, growing, and profitable channel for Macy's, Inc. With one of the largest digital shopping platforms in the U.S. Based on the latest NPD data, we maintained our market share for the categories we serve over the course of 2020, holding the number two spot. We know our investments in this space are critical to Macy's growth over the next three years. In the past year, we've made strong headway in digital, thanks largely to a new team that is transforming our capabilities. We exited our corporate office in San Francisco last year and stood up a new team with some of retail's most talented digital innovators who have found a new energy and focus on our digital customer. This team has already improved our customers' digital journey in many ways, including our browse, product recommendations, and checkout. This, along with our robust plans to transform our digital assets and experiences over time, make us very optimistic about Macy's opportunities in digital. To build on this momentum and realize our goal of growing digital sales to $10 billion within the next three years, we will continue to make fundamental investments while delivering new, immersive, content-driven experiences for customers. For example, we are launching a refreshed homepage with curated visual content and more precise search and browse functions, as well as a more intuitive bag and checkout experience with broader ways to pay. In high engagement categories like beauty, we are creating immersive online experiences so customers can discover new products to shop with confidence. These experiences augmented with virtual reality plus virtual consultations, which we have staffed with our own beauty consultants, are already showing tremendous power. Digital growth in our beauty category within Macy's in 2020 grew more than 60%. This elevated digital experience in beauty is only the beginning. We will carry our learnings here into other categories in 2021 and beyond. Over the next three years, we expect to see continued double-digit growth in digital with increasing channel profitability. Number four, reposition our store fleet and enhance omni experience. Our fleet continues to have high-value, relevant, and vibrant stores, mostly in A and B-rated malls, which will remain a critical part of Macy's future. We have already invested considerably in these best of Macy's stores. Across the remaining fleet, we are committed to the 125 store closures that we announced in 2020. Approximately 60 stores have closed or will close soon, further reducing our footprint in C and D malls. Following the closure of all 125 stores, at least 85% of our sales will come from A and B mall stores, and we will ensure through targeted incremental investments that all remaining Macy's represent the best of our brand. This year, reflecting consumers' increasing demands for speed and convenience, we are concentrating on two initiatives. First, we are enhancing our omnichannel shopping experience by focusing on scaling store fulfillment, BOPIS, curbside pickup, and same-day delivery services. Second, in an effort to more closely connect online and offline and deliver a seamless customer experience, we continue to invest in technology that enhances the way we engage our customers and elevate our in-store experiences, from category merchandising and store layout to transaction and staffing models. Together, we expect these efforts will drive down our cost per transaction while increasing our customers' conversion in the store. At the same time, we continue to test how off-mall stores can lift our digital business while profitably filling gaps in our geographic markets. As we test new store ecosystems in three markets, Dallas, Atlanta, and D.C. Metro, we continue to find significant synergies between digital and stores. Adding off-mall locations will provide customers with a fuller omni experience by providing more convenience, selection, and speed, whether they are shopping the digital or store channels. We look forward to sharing findings from tests in these markets in the early part of next year. Number five, modernizing our supply chain and technology infrastructure. Another element of our Polaris strategy that was elevated this year is our focus on rebuilding our infrastructure and network to better meet customers' desire for speed and convenience. As Adrian mentioned, we are hyper-focused on building a supply chain that can handle more sales volume and reduce friction for customers on fulfillment and returns while managing and reducing our delivery expense. Through these actions, we are also better managing and placing our inventory to meet customer demand and to minimize markdowns. We expect these efforts will deliver higher productivity in our customer fulfillment centers and in our stores, lower delivery expenses, and improved customer service across our network. We know customer expectations in this area are rising, and we are committed to meeting their demands. Last, we have added a pillar to our strategy that will enable our transformation strategy and accelerate the pace of change. This includes, first, a modernized technology platform to support a friction-free customer and colleague experience. Second, a revamped data and analytics foundation to drive growth and profitability through all of our decisions. Third, and the most critical to our success, a performance-driven operating model enabled by clear incentives for our colleagues. We recognize that the next 12 to 18 months of our transformation journey will require great focus and superb execution. Our team has never been more aligned in their urgency to deliver the advances we discussed, which will strengthen our growth and profitability. Our colleagues and our leadership team are all in. Their passion, dedication, and excitement, as measured by their willingness to step up during the pandemic, is extraordinary. In further proof of their commitment, our colleague engagement scores across our organization are the highest they've ever been. I'm excited to see how this will translate into better sales and styling support, especially in stores where we're targeting a significant improvement in customer conversion rates. With that, I'll turn it over to Adrian, who will share our guidance for 2021. Thanks, Jeff. As we look ahead to the rest of this year and beyond as we get beyond the pandemic and our business normalizes, we are focused on delivering on the metrics that will cement our position as a digitally led omnichannel retailer. That means sustainable sales growth across channels, resilient gross margin and EBITDA margin, solid free cash flow, and a healthier capital structure. Considering the profound changes over the past year and the lessons we have learned, we are today providing updated short-term guidance as well as some guideposts towards where we see the business moving longer term. These are based on our current strategic priorities with a recognition of ongoing uncertainties in the marketplace. They also reflect a more significant and faster lean into our digital growth efforts, as well as the continued rightsizing of our mall-based stores within the highest quality malls while testing new off-mall concepts. I'll first talk about our long-term objectives, then cover our shorter-term outlook for 2021, which we consider to be a recovery and rebuilding year. In the future, for Macy's, Inc., we target annual sales comps of low single digits as the business normalizes past the full effects of the pandemic. We foresee digital penetration exceeding 40%, while for our stores channel, we acknowledge that malls in general will continue to face headwinds that will lead to low to mid-single-digit comp store sales declines after recovering from the pandemic in 2021 and 2022. We see gross margin as a percent of sales stabilizing in the mid-30s. This will be driven by improvements in delivery costs and merchandise margin, faster inventory turns, and the ongoing shift to the digital channel. For credit, we are targeting this channel to stabilize at roughly 3% of sales. For adjusted EBITDA margin, we see continued growth moving into high single digits. For debt, we will remain disciplined and are committed to paying down debt as it matures to deleverage the balance sheet. We're targeting investment-grade metrics, which include a leverage ratio of under three times and an interest coverage ratio of greater than six and a half times. We do not plan to reinstate the dividend or share repurchase program in the near term, as we are focused on investing in our growth initiatives and paying down debt. However, we will monitor our plans continually in this area and will consider, with board approval, when the time is appropriate to resume dividends and repurchases. Now, let's look more closely at 2021, which, as I mentioned, we view as a recovery and rebuilding year as we approach the resolution of the COVID-19 pandemic. Of course, there are still questions about the rollout of vaccines and the resulting shifts in consumer behavior. As a result, no one truly knows what the near to medium term will look like, but we do expect our 2021 performance to be bifurcated, with continued pandemic challenges in the spring season and more post-pandemic-like momentum starting in the fall. Our annual guidance reflects this view. Here are some highlights. We expect Macy's, Inc. 2021 net sales to be between $19.75 billion and $20.75 billion, up 14%-20% over 2020. Remember that we are lapping a year of significant declines in store growth due to store closures. Our expected stabilization of performance in 2021 is reflected in these metrics. We expect our gross margin rate to improve by high single-digit percentage points from 2020 levels up to 37%. Credit card revenue is expected to be substantially lower than 2020, approximately 3% of sales, due to an expected rise in delinquencies and bad debt that did not materialize last year. SG&A expense dollars are expected to be lower than 2019 levels, primarily due to savings of $900 million we accomplished in 2020. As a percent of sales, SG&A is expected to improve from 2020 levels, but deteriorate by approximately 1.5 percentage points compared to 2019, driven by the sales deleverage. Asset sale gains are expected to total between $60 million and $90 million. Adjusted EBITDA margin is expected to be approximately 7%-7.5%. Net interest expense is expected to be approximately $325 million for the year. The adjusted tax rate for 2021 is estimated at approximately 23.25%. Adjusted diluted EPS is estimated between $0.40 and $0.90. Finally, we're committed to delevering the balance sheet, and as such, expect to repay debt at maturity in January 2022. To support the growth I've outlined both in the near and long term, we plan to invest a large percentage of our capital in the digital experience, as well as our supply chain and technology transformation. As we go forward, we expect to spend about half of our capital supporting these, which will be an increase of roughly two and a half times from what we've done over the past several years. In total, in 2021, capital spend is estimated at approximately $650 million and is targeted to grow over time. Now from a channel perspective, digital sales are expected to make up approximately 35% of net sales. This past year saw an unprecedented year of digital growth, and our outlook reflects a more normalized growth cadence, but one heavily focused as a digitally led business. For stores, we anticipate strong comp store sales numbers as we cycle the pandemic-related closures. Stores are targeted to represent about 65% of net sales for the year. We do anticipate that customers will be increasingly more comfortable in public spaces as vaccine distribution reaches scale, but we haven't made any significant assumptions around tourism-based sales recovering in 2021. We expect that store gross margin will help improve total enterprise gross margin compared to 2019 as we prioritize our promotional and markdown practices while improving inventory productivity and turn. From a seasonal standpoint, our guidance contemplates continued pandemic-related challenges in the H1 of the year, with momentum building in the back half. We expect our profits to be weighted more towards the back half of the year as sales continue to improve. We expect about 75% of our adjusted EBITDA, excluding asset sale gains, will be generated in the H2, with the majority of that coming in the Q4, given the importance of holiday. The seasonality of our profits is expected to be most apparent in SG&A. While we've made significant progress on cost reductions, the sales del everage is expected to continue elevating our first-half SG&A rate as a% of sales compared to 2019. Once we cycle into the back half of the year, the sales improvement is expected to drive SG&A rate to be more in line with the levels we saw in the back half of 2019. Keep in mind too, that we plan all of our asset sale activities for the Q4, so asset sale gains are not contemplated in our guidance over the first three quarters of the year. Within our expectations for the H1, we expect Q1 net sales to increase significantly compared to the Q1 of 2020, to between $4.2 billion and $4.3 billion, with adjusted earnings per share between a loss of $0.52 and $0.45, compared with a loss of $2.03 in 2020. In summary, with our updated and accelerated Polaris strategy, Macy's has a clear path to sustainable growth driven by the digital channel, by rightsizing our mall-based stores to better quality malls, as well as exploring more convenient and productive off-mall formats that are closer to our customers. At the same time, we'll continue to address gross margin opportunities and gain SG&A leverage as sales recover in 2021. We target to return to stabilized growth longer term as the effects of the pandemic wane. We are keenly focused on delivering strong and sustainable shareholder returns, investing in growth initiatives that generate high returns, achieving a healthier capital structure, and progressing towards investment-grade metrics. With that, I'll turn it back over to Jeff for some closing remarks. Thanks, Adrian. In closing, I'd like to leave you with a few thoughts. As we look toward a healthier economy in the coming months and years, I am optimistic about the way we are reimagining and repositioning our business in line with our Polaris strategy. We have a strong focus on our customer and market trends. We are building out our digitally led omni-channel experience, and we are well-positioned to better capture customer demand across the total market, from off-price to luxury and from offline to online. We know what's important to customers. We will empower them to find their personal style through curated and distinctive products, clear value, and enhanced digital and store experiences optimized by a modernized infrastructure and performance culture. We will be in a better position to be increasingly relevant to the next generation of customers. I am encouraged by the talent and focus of our teams across Macy's, who persevered through 2020 and who are committed to our future growth. We have a diverse leadership team that includes a blend of new talent with outside perspectives, along with our tenured and best-developed leaders. I am confident that together, we will build towards a sustainable, profitable future. This concludes our formal remarks, and now we'll take your questions. Thank you. We will take our first question from Chuck Grom with Gordon Haskett. Hey, thanks. Good morning. Thanks for the thoughtful update. Jeff, on the pace of recovery in 2021, how are you planning the business by category, particularly areas that may take longer to recover, but also areas of the business that could see the release of some pent-up demand? Then, Adrian, when we think about the gross margin structure and the 2021 guide of 37%, with digital where it is, do you think you can get back to 40%-41%? Or is the mid-30s the best run rate? Thanks. Hey, Chuck. Good morning. What we're expecting is that we're going to see much of what we saw in the Q4 going through the H1. When you look at some of the luxury businesses that customers have been spending on, like fine jewelry and fragrances, some of the designer skincare, all those categories are strong. When you look at the Q4 in those businesses, we were up about 14%. When you look at all of home, you look at fine jewelry, fragrances, sleepwear, I would expect that those would continue. The AUR is up. The sell-throughs are better on those particular areas, we're definitely funding those. That's across Bloomingdale's as well as Macy's. I would expect the negative categories to continue. I think all of apparel remains challenged. While we are doing well in the casual categories, the dress categories remain depressed. Our inventory levels remain in line with our sales. We have a ramp-up strategy with all of the relevant vendors as well as our private brands, if we start to see seeds of improvement as the vaccination starts to get scale and customers are starting to book events, weddings, you'll start to see those businesses improve for us. We expect the H1 is going to be very similar to Q4, and that the back half will start to see an improvement in apparel but remain strong in the categories that have been strong, as well as the new brands and categories that we have added. Chuck, thanks for your question, and thanks for joining this morning. To your point about gross margin, the thing that we would keep in mind is that we're targeting adjusted EBITDA margin moving towards the high single digits range. In order to achieve this, we're driving both the top line as well as efficiencies in both our SG&A and our gross margin. Now, Chuck, you're absolutely right. From a gross margin standpoint, we are planning to stabilize in the future as the business normalizes in the mid-30s in the future. We're actually working diligently to improve merchandise margin as well as the delivery costs and getting efficiencies in our SG&A. Really elevating the profitability of the overall business. As we think about the merchandise margin, obviously, category mix will have an impact on our margin level as the current pandemic mix tends to be geared towards our lower margin categories such as home, as we discussed a little bit earlier. At the same time, we do believe that as recovery happens, apparel sales will return, and that will also help offset some of the declines in gross margin rate due to the mix shift that I just mentioned. We're also going after pricing and promotions. We're trying to minimize the unnecessary promotions and markdowns and discounts to achieve a higher full price sell-through, which will help our merchandise margins and ultimately help our gross margins. We've gotten a lot of momentum from what we've seen in the Q4 of last year. We talked at length a bit about the delivery expense. It's all about better allocation of inventory where the customer wants to transact. It's reducing split shipments. It's improving our AURs. There are a number of levers we're going after. As we think about the contribution margin piece that we talked about a bit earlier, we're really focused on not just gross margin hitting in the mid-30s in the future, but really elevating our EBITDA margin, adjusted EBITDA margin, closer to the high single digit level over the longer term. Thank you. We will take our next question from Paul Lejuez with Citi. Hey, thanks, guys. Just thinking about the contribution comments by channel that you laid out. In years leading up to the pandemic, as digital penetration was increasing, your overall EBIT margins were going down. I'm kind of curious what you think has changed that would reverse that as digital continues to grow in terms of overall penetration. Along the same lines in that longer-term algorithm, the low single-digit top-line growth that you laid out, how does store closings factor into that? Are you talking overall sales? Is that a comp number? Just want to make sure I understand how you're thinking about stores long-term and how it factors into that top-line. Thanks. Great. Thank you very much for your question, Paul. As we think about the contribution margin, it's important to understand this difference between the channels, right? As we're looking at contribution margin, we recognize that improving margins in the digital channel is all about elevating delivery expense. Oh, I'm sorry, improving delivery expense to elevate our digital gross margin. From a store standpoint, it's really just leveraging more of that asset for BOPUS, for curbside, for BOSS and a lot of the digitally led initiatives that we have on the way, while at the same time getting back to comp store growth. When we think about the low single digit growth in the future, that's really on a comp basis. As you probably know, with regards to the announcement of the 125 store closures that we announced in January of last year, on a 2019 basis, that's about $1.3 billion in sales. That provides a real headwind as we actually right size our mall-based stores. With the ambition to grow digital to $10 billion in the next three years, with the work that we're doing to reduce digital delivery expense, and also the permanency of the $900 million of SG&A savings from the restructurings that we had in February and July of last year, we should be able to elevate those EBITDA margins relative to what you'd see in pre-pandemic. Those are some of the major levers that we're focused on as we look ahead. Thanks. Good luck. We will take our next question from Kimberly Greenberger with Morgan Stanley. Great. Thank you so much. Adrian, I appreciate all the comments today. This has been extremely helpful and illustrative. I wanted to clarify or ask two things. On the 500 basis points differential and contribution margin between stores and digital. If you sort of reflect back over the last five years, can you give us some context around the performance just in your stores channel? Have you seen store margins fall over time? Secondarily, on the longer term financial targets with gross margin in the mid-30s, I think this year, 2021, you're providing a preliminary gross margin outlook of 37%, if I heard you correctly. Should we consider that 37% target this year where you would expect gross margin to be sustained at? Thank you so much. Thank you, Kimberly. Thanks for your question. In terms of the contribution margin, the mid-single digits profitability contribution for our digital channel relative to our stores is actually quite real, and that's based on our 2019 numbers. The thing to keep in mind is over the last five years, we've built tremendous scale in the digital channel. When you think about the leverage of the technology infrastructure and the improvement of scale, we're really seeing increased benefits in terms of the profit contribution in the digital channel. In contrast, we've actually seen with a large fixed asset base in stores, our store sales is declining. What we're working to do from an omni-channel standpoint is really leverage our store assets for the digital experiences around box and curbside and store fulfillment and those capabilities. What we do see very clearly is that as our business on the digital side scales, we have great opportunities to continue to improve the profit contribution margin of that business. Delivery expense is a real focus for us as we think about ways to reduce split packages, encouraging customers to pick up from our stores, improving our AURs, even with the pricing and promotion work that we've done, we're receiving really good gains. That will all continue to contribute to an even healthier and more profitable digital business, while also taking advantage of the physical assets that we have within the business. Now, as we think about Q1, we're only sharing our expectations around the sales and adjusted EPS. As we think about the Q1, we're very comfortable with our inventory position going into 2021. We do expect to have a healthy level of gross margin as we think about the Q1 of the year. We're starting the year with really healthy inventory. As you know, we are down 27% over last year in terms of our inventory going into the Q1. We're really happy with our stock-to-sales ratio. We've planned receipts conservatively because of what we describe as the kind of the pandemic-like activity we expect in the H1. For our stores, providing clear value with simple, easy-to-understand pricing and promotions that allow us to maintain a strong margin. Those are the kinds of things that we're actually focused on. We do expect to move into the Q1 in a healthy position, but at this time, just really providing Q1 guidance around the sales and the adjusted EPS level. Okay, thank you. We will take our next question from Matthew Boss with J.P. Morgan. Great, thanks. Jeff, your sales guidance for this year, I think, stands 17%-18% below the pre-pandemic base at the midpoint. As we think about potential consumer recovery in the back half, and I think you've laid out $10 billion or more in competitor revenues up for grabs, what's your flexibility to chase sales in key categories? Secondly, as we think multi-year, how should we think about your ability to recapture that $4 billion-$4.5 billion in revenues to potentially get back to your 2019 revenue base over time? Hey, Matt. We have a lot of flexibility. Obviously, we're in a very good liquidity position with our inventories right now. As we were when you saw how we came out of the Q3 and our opportunity with our inventory position for third and Q4s. Those categories that were really tracking and trending for us, we were able to respond to. There were some supply chain snags in certain businesses like Home Store, where we didn't have as much flexibility on that. We're certainly looking at the front half of the year and really the full year, based on where the consumer goes on this. We have the seeds of where we see those runways, but as I mentioned in my first answer to Chuck's question. If you think about the dress and the suit business, the clothing business, as people go into more occasion-based dressing, we'll be ready with our main wholesale partners. Those would be where I know we're going to be able to react based on. We have longer lead time businesses like HomeStore. We're placing those bets. As an example, if you look at our textiles business, which is mostly private brands, we expect those great trends to continue all the way through 2021. We placed those bets based on what we were seeing through the second and the third quarters. When you think about our overall inventory levels from before, we had opportunities for better sell-throughs. We had opportunities, certainly, for faster inventory turns. Even though our inventory levels are down and our sell-throughs are really way up, and particularly in our regular price sell-throughs, that's obviously helping our margins. I think we have opportunity to do more with the inventory than we've done historically. It's not just buying into kind of lag, if you will, future markdowns and sales of a quarter and how we plan our receipts, but it's also getting better sell-throughs. With the markdown optimization that we have, the ability to mark goods at a store level to decrease our POS-ing that we're doing based on having more hyper-localized offering through our personalization engine with customers, that's all helping us on the margin conversation. Having the liquidity in our inventories is giving us the opportunity to respond to all customer needs by going after categories that there's always stock available in virtually everything that we sell. We can also go into new categories, new brands, new categories, and we're doing that through either VDF or we're doing that through our own inventory. That's what we've been doing, and I expect all those trends to continue. We will take our next question from Omar Saad with Evercore Partners. Good morning. Thanks for taking my question. Great presentation. I wanted to ask about the seven million new customers. It's great that you guys are attracting a lot of new, fresh faces to the franchise. Do you have a sense from where they're coming from, and why they're discovering Macy's at this point in time? Then if you could also address the existing customers. Many new customers kind of implies the existing customer base is spending a lot last year-over-year. Is this predominantly older customers who aren't necessarily digitally active and haven't felt comfortable to go back to the stores? What are the strategies for bringing those existing customers, historical customers, back into the franchise while keeping a lot of these new entrants you've attracted? Thanks. Hey, Omar. Happy to take these questions. Let's just talk about in the Q4, the number that you're quoting, the seven million new customers. This was a good quarter for us because these new customers that came into the brand, that was a 2% increase over what we had in 2019 levels. It was really good to see that. In a quarter that we were down 17% in sales, to have the customer base increase, that gives us some momentum going into the new year. The new customers that have been coming into the brand has been steadily improving. Each quarter, Q4 was our best performance. When you look at those customers, they are much more young and more diverse than what we've had historically. Four million of those seven million came in through digital. Obviously with the digital engine that we have, that has opened up lots of new customers to us that are shopping more on digital or now experiencing new brands digitally. When you think about the four million new customers that came in through digital, that was a 36% increase versus the previous year. We're encouraged by those trends for new customers coming in. Let's just talk about it on an annual basis, because when you look at the full annual profile, one of the things that we're proud of is that we had four million new customers come to us because of what we changed with our Star Rewards loyalty program. We added a bronze Tier two years ago, and that's starting to get some real traction for us. In 2020, we had four million new members join us on that. That was the 50% increase. Again, those are predominantly, when you look at our overall base of customers, a younger cohort. 38% of those customers were under 40, and that's versus the total company being about 28%. To the other part of your question about customer retention and what happened with our existing customer base, we definitely saw a slowdown in our gold and our platinum customers based on where they are in their feelings about shopping and the pandemic. They are an older cohort versus the new customers I'm talking about are the ones that came in from bronze. We do expect in listening to them, that they're really stalling their buying habits overall, and we do expect that they will return to more normalized behavior as the pandemic subsides. The other thing I'd talk about would be is Klarna. That also has been a nice accelerant for us in terms of new customers. When we added that in, that has really been about when you think about all the new customers that we've had come in from Klarna, about two-thirds of those were previously unknown to Macy's. New customers, and they also are predominantly under 40. 45% of those are under 40, again, versus the 27%, 28% for Macy's in total. On the customer front, I guess we definitely have some momentum, it's good to see that. It's good to see younger customers coming in. They're responding to our values and our products. Really the big engine here, they're coming in through digital. Interesting color, Jeff. Thanks. Good luck. Thank you. We will take our next question from Michael Binetti with Credit Suisse. Hey, good morning, guys. Thanks for all the detail here. Maybe I could just, Jeff, ask you about the inventory comments. You mentioned you have a plan to ramp inventory in some of the categories as your indicators start to improve. Could you offer a few thoughts there? Are the vendors going to be holding inventory? What's making them more comfortable holding that inventory before you're comfortable? Maybe just as you look at the shape of the year for inventory, maybe you could help us triangulate around your sales growth plan and how you think about the base case and where inventory will grow in the H1 versus the H2 of the year as you see it today. Yeah. Hi, Michael. We're happy with where our inventory position ended the year. Looking at the stock to sales ratio and where we stand, and just having the liquidity that's built into where we believe customer demand may or may not go, we're going to be ready with putting receipts against that. We have not seen an issue in vendors predominantly in the categories that are dormant right now. They do have inventory ready for us if we were to buy it. When you look at all of the dress-up categories, it's predominantly a couple of very strong wholesale partners that we have deep relationships with, and they're ready with us across multi brands, across those categories. Those are the big engines of suits on both men's and women's, as well as all the dress up categories, the dress up accessory categories, dress shoes, more in the bags that work with it. Those are categories where we have worked with our vendor partners on that. We're very focused on when you look at the back half of the year, we had an 18% improvement in inventory productivity. That was a number that we're looking at that continuing to really hold in terms of improving that productivity for the H1 of 2021. As mentioned, I think that where we're most focused right now is can we get the home inventories that we need? We've made all the adjustments that are required in our private brands, but making sure that we have that in the housewares categories. We clearly have a supply chain and have had a supply chain issue in both furniture and mattresses. The mattresses one is largely behind us. The furniture one, it persists. The demand is quite high. The supply, we're still having some issues with some of the categories there coming out of Vietnam and in China. We expect that all to be behind us by the end of the Q1. When I look at the inventory levels, we're planning those to definitely be below where our sales are going to be. We're planning to lag. We're planning for higher sell-throughs. We're planning for less markdowns. When you look at the composite of our business and our inventory on regular price inventory versus markdown, it's dramatically lower in markdown inventory. It's basically still below last year in regular price inventory, but in a much healthier position than where we are with markdowns, which is planned. I think we're in a good position with the way we're thinking about our inventory moving forward. If I could ask one follow-up on Vendor Direct. I know that that's been a bigger focus around the space. I think you said it was 20% of digital. Can you speak to the unit economics there? Maybe just an update on the unit economics, and is there an opportunity to increase that program as you talk to the vendors going forward? Yeah. I think the big thing, Vendor Direct has been quite strong for us. One of the things that we're always balancing is the customer. When you have a customer that's coming into your brand, does that vendor going to be shipping it in exactly the time? Is it in the right condition? We're always watching the customer reaction to all Vendor Direct. We've done a very good job, our merchants have done a good job with all of our Vendor Direct partners in really improving that level of service. We're pretty pleased with it. You get down to whether or not these orders don't come in, where it's a pure Vendor Direct order versus owned inventory. Oftentimes that does increase split shipments, which can be a customer inconvenience. We're always watching that. When you look at a lot of our vendor direct, we're looking at single category, single purchase. When you look at a lot of the home categories where a customer will purchase that single item, it'll be shipped directly from that vendor. That's been a very positive experience. When it ends up being a split between a vendor direct apparel order or an accessory order, and they're ordering something else that's in our owned inventory, it's either coming from a store, it's coming from a warehouse, and it's coming from a vendor direct warehouse. That can be an experience that we're very watchful of to ensure that it matches the customer expectation. I do expect vendor direct to continue to grow in the right times. Certainly when you look at the level of peak that we have between Black Friday and Cyber Week, looking at vendor direct to alleviate some of those peak pressures, that's always a factor for us. When we're going forward with a $10 billion strategy, we're looking at all elements to be able to satisfy the customer. When you looked at the number of new brands we brought in, the number of expanded categories, and just the continued number of failed searches we have that guide us to where the customers are looking for the Macy's and Bloomingdale's brands to play, we're going to look at all avenues to be able to satisfy that, and vendor direct is part of that engine. Thanks so much, guys. We will take our next question from Dana Telsey with Telsey Advisory Group. Good morning, everyone. As you talked, Jeff, about new partnership models with vendors, can you expand on that and tell us exactly what you're meaning? The tourist impact, which I think was 290 basis points of a headwind in the third quarter, 210 in the second, what did you see in the Q4? How are you planning it for 2021? Just lastly, it sounds like you're seeing good results on Backstage. How are you planning the growth there? Thank you. Hi, Dana. Let's talk first about vendors. What we're working with is we got a brand new chief merchant who basically was a Macy's veteran and did great stuff for us in the beauty and the center core worlds. She's taken over the reins, and it's always a great opportunity to work with our top partners. We're working with those and things that we're really looking at together because in many cases, we share the same customer. We're kind of ticking through the opportunities. First off is just being really transparent about our joint profitability and what are our investment decisions against the shared customer. We're looking at that. We're looking at what are the brand experiences, both online and on store, where their brands can come really fully to life. We look at elevated fashion products that are balanced across wearing occasions. We definitely look at data and the customer data that we have for their brands and what they know about their brands that can help us. What do we do with data together that can help build lifetime value, really getting much better with our own data analytics and looking at their opportunities with that. We look at marketing and brand opportunities to deepen the brand engagement. We clearly look at all of our gifting and our special occasion opportunities that we're a high consideration set for those occasions for our customers, and how do our brands play with that. We look at that. Obviously we have our base of our private brands, we look at our national brands, and then we look at our new emerging brands on that. Those are the new partnerships that we're working on. Let me answer your Backstage question. This has been one that, as you well know, Dana, we started this in 2015. We started out as a freestanding format. We brought it quickly into our stores because we had productivity opportunities in our brick and mortar store fleet. That's really where we've been spending most of our efforts. To what Adrian's comment was earlier, that has been a strong growth strategy for us. Obviously, during the COVID-19, those Backstage areas were down about one third of what the balance of the brick and mortar stores were. A much better productivity level. The sell-throughs are really good. The top line and the margins have been quite strong there. We're going to expand that to another 35 stores, we're well over 200. We're going to get close to 300 stores within stores with Backstage through the course of our rollout in 2021. We're back to adding freestanding Backstage stores into those three markets that we announced with Polaris back in February of 2020. Getting back to freestanding Backstage, which has full omni-channel fulfillment capability for returns and store pickup across the full network. We continue to roll out Backstage or the Bloomingdale's equivalent of that with Bloomingdale's Outlet. We're continuing to do that. We're still bullish on off-price, and when you think about our brands of being off-price to luxury, that's what's been so interesting about 2020, was how well those great values of Backstage worked for us, as well as how the bifurcation of the luxury products worked across Macy's and Bloomingdale's. They were both standout performers on both ends of the value spectrum. Got it. We will take our next question from Steph Wissink with Jefferies. Thanks. Good morning, everyone. I have a follow-up to Paul's earlier question on gross margin optimization. Could you talk a little bit about what you're assuming in your $10 billion digital target in terms of the percent that's fulfilled from stores? I think in the Q4 it was around 25%. What should we think about the optimal penetration of store fulfillment in that $10 billion target? Thank you. Good morning, Steph. You're absolutely right. About 25% of our digital demand was fulfilled from stores, and that includes store fulfillment, BOPIS, curbside, and same-day as well. The reality is that we're keenly focused on inventory placement so that we can actually leverage our stores asset to continue to allow us to meet the expectations on cost and speed and efficiency for our customers and for our business. As you remember earlier in the year, we had actually turned on curbside within just a couple of weeks, and we are already in our curbside 2.0. We believe from a convenience standpoint that the idea of continuing to leverage our stores for store fulfillment for BOPIS and curbside is an important target for us. We hope, as we think about the 25%, we want to figure out are there ways to increase that where it makes sense, and also think about our upstream fulfillment choices as well. From our perspective, it's really about how the customer wants to shop us. The customer may want to have the delivery sent to his or her home, or the customer may want to pick it up at a nearby store within an hour or two. We just want to make sure that we have the flexibility to meet that demand and respond to where the customer is taking us from a digital and an omni standpoint. That's great. Jeff, could I put one more question out just on your inventory plans for the H2 and as you're working with your vendors. How are you thinking about the trend cycle and the inventory composition? Are you seeing vendors presenting you with stronger trend and fashion, maybe taking a bit more risk on newness in the back half as consumers come back to stores and back to retail? Yeah, that's a good question, Steph. I think that when you think about our merchants and where we do really well is where we have great fashionable product and categories that customers want, be it trend products or trend categories or otherwise. We found our vendors very receptive to that. We're aligned with our vendors about building AUR by putting more value into those products. That's our sweet spot is really pushing the edges of that. Even in our brands that are more widely distributed, in many cases, they've got great premium pieces of their lines that we really like to dive into with them because our customers expect that, and they love it when we get it right. We found good receptivity from vendors on that subject. Thank you. We will take our next question from Paul Trussell with Deutsche Bank. Hi. Good morning. This is Gabby Carbone on for Paul. Thanks for all the color today. I was wondering if you could dig a little bit deeper into the work you're doing around enhancing the digital experience. In your presentation, you mentioned an online business model for Bloomingdale's and Dillard's. I was wondering if you could share any details around that initiative. Thanks. I'm sorry. Your question was a little garbled. Could you just repeat the first part of the question? I heard the second part. Oh, yeah. I was just wondering if you can talk about the work you're doing around enhancing the digital experience? Oh, sure. Let me take that. Obviously, let me just talk about what we've got planned for 2021. You have two big initiatives within digital. One is to continue to improve the functionality of the site, remove all the friction, and the other is to be much more experiential and then really look at the fullness of our ability to tell stories and brand stories. When you think about expect increased beauty enhancements that Adrian talked about earlier on the site in the first and Q3. We're also going to be layering in other categories like some of our leased businesses, some of the luxury businesses, as well as sunglasses and eyewear. When you think about the back half of the year, a lot of it is going to be customization tools for products. Live stream shopping experiences, that's something that we've been experimenting with. Bloomingdale's has been a great pace car for us on that. That's going to continue across the Macy's brands. Really looking at kind of the advisor shopping experience is going to be an add on that. As you just mentioned, or you asked in the second part of your question, testing and developing an off price online with Bloomingdale's as our pace car on that. We're also going to be having a total site redesign that is a multi-year project, the first incantation of that is going to be launched for the Q4. That's also going to be in time for the holiday. We've got other plans that are looking in the future years, those are the ones that are on the docket in experience for 2021. We will take our next question from Lorraine Hutchinson with Bank of America. Thanks. Good morning. I wanted to follow up on your comments around credit. The business outperformed sales nicely in 2020, so I was a little bit surprised to see the 2021 guidance calls for a drop. Can you speak a little bit about your assumptions behind the 3% of sales guidance and where there could be upside or downside? Hi, Lorraine, it's Adrian here. Good morning. As you described, our guidance for credit card revenue is about 3% for 2021. Also, as we think about the normalization of the business, that's our guidance as well. If you think about 2021 specifically, our guidance is really reflective of an expected increase in bad debt and delinquencies. What we didn't realize from bad debt and delinquency levels in 2020 is expected, will effectively show up in 2021. If you look at the presentation we posted on the website, what you see fundamentally is an elevation of credit card income as a rate of sale In 2020 relative to prior years. We're effectively getting back to more normalized levels, but also recognizing that we do expect some degradation to happen because of bad debt and delinquencies. There's also some degradation in lower account balances driven by just simply the lower sales level in 2021. We do expect in the H1 of the year to be more pandemic-like activity. That will certainly suppress some of the sales opportunities that we do see, especially as Jeff mentioned earlier, around some of our higher tier credit card users. That's really how we're thinking about it, and how we are actually projecting credit card income for this year. Operator, I think we have time for one more question. Perfect. We will take our next question from Oliver Chen with Cowen and Company. Hi. Thank you very much. We were curious about the opportunities ahead with price clarity and how you'll balance price clarity relative to promotions and offering a good value, yet maintaining some nice merchandise margins. Would also just love your take on speed, the concept of speed, and how that may be an opportunity as you think about the supply chain and/or delivery to customers, where you see an opportunity with speed. Thank you. Good morning, Oliver. You're absolutely right. We're focused on simplifying our pricing, promotions, and discounts for our customers so that we can really just deliver value of our product in a much clearer way. The key to this work, though, is that we reduce promotions that customers are just not responding to, which will allow us to reinvest in those categories that can actually help us accelerate growth. As you look at 2020- I think we lost Adrian. Adrian, you back on? Adrian, you back on? Yeah, maybe you garbled. Adrian, can you hear? Sorry about that. Yeah, sorry about that. During the holiday, we were focused on increasing our full price sell-through and protecting our margins, and that allowed us to actually reduce our POS promotions. As we think about permanent markdown cadence and the launch of our new markdown tool, we believe that that will enable us to have more location-level markdowns at scale as we move into 2021. That initiative alone, we believe, is about a $90 million opportunity. As we also think about our pricing and promotion and markdowns, it's also important for us to be very conservative with our buys. Combined with being just more surgical with our pricing, promotions, and markdown activity, we want to make sure that we're very measured in the buys that we're making going forward. That'll certainly help us on from that standpoint. As it relates to shipping speed, a big part of what we're focused on is just being competitive on delivery speed by providing our customers with convenient options they want to choose, whether they're shipping to home quickly or picking up from a store within a couple of hours. We're keenly focused on building a supply chain that'll really help us handle more sales volume, increase delivery speed, reduce the cost of fulfillment, and also reduce a lot of friction that may exist today in our returns process. We're leveraging our stores to be a big part of that. We're rebuilding our network. We're investing in the technology needed to do that with predictive analytics to help us make sure we have the product in the right amount in the right place. We're making a lot of progress on the speed dimension as well, but we're really following the lead of the customer and taking advantage of the customer's move into digital, where we feel we have a strong advantage. Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.