Good afternoon and welcome to this next session of the Goldman Sachs 32nd Annual Global Retailing Conference. My name is Brooke Roach, and I cover the apparel, soft lines, and branded consumer goods here at GS. I'm thrilled to introduce our next session with Macy's. Here today representing Macy's is Tony Spring, Chairman and CEO, and Tom Edwards, COO and CFO. Welcome, Tony, and welcome, Tom. Thank you, Brooke. Great to be with you. Tony, Macy's reported second quarter earnings yesterday and delivered an impressive inflection to positive comps. Can you kick off our session by speaking to the key highlights in the quarter and the drivers of the momentum that you see? Sure. We're very pleased with our second quarter results. We saw enterprise-wide growth across each of the three nameplates. Pause for one second. I don't think we can hear you. Can you bring a mic? Or do you want him just to try again? Can I move it up? Danny, you're in the front row. It doesn't count. Try again. How about now? No. Go ahead. Can you hear me now? Yes. Okay. I will try to speak loudly because we had a good quarter. We beat on the top line. We beat on the bottom line. We exceeded our guidance for sales, for margin, for revenue, for EBITDA, for EPS, quarterly EBITDA. We had the best quarter in 12 quarters for Macy's Inc. and for the Macy's brand. We saw a growth in our R 125. We saw growth in our digital business and our physical business at Macy's. We had the fourth consecutive quarter of growth at Bloomingdale's, growing over 5.7%. We had our 18th consecutive quarter of growth at Bluemercury. I think what we look at as being a multi-channel, multi-category, multi-brand, and I think in this environment, saying multi-price point retailer is an advantage. It reinforces our conviction that the Bold New Chapter is the right strategy to bring Macy's Inc. back to sustainable profitable growth. Very clear. Tony, you mentioned the Bold New Chapter strategy, and it's been in place for about a year and a half now. Can you discuss where you've made the most progress and what might be longer dated? Sure. Just to refresh everyone's memory, the Bold New Chapter was our three-year plan to improve the quality of the entire enterprise. It was broken down into three parts. The first part was to be able to reimagine and strengthen the Macy's nameplate. We're pleased with our performance 18 months in. We closed 64 underproductive stores last year. We have flowed in new brands, which was a part of adding more relevancy to the Macy's brand. Seeing growth from existing brands like Levi's and Coach and Ralph Lauren is also good because it strengthens the power and impact and desirability of the Macy's brand. We also wanted to make sure that our stores reflected the future of retail. If you remember, before we did this strategy, we talked to 60,000 active Macy's customers and customers who used to shop Macy's and tried to talk to them about what are the things we're missing. The delta was interesting because the love for Macy's was just as strong as had been previously. What wasn't as strong was the like. They were unhappy with the experience in our stores. It made it easy for us to figure out in our first 50, which was a part of 2024's launch, and we added 75 more stores in 2025, and we're now at our Reimagined 125. The tenets of improving the experience had to do with more staffing in specific areas where the customer said we were underserving their needs. It had to do with improving the presentation, that's both density on the floor to make it easier for people to shop, to find their size and color, and also the general presentation and standards in the store, as well as storytelling, which I don't think we give enough airtime to the importance of telling stories in a very busy, active life where people are in a nanosecond moving from one point of information to another. How do you tell a compelling story that gets people excited about a trend, about a style, about a new brand? Finally, was the empowerment of our people and the empowerment of our local store managers to make sure that we could learn from what they thought we were missing in the central direction we were providing. The final tenet is the end-to-end operations and making sure that we were adding more simplification, more automation, reducing the complications that had to do with reducing the number of supply chains that we operate, that had to do with embracing the power of AI as well as generative AI, that had to do with making sure that we were taking cost out of the network, and in some cases also speeding up the delivery of product to the customers where we were behind the competition. Very clear. In terms of the impact of the A Bold New Chapter strategy, you just inflected comps positively in the quarter. How are you thinking about the sustainability of this performance here, particularly given your guide for a bit of a deceleration in 3Q and what's in your control and what's a function of macro? It's a great question. I think the execution of our strategy is 100% in our control. What's not in our control, and I think is incorporated into our guide, is the uncertainty in the macro environment that we're all operating in. I was reading and joking with you before coming on stage that there seemed to be a consistency of the use of the word resiliency and also the word uncertainty. I think that's the reality of the retail environment right now. We've not seen a time period where a number of costs in different categories are going to go up to some degree, where availability may be different depending on the brand and the category and the item. I think we've put in our guide for the fall season a level of prudency to make sure that we can react to the way the customer is going to shop. It's another reason why I am so bullish on being a multi-category, multi-brand, multi-price point retailer because there are categories and items within our assortment that are the same price. There are items within our categories that are more expensive. There are things we bought less of or didn't buy because they were unrealistic in terms of their pricing. That's the advantage of not being limited to a specialized brand, your own brand, and having the ability to shop the market like a consumer would and say what will make the biggest difference in our business this fall season. Very clear. The Reimagined 125 stores have been consistently outperforming the rest of the fleet. Can you contextualize for the audience some of the changes that you're making in these stores? Which of these drivers have been most material, and how quickly can you scale these across the rest of the fleet? Yeah, I've used the example we're not going to trip on our way to success. We went from 50 to 125 stores. We will add more stores next year and talk about that on the fourth quarter call. We had a 1.4% comp performance in the R 125 in the second quarter. Both the first 50 and the next 75 grew in the second quarter. That is five of six quarters of growth in the first 50. It is a programmatic result that we're seeing that I think is scalable. We also want to make sure that we continue to refine and iterate and learn as we go forward. I think I mentioned in my previous answer the three ingredients that I think are so important to our R 125 program. It is really the staffing investment. It needs to be targeted. Where will you get the biggest payback? I think in many cases we're learning from our traffic and conversion data. We have more opportunities on the weekends. We have more opportunity in peak hours. How do we reduce the workload that isn't customer-facing so that we can have more colleague-facing colleagues on the floor when the consumer is in the store? I think the other piece that I said briefly was important is this local empowerment. It gets 75% right centrally. We can direct a portion of the schedules. We can direct how to take the markdowns. We can direct some degree of planogramming. The local leader knows exactly that they have traffic in the women's shoe department and it's not satisfying the customer. How do we move people around? They know specifically that if we direct somebody to put a piece of outerwear in a store in Florida, that's not a good decision. They need to be empowered to change that. That is really where we're trying to embrace the benefit of being a centralized retailer that has many stores across this country and at the same time empower local leadership to make smart decisions. Tom, the Reimagined stores have driven strong sales, but they also come with some incremental investments. Can you help frame up the profitability trajectory of these stores relative to the rest of the fleet? Sure, Brooke, I'd be happy to. We do invest in our Reimagined stores in order to drive the results that Tony was speaking about and really implement our initiatives. That's important because it's important to drive the top-line comparable sales. We saw that happen in the quarter. This is critical. It's also important to drive a differential across the Reimagined and rest of the fleet so we show that our implementation is working. We saw that with the Reimagined 125 up 1.4% in the quarter compared to the overall go forward up 0.1%. The initiatives are working. The investments are paying off. In terms of the profitability component, at the same time, we're always on in terms of looking for savings. We are looking for savings as we are closing underproductive stores, and we're seeing that come through in SG&A. We're also looking and implementing savings in our end-to-end operations initiatives, which have been occurring and have a long tail of benefits that will continue into the future, as well as looking at costs on an ongoing basis. This really came together in Q2 because you could see we had investments in R 125. We grew the top line. SG&A was reduced in the year versus prior year by about $30 million, and we over-delivered our top and our bottom line together. That shows how the synergy of this can work together. I believe, Brooke, long term, you'll see as we roll out those initiatives to more stores, we'll get that positive return on investment and drive the top line. You mentioned some of the store closures in your last answer. Let's dig in a little bit more to your fleet repositioning. You've closed more than 60 stores under the Bold New Chapter strategy, and there's more on the horizon. What are you seeing so far in terms of sales recapture, either online or in adjacent stores, and how do you expect this to evolve moving forward? Sure. Happy to help on that. First, we did close 64 stores last year. We generated cash proceeds from sale of assets of nearly $300 million last year and $75 million year to date this year with a forecast of $175 million. We're doing the right things from a monetization point of view to get to a fleet that is profitable and that we can grow going forward. We're exiting stores that are underproductive, not necessarily that are unprofitable, that are underproductive. In each of those decisions, there's a real careful analysis of whether it makes sense and how we capture volume from those stores in existing stores in the market or in our online business. This is a very thoughtful process to not just close a store, but to transition our faithful and loyal customers to new places to shop or places that they've been to, but we want them to go to more. The net is they are coming back at a higher rate than we were initially anticipating. The capture and the recapture rate is better than expected. I think this is also helping contribute to our overall top line. Tony, let's move back to you and talk about Bloomingdale's, which I know is very dear to your heart. Always. Bloomingdale's comps have been really strong. You've seen some new brand launches and some capsules. Can you elaborate on the drivers about performance here? Are there any specific categories or customer demographics that you would call out? How much of this has been driven by recent disruption in your competitive set versus idiosyncratic initiatives? Yeah, I like to start first with Bloomingdale's is in charge of Bloomingdale's performance. The reason that Bloomingdale's is performing well is because they have a great assortment, a strong team, a clear strategy, a productive fleet, and a growing and healthy online business. They've got wonderful marketing campaigns and partnerships and activations. They're launching this week, Just Imagine, which is a wonderful artistic campaign with lots of exclusive products, with an event in all stores this Saturday. All you out there, please go shop. Yes, the marketplace is disrupted, and there certainly is a benefit to Bloomingdale's that comes from that. They're not resting on their laurels. They're seizing the moment. They're a hungry team. They are expanding the amount of distribution they have with existing brands. They're approaching brands that we don't currently carry. They're doubling down on the growth we've seen in the digital business. We're attracting new customers to the Bloomingdale's brand. We're attracting colleagues who want to work for the Bloomingdale's brand because they can see that we have inventory. They can see that they can make more money. These customers see that they can satisfy their wardrobe. In some cases, we're introducing existing customers to new categories within the store. Someone who used to buy their sheets or towels at Bloomingdale's all of a sudden goes to the shoe department and says, "Oh, I didn't realize you carried the brands that I buy in another retailer." It's just more share of wallet opportunity for that brand. Very great. What about the Bloomies concept? How are you thinking about the opportunity there? Yeah, we have four stores open now. It's both. It's a densification opportunity. How do we add a node into a market where we feel like there's more opportunity? It's a replacement strategy. How do we close a store that may be bigger or less productive or not as in good shape and put in a Bloomies store? How do we use it to enter new markets? In the case of Seattle, it was entering a new market. In the case of the DC Bloomies, it was a densification. In the case of Chicago, it was a replacement store. In the case of our newest store in Shrewsbury, New Jersey, that was a densification, even though it's probably still 40 minutes from our Short Hill store. We see the opportunity to open more Bloomies stores. It is with the Bloomingdale's Outlet, the two vehicles that we see as the primary ways to grow the footprint of the Bloomingdale's total brand. Remember, Bloomingdale's is only in 14 of the top 50 DMAs in the country, the smallest penetration of DMAs of any of our competitors. In our mind, there's still runway for real estate. I like that adage of location, location, location, and it's easier to open a store and close a store than to do everything in between. I want to make sure before we just add more real estate, we add the right real estate. Very clear. You mentioned at the beginning of your conversation about different income demographics, and how it was very advantageous that you played all the way from the high to the low. Yes. What trends are you seeing in your off-price business today? Are you seeing any trade down given the choppy macro? We're not seeing any trade down. I think we're enjoying the benefit of the off-price business at both Macy's and Bloomingdale's being healthy. Backstage has continued to perform at Macy's. Backstage was a way for us to add more volume and more productivity to stores that didn't necessarily have enough content or categories within them. In the case of Bloomingdale's, the outlet store continues to perform, and we continue to add more locations. The interesting thing is when we look at the basket, when a customer buys online and from a full-price store and off-price, they're a more valuable customer. To me, the off-price business is not necessarily a trade down of the consumer. I think it's capturing an off-price purchase that they would have made in another off-price retailer. There are certain categories, whether we like it or not, could be the Kids' category, could be some novelty home products, could be seasonal things like Halloween or Easter that people don't love to pay full price for. Whether it's kids growing out of sizes or a holiday that lasts for a nanosecond, we need to make sure that we are capturing that business in one of our points of distribution. Very clear. Let's take a step back for a minute to discuss a few topical questions. Tony, you described the consumer as more choiceful this year. Are there any pockets across categories or consumer demographics where you're seeing outside strength or weakness? The thing that continues to strike me is that the consumer is interested in newness and in fashion. Wherever we have it across any category of business, it could be a new brand that we added to the Kids' department, like Abercrombie Kids. It could be the level of newness that we see with Coach, given the popularity of Tabby and Empire and all the different bags that have driven that business. It could be the introduction of denim from Good American. It could be the new silhouettes of top-tier products from Levi's. Every place we have newness, we have a good business. The places where we have softer business or a less robust business is where we have more basics, necessity, more continuative products. I think it's an example of, just like value, it's an example of how in a choiceful environment, the consumer is not going to not spend. They're going to be spending more surgically, more thoughtfully on where they think they get the most value for the money. There's some embellishment to a coat. We're seeing some action and reaction. If there's an embellishment to a sweater, even though it's only early September, we're seeing a reaction. I think the basics we're going to probably have to be more aggressive with. I think it's another, again, back to the benefits of a multi-branded retailer. We have a range of price points. We are not limited to just one. We'll try and adjust our buys. Obviously, in the case of continuative product, in the case of basics, those things are on replenishment. You tend not to overbuy them. You buy back into what you sell. Very clear. One question that we're asking nearly all companies at our conference is their expectations for the environment into the back half of 2025 relative to recent results. Do you expect things to be the same, better, or worse? I expect the consumer to be more choiceful, and we've embedded a more prudent guide into the fall season. It's hard to look at our guide and say that I'm more optimistic about the fall season because we've added a more prudent guide to the fall. It's not as good a performance as we had in the second quarter. I hope I prove myself wrong because that would say that the consumer wants to remain resilient, and there are categories where they will pay more, and that they will adjust and work around the tariff environment and still have gifts under the Christmas tree, still have the right items for the winter and holiday season. Is there anything that you see into 2026 that would change your response? 2026 is always hard for me to answer at this point in the year because we do so much business in the fourth quarter. What I would say is I look at four elements and challenge myself. Are we in a good place on those elements? Number one is culture. Yeah, I feel really good about the work we're doing from culture inside this company. Number two would be strategy. I'm in the middle of the strategy, 18 months in. I feel really good about the work. We talked about it at the beginning. Lots of points of progress, plenty of work still to do. The third would be leadership. We have a complete leadership team. I feel really good about the people on our team, the level of collaboration, the level of focus, the opportunity to be able to accomplish more as they learn even more about the department store business if they come from outside or the impact they're having as they rebuild their teams. Finally, execution. Frankly, we're just executing better. Those aspects would make me feel better about 2026 than about 2025. You have to give me more insight into what's going to happen to the economy. Very, very helpful. What proof points do you see that give you confidence that Macy's can gain market share in this environment? One question that we're asking everyone in consolidation with the market share question is whether or not you think that market share consolidation will speed up, be the same, or be less in 2026. Again, I don't have the crystal ball. I'm not an economist and not a great prognosticator. I would say it likely will have more consolidation, that this environment will create more winners and losers versus everybody going down or everybody going up. I feel like based on the four tenets we talked about, I like our odds. We're coming into this a healthier retailer. We have a healthy balance sheet, no debt maturities until 2030, healthy cash flow, investing in the business, maintaining our investments in stores, maintaining our investments in the digital business, returning cash to shareholders, a quality quarterly dividend, buying back stock. I think those are signs that we're a healthy retailer that's going to be around. Our key is to pay attention to the signals from the consumer. The consumer dictates how our business goes. If we're attentive, we're in the market, we're in our stores, we're talking to our vendor partners, we're more likely to be successful. The topic of the year is tariffs. Tom, you talked a little bit about this yesterday on your call, but can you contextualize how you expect the cadencing of tariffs to impact Macy's profitability ahead and into 2026? How are you thinking about the timeline and mitigation magnitude of your action? Oh, sure. I'd be happy to. As we discussed on tariffs, we had previously had a 20 basis poin t- 40 basis point impact to gross margin for tariffs built into our prior outlook. The tariff outlook and situation changed. It increased. In our current guidance, we've embedded 40 basis points- 60 basis points impact. As we look through the year, in Q2, most of the original tariffs came through, including the 145% tariffs from China. In Q3, that base tariff is also occurring. In Q4, some of the incremental tariffs we believe will impact the company. That's really due to the timing of receipts and when they start, when the tariffs actually come into play. That's what's currently baked in. Our teams are doing an amazing job of mitigating it. We are talking and negotiating with vendors. We're talking with manufacturers. We're taking other initiatives across the supply chain. We'll be looking more longer term at things like country of origin and how we manage our business holistically. I'll point to something Tony mentioned. We have the benefit of being a multi-brand, multi-channel, multi-price point retailer where we can flex, I think, in ways that others can't and far more broadly. Brooke, it's a little early to talk about 2026 and the impact in that year. I would say that we have far more time now to react, to plan thoughtfully, and to use some of those advantages and levers to mitigate this impact and really ultimately serve the customer with good products, good value across all of our channels. Tony, given the uncertainty that tariffs create across the supply chain, have you noticed any shifts in vendor negotiations as your partners react to some of these direct cost pressures? Everybody's working together. I think this is symbolic or symptomatic of almost like the post-pandemic period where we're partners. It's in our best interest together to keep the factory in business, to keep the customer engaged. There is a negotiation. There's a tit for tat. We are really trying to look very thoughtfully. A coat can probably take $5, $10, $15 more. A T-shirt probably can. How do we margin ourselves to a place? How do we really think about, as if we were the consumer, what do we think is reasonable? What do we think is realistic? The beginning of micro and retail was it's not what it costs. It's what will the customer pay for it? We try to pick up the item and look at it together, go through assortment planning. It's one of the benefits, again, we keep saying it, but of assortment architecture is a key barometer and talent that a merchant has to have. It's particularly important in a multi-branded retailer. We get the opportunity to have good, better, best. If we feel like some of the best is too expensive or some of the good feels like it's better but looks like it's good, then we have to make those adjustments. Sometimes those are harder conversations. I think when you're honest and you do it in a way where, you know, I use the adage, say what you mean, don't say it mean. There's a way to get across to people exactly why you're not going to buy something or why you're going to buy less of something because it's not competitively priced. Conversely, we have to accept the fact that this is a balance between what's right for our customer and what's right for our shareholders. We can't absorb 100% of the cost of tariffs. We can't pass along 100% of the cost to our customers. We don't have to swing ourselves, our vendors, the factories. How do we work together to solve that problem? Tying up the tariff discussion that has led to a lot of pricing questions. Are you seeing any pushback or elasticity as a result of pricing actions to the extent that you or your vendors have taken pricing? What are your plans for pricing in the remainder of this year and into 2026 based on what you see in the order book? I think that pricing is one of the levers that we can look at. It is definitely not the first lever because we're talking to vendors, manufacturers, and looking at all other options. As we look at it, we'll do it judiciously. As Tony mentioned, with an eye to where the consumer is and what we can do at the different levels. We've seen an incredibly resilient consumer to date, and our AUR in the quarter was up 1.3%, but it was more through the management of our business and really doing the right things to serve the customer and drive good full-price sell-through. That AUR was more of a function of mix or like for likes. It was just doing everything we were doing with our go forward and A Bold New Chapter strategy with the right brands and the right levels of pricing. Very clear. Both mix and like for likes. I think you have, as we've talked about, some categories where we have before tariffs undershot the customer. We have a brand like Donna Karan that is doing quite well. In most cases, the average in a retail on the floor for Donna Karan is higher than the other tickets on the floor in the Missy or Bridge category. In other cases, it's the mix of the business. Very clear. Thank you. From an inventory perspective, Tom, can you discuss your expectations for inventory into the back half? Are there any adjustments or changes in the order or magnitude of shipments because of what's happening in the environment? In Q2, our inventory was down around 1%. We're really pleased with that. We moved through the quarter to get out the inventory with a very, very clean and a good composition. We feel like we're really well positioned. We have a great amount of newness in. As Tony mentioned, the customer and the consumer is responding really well to that. We feel positioned well. We also, on the other hand, have ample open to buy. That gives us the flexibility to respond depending on where we're at in this choiceful consumer environment. We can chase and also respond appropriately if the consumer is more choiceful. We're getting the receipts we need. We're comfortable with where we stand right now and expect to manage inventory in line with our sales going forward. Tom, sticking with you, can you contextualize the areas in your business where you've driven the most significant change regarding intentions to simplify and modernize the operations? Where do you see the most opportunities for further efficiencies ahead? What does that mean for profitability? Sure. I've had the pleasure of seeing some automated distribution facilities. In our end-to-end savings and initiatives across operations, there's been a tremendous amount of work done that's really foundational and allows us to serve the customer faster, at a lower cost, and with more visibility to what we're doing from a customer perspective, for instance, in terms of delivery times. I see that continuing as we're still in the process of implementing and rolling it out. We should see more savings and see more of a positive impact from a customer-facing point of view. We're doing some similar activities on the IT side and simplifying our operations, moving more to the cloud to operate at ultimately a lower cost, but also provide more capabilities for the business. I've been very impressed coming on board with the capabilities in areas like data analytics, data science, and our ability to really talk to and understand our customers so that we can engage with them better. I do see, Brooke, a longer multi-year path to this where there will be savings and capabilities developed over that time that will continue to support the Bold New Chapter. Tony, one of the initiatives that you have that also happens to be margin accretive is your private brand strategy. You've relaunched several of those brands over the last several quarters. What feedback are you hearing, and how is that shaping your roadmap for future launches? Are there any specific categories where you see the most white space? We've been on a methodical refreshing of our entire private brand portfolio. We have retired brands that were less relevant. We've introduced new brands like State of Day or Mode of One or Art Studio in the home area. We've completed the refresh across the pyramids with the exception of home furnishings, which will complete by the end of this year. I think we see the biggest white space or biggest opportunity in the white spaces that exist within our assortment. That could be in some opening price point. That could be in some essentials within categories. It's many times the things that are missed in the market that we feel is necessary to keep the customer coming back because we stay with a particular category or price point within our private brand portfolio. Private brands are just like market brands, though. As much as I love the business and I believe we have the opportunity to grow private brands based on the penetration today being in the low teens versus at a high of 20% just a few years ago, it needs to be accretive and it needs not to be duplicative of a better market brand at a comparable price. The challenge for us in private brands is to make sure that we are as requiring of ourselves as we are of our market brand partners. Is that product priced appropriately? Is there a compelling reason for the consumer to buy? In some cases, we have a brand styling code that is doing exceptionally well. There really isn't anything in the marketplace that meets that customer's need. The same thing is true of a State of Day within our intimate apparel area. It's a great product. It's a niche within intimate apparel that we feel is missing in the marketplace. We want to find and nurture and grow those businesses that reflect that. On promotions, near term, you've signaled that your guidance includes a step up in promotions into the back half, and that the backdrop will intensify. What are you seeing in the promotional landscape today relative to this assumption? Is this just caution, or are you seeing signs that would warrant you becoming more prudent? I think, again, based on our inventory ownership and our marketing calendar, I see nothing that says the environment is more promotional. I think the reality is, in all transparency, if you have prices going up in different ways between retailers, you have some folks talking about having loaded in inventory earlier in the season, which, by the way, is not my approach to retail. I don't believe you ever get the payback of loading in inventory to try to save on cost because we need to sell through that inventory. The cheapest markdown is the first markdown, and the opportunity to sell is usually in the first few weeks that you have the product. Carrying lots of weeks of supply to try to save on tariffs, I don't think is a great strategy. I think ultimately, we want to make sure that in the fall season, we come out clean. We're positioned well for 2026. We continue to flow freshness into the fourth quarter, and the guide includes the prudency to make sure that we can react to how other people have bought the season, not just how we've bought the season. Great. We're about out of time. Tony, any final comments? Already. Already. Time flies very quickly. Any thoughts that you want to leave with the audience? This is an inflection point. This is the beginning of momentum for Macy's Inc. We have a Bluemercury brand that's run 18 quarters of growth. We have a Bloomingdale's brand that had its largest volume second quarter in the history of the brand. We have net promoter scores. Our customer service scores are at the highest level they've ever been at both Macy's and Bloomingdale's. We are getting feedback from the customer that says we're doing many of the right things. It's our job to continue to lean in and do more of them, even in the face of tariffs, even in the face of a complex environment. I believe that we have a multi-brand portfolio of businesses that offers the consumer and the investor opportunities for growth as we go forward. Great. Thank you, Tony, and thank you, Tom. Thank you. Thank you. Have a great day.