Michael Binetti: Okay. If I could sneak in a second one. On the credit income, you’re guiding it down to 30% for the year that excludes the potential regulation change on late fees, but it was down 30% in the fourth quarter. I’m trying to figure out why it would still be down as much or if that’s just a conservative assumption on your part.
Adrian Mitchell: Well, if you look at what’s happening in the broader industry in retail, what you see are a combination of things. The first thing is that the consumer remains under pressure. And as a result, what we’re seeing across the industry are higher credit card balances and higher delinquencies really returning to more normalized levels. As you know, Mike, the last few years had an abnormally low or historically low level of net credit losses, delinquencies as folks were flushed with cash. But now we’re back to more normal times. And so what’s reflected in our credit card revenues, which does exclude the impact from late fee ruling is really the increase in net credit losses as we are more in a normalized environment.
Michael Binetti: Okay. Thanks a lot, guys. Congrats again on a nice holiday.
Adrian Mitchell: Thank you so much, Mike.
Operator: Thank you. Our next question comes from the line of Bob Drbul with Guggenheim Securities. Please proceed with your question.
Robert Drbul: Good morning. Can you spend a little bit more time on the inventory? I guess, the plans around the inventory and how you’re thinking about inventory throughout the year. Just — I guess I’m just curious if you think that with some of the newness that you’re bringing in, will that be the plan for the full year as you think about fall and into holiday, just especially as it relates to sales? Thanks.
Tony Spring: Bob, let me take the first part of that, and I’m sure Adrian will add. Our plans incorporate the liquidity to buy into the newness that we’ve described and to be able to chase into opportunities as they occur. So we retain an inventory reserve in each of our areas of business to make sure that we both have made commitments to brands that require that, and at the same time, hold back the flexibility to should opportunities arise or should softness occur that we can pull back as necessary. But all of that has been incorporated into our forecast. And I think that inventory should be on or around flat to last year as we begin to improve sales.
Adrian Mitchell: Just to build on Tony’s comments, there’s another dimension of inventory that we’re focused on this year with our data science tools, and that’s really around continuing to get better on the allocation side. So as we think about the style, the brand, the color and size allocated by market, allocated by channel, allocated by store, we see that there are opportunities to drive the top line by actually increasing product availability and stocks by putting in some new procedures. And this is one of those places where the data science and being able to scale that data science with some new capabilities is something that we’re leaning into. But we believe with all the work that’s being done to have the right product in the assortment, we also want to make sure it’s in the right place. And that will also complement our ability to grow the top line as well.
Robert Drbul: Great. Can I just credit — a credit question as well? In this quarter, there was a note around the impact of sort of better contractual profit sharing within your partner. Can you just talk about how you’re positioning? I guess, what drove the better-than-expected sort of contractual profit? And then as you think about the prospects of the credit filing, the late fee filing proposal, just where you think there might be opportunities if something were to be implemented negatively?
Adrian Mitchell: Absolutely, Bob. It’s a good question. So the terms of our CD agreement is pretty much predetermined. So there’s clearly a little bit of benefit in terms of how we think about the profit sharing based on the level of credit card revenues and receivables that we actually build. I think the more important conversation is how do we actually increase usage of our credit card. And there’s a lot of work that’s happening around our loyalty program around the use of our credit card to drive engagement with our customer and just thinking about that program more broadly. There’s real opportunity there. We don’t have customers that are tapping out on their spend on average. We actually see that our customers do have capacity to spend.
And do have capacity to use our card because they are already shoppers at Macy’s or Bloomingdale’s. From a mitigation standpoint, we’re already thinking through and partnering with Citi on mitigation factors for if and when the late fee ruling is actually implemented. As I mentioned a bit earlier with Mike, we have not included the late fee impact in our outlook for this year but we’re working on mitigation factors in case that were to happen. And so that’s something that we’re very thoughtful about working through and trying to get ahead of us.
Robert Drbul: Great. Thank you.
Adrian Mitchell: Thank you, Bob.
Operator: Thank you. Our next question comes from the line of Alex Straton with Morgan Stanley. Please proceed with your question.
Alex Straton: Perfect. Thanks a lot for taking the question. Just a couple from me. Just first, can you walk us through how maybe you factored in the 53rd week reversal into your guidance, just so we can understand how that flows through the year? And then secondly, just on the long-term targets, can you break down that low single-digit comparable sales growth number for me in terms of kind of how you arrived at that level as comfortable? Thanks a lot.
Tony Spring: Let me take the second part of the question first, Alex. In terms of our low single-digit sales target, it reflects the delta that we see today between our go-forward fleet versus our non-go forward fleet first, it’s based on store sales. There’s an opportunity in our existing Macy’s and Bloomingdale’s and Bluemercury fleet to grow comp sales starting in 2025 when you exclude the non-go-forward locations. Second, it’s the return of growth in digital, which is a breakdown between lower growth in our own digital business and accelerated growth in the Marketplace business. And then finally, it’s beginning to add versus the lead from our private brand portfolio or making sure that all the work that we’ve done in analytics on our assortments with SKU rationalization and the pursuit of brands that are missing from our portfolio begin to take hold.
So there’s an ample opportunity to grow across all 3 nameplates by making sure that our assortments are appropriate, as Adrian talked about, making sure that our inventory is accurately allocated between the channels and getting into a more normalized environment where we’re not up against as many discontinued private brands.
Adrian Mitchell: Good to be with you this morning, Alex. So the 53rd week last year was about $252 million of our sales coming out of the fourth quarter. As we think about 2024, we’re making the adjustments with regards to the calendar and promotional shifts given that 53rd week. I think the way to think about it from our perspective, from a comp standpoint is we’re focused on more full price sell-through getting the right combination of assortment in terms of variety, breadth and depth and also making sure that we’re actually positioning our content to the customer across channels in a way that allows us to have more full price sell-through and less discounts. And so we’re navigating that throughout the year, but we’re encouraged with the traction that we’re seeing, particularly in the test and first 50 stores. We’re pleased with the traction that we’re seeing, and we’ll continue to keep you updated as that evolves throughout the year.
Alex Straton: Thanks a lot. Good luck.
Tony Spring: Thank you.
Operator: Thank you. Ladies and gentlemen, our final question this morning comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.
Chuck Grom: Thanks. Congrats, Tony, on the new position again. Just on the transaction decline in the fourth quarter. I was wondering if you could parse that out across your various income cohorts that you cater to. And then Adrian, on the first quarter comp guide, is that on a shifted basis or a non-shifted basis, given the 53rd week last year?
Tony Spring: Good to be with you, Chuck. I think the comment about the decline in fourth quarter transactions, was more pronounced at Macy’s than had Bloomingdale’s or Bluemercury, although all segments are under pressure. And the decision is more today about buying those things that people are looking for that sometimes are a higher AUR and then we get fewer units versus customers not shopping. So we’re really trying to follow the customer in this regard, make sure that the inventories are shifted to where we see the business happening. It’s always one of the advantages, I think, of being a multi-category and multi-brand retailer is that we have the opportunity to have content, where, when and how the customer shops as long as we’re paying attention to the most important signals.
Adrian Mitchell: As we think about the first quarter comp, it really just reflects the calendar shifts that we’re doing with regards to our promotions and the calendar coming out of a 53rd week. We’re encouraged with some of the traction that we’re seeing with regards to test coming out of the fourth quarter. But from our perspective, the number of the ships that I mentioned earlier is how we’re approaching it.
Chuck Grom: Okay. I’ll sort it back later with you, Adrian. And then just bigger picture, on revitalizing the assortment and your comment earlier, Tony, on duplication. I think it’s pretty interesting. Just wondering if you could maybe size up the opportunity, what you learned at Bloomingdale’s with this endeavour, how long it took to take to start to see some of the benefits?
Tony Spring: Look, it’s a process that every merchant and every planning partner has to go through in order to have the most compelling assortment in every category. We work in multiple seasons at one time. We’re obviously executing the spring season, planning the fall season and in some areas are beginning to buy the spring 25 season. So I would say it’s a multi-season exercise but it’s not a multiyear exercise. It starts with the ability to kind of ebb and flow or shrink or grow depending on what’s happening in the particular business segment. When something occurs where jackets are important or blazers are important, you want to have a more robust assortment of blazers. And when you return to a moment where sweaters are more important, you need to downsize the amount of blazers you carry and augment the amount of sweaters.
And you don’t want to have all black sweaters and you don’t want all of them to be embellish. So the ability to kind of look at your assortment as the customer will see it, make sure that you’re serving a multigenerational customer with a variety of price points, understanding where brand is important where price is important and where style may be important. And sometimes it’s all three. But I think in my kind of learning and listening with the Macy’s team over the last six to eight months, the team is really leaning into this. I think you’ll see the assortments improve as we move sequentially through the quarters this year and then make meaningful improvement as we get into 2025.
Operator: Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I’ll turn the floor back to Mr. Spring for any final comments.
Tony Spring: Thank you, operator. We look forward to updating all of you on our Bold New Chapter strategy progress in the coming quarters. I hope everyone has a great day.
Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
