Macy’s - Q1 2025
May 21, 2024
Transcript
Operator (participant)
Greetings, and welcome to the Macy's, Inc. Q1 2024 Earnings Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Pamela Quintiliano, Vice President of Investor Relations. Pamela, you may begin.
Pamela Quintiliano (Head of Investor Relations)
Thank you, operator. Good morning, everyone, and thanks for joining us. With me on the call today are Tony Spring, our Chairman and CEO, and Adrian Mitchell, our COO and CFO. Along with our Q1 2024 press release, a presentation has been posted on the investor section of our website, macysinc.com, and is being displayed live during today's webcast. Unless otherwise noted, the comparisons we provide will be versus 2023. All references to our prior expectations, outlook, or guidance refer to information provided on our February 27th earnings call, unless otherwise noted. In addition, all references to comp sales growth throughout today's prepared remarks represent comparable owned plus licensed plus marketplace sales growth and owned plus licensed sales growth for our store locations, unless otherwise noted. 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, on the Investors section of our website. Today's call is being webcast on our website. A replay will be available approximately 2 hours after the conclusion of this call. With that, I'll turn it over to Tony.
Tony Spring (Chairman and CEO)
Thanks, Pam, and good morning, everyone. On today's call, we will provide updates on our Bold New Chapter strategy, as well as our Q1 results and Q2 and full year outlooks. But first, let's discuss the current macro climate. Our customers across all three nameplates continue to benefit from strong wage and job growth. However, inflationary pressures persist, and they're feeling that pinch. The outlook provided on our Q4 earnings call, as well as today's update, assumes our customers will continue to carefully scrutinize their discretionary purchases. We are reading and reacting to the dynamic economic environment and competitive promotional landscape in real time. Regardless of income tier, we know our customer responds to fashion newness at compelling price points in an engaging environment. We continue to evaluate inventory depth and composition to ensure we strike the right balance.
Despite the ongoing pressure on the consumer, we are confident in our ability to return to profitable growth as we execute on the pillars of our Bold New Chapter strategy, which are, 1, to strengthen the Macy's nameplate. 2, to accelerate luxury growth, and 3, to simplify and modernize end-to-end operations. This morning, we are pleased to report that although early days, we are on or ahead of plan across all three pillars, and that our Q1 EPS results exceeded our outlook. Now, a brief update on our Bold New Chapter progress. At our largest nameplate, Macy's, the customer is responding well to our omni-channel initiatives across product, presentation, and experience. In luxury, we are pleased with Bloomingdale's advanced contemporary growth and acceleration of digital. While at Bluemercury, skincare remains a differentiator and a standout.
For both nameplates, we are evaluating new store opportunities that will strengthen our ability to accelerate omni growth. In end-to-end operations, we are actively advancing on solutions to consolidate capacity, increase automation, and reduce costs across the network. For our non-go forward Macy's locations and distribution centers, given our strong balance sheet, we are able to be thoughtful and strategic with our approach to monetization. We have good traction thus far and are encouraged by the pace of deal making. The entire Macy's, Inc. organization is focused on understanding and meeting the evolving needs and preferences of our customers. They are committed to our future and making sure our Bold New Chapter is a success. The level of enthusiasm and engagement is palpable, and every single function is working together to get a better result.
I am pleased to report that the Q1 net sales of $4.8 billion were near the high end of our outlook, and adjusted EPS of $0.27 was above our outlook. By nameplate, Macy's was in line with our expectations. Comps were down 0.4% and were led by our First 50 locations, which registered a 3.4% comp gain. The First 50 serve as pilots to test new ideas that are based on customer feedback. Results are encouraging, as they are an early indicator for the go-forward Macy's fleet and ultimately, the entire Macy's, Inc. go-forward business' ability to return to growth. The First 50 represent what we can do when we deliver on our customers' expectations. During the Q1, we enhanced merchandising through elevated product rollouts. Full price and planned promotional sell-throughs of new and expanded assortments has been strong....
Importantly, our vendor partners are embracing our journey. They are joining with us and helping us raise the bar on both the quality and the differentiation of our assortments, and we truly appreciate their commitment and support. During the quarter, we also piloted new marketing and animation, bringing retail theater to life. Activations included personal styling sessions, fashion shows, beauty services, such as fragrance bottle engraving, and craft stations. Our customers were engaged, and these events serve as strong traffic and sales drivers. Rounding out our First 50 conversation, during the quarter, we shifted store staffing to key merchandise departments and to the checkout area and added visual merchandising staffing. These changes were well received by our customers. Net Promoter scores improved roughly 500 basis points year-over-year, and were over 250 basis points above all other Macy's stores.
Improvements are not limited to our first 50. Across the entire Macy's nameplate, we are offering product newness in our most important categories. Within apparel, we introduced and expanded distribution in several market brands to address areas of opportunity where we have experienced softness in both women's and men's assortments. Customers are responding well to Donna Karan, which is a new brand for us, where we're seeing no price resistance. We also expanded distribution and content of Free People, French Connection, Karl Lagerfeld, and Hugo Boss, just to name a few. Positive customer response to fashion newness was partially offset by weakness in select warmer weather categories. Our private brand apparel initiative is moving forward as planned. We have completed the majority of our brand exits and reimagined and launched several new ones.
During the quarter, INC and Style & Co, which have led the initiative, continued to outperform the Macy's women's apparel segment. This summer, we are refreshing our kids brands, Epic Threads and First Impressions, and later this year, we'll introduce a new men's contemporary private brand, which will be the last launch of this phase. In the near term, as this transition continues, we expect private brand sales volumes to remain depressed relative to historic levels and to realize improvements beginning later in the year. As a reminder, in fiscal 2023, private brands represented about 15% of Macy's sales, reflecting the exit of several heritage women's brands. Beyond apparel, accessories was better than expectations, with strengths in women's shoes and fine jewelry, offset by ongoing weakness in handbags. Beauty continued to be a standout and key traffic driver, driven primarily by fragrances.
Our selection of brands, including Chanel, Dior, YSL, Carolina Herrera, and Valentino, as well as our strong presentation online and in stores, keeps our customers engaged. In big ticket and home, the overall business remains challenged. Although we've seen some recent traction in certain categories, we believe there is an opportunity to recover lost sales. The team is actively working on the market brand matrix, and we plan to begin a complete refresh of our home private brands in fiscal 2025. Digital is also an important part of our Bold New Chapter strategy. It serves as both a gateway to the Macy's brand and as a source of commerce and omni-engagement. Under new leadership, the team is making progress on optimizing the customer journey, including addressing places of greatest friction and enhancing and expanding the shopping experience across platforms.
Recently, we launched an online baby registry with over 150 new brands, which has been well received. In addition, Marketplace provides an opportunity to serve our customer better and gain a greater share of their wallet. For example, this year, we're offering a compelling selection of electronics for Father's Day and the graduation season. Our digital and marketing teams are working together closely to leverage Macy's iconic events and create a modern and cohesive experience. We kicked off the spring season in Herald Square with our 49th annual Flower Show, where we partnered with Christian Dior Parfums to create floral installations using 16,000 individual plants, representing over 50 varieties. The installation centered around different Dior scents and were supported by interactive components, including an online activation about the origins of Miss Dior.
We are excited for our newest marketing campaign, The Greatest Hits of Summer, which represents the beginning of a modern interpretation of the Macy's brand and is the first under our new head of marketing. Finally, during the quarter, we opened a 31,000 sq ft, small format Macy's in Mount Laurel, New Jersey. With each new opening, we continue to learn and adjust. We remain on track to introduce 11 more this year, bringing the total to 24 by year-end. Turning to luxury, Bloomingdale's and Bluemercury continue to be bright spots within our portfolio. Both foster brand love and loyalty through the unique customer experiences and curated selection of market and private brands across price points. At Bloomingdale's, Q1 results were in line with our expectations.
While our customer is not immune to macro pressures and has become more judicious with their spend, the power of Bloomingdale's position in the upscale market is its diversification across categories and price points. It has the flexibility and the tools to quickly adjust to the market, allowing it to gain wallet share, even as there are shifts in popular categories and brands. During the quarter, Bloomingdale's top two household income brackets and loyalty tiers increased their total spend. Contemporary apparel, including brands like L'AGENCE, and Mother, and Cinq à Sept, just to name a few, continued to be well-received. Along with the beauty category, they serve as powerful engines for growth. And our private brands at Bloomingdale's are a complement to our contemporary matrix. During the quarter, Aqua registered a double-digit year-over-year increase in its ready-to-wear sales, benefiting from the quiet, luxury-inspired collaboration with celebrity stylist, Liat Baruch.
Looking ahead, we have several exciting upcoming collaborations on the horizon. We remain committed to growing the Bloomingdale's physical footprint and associated digital presence, and are on track to open roughly 15 new Bloomies and Bloomingdale's The Outlet locations through fiscal 2026, including 3 later this year. Comps at both concepts are continuing to outperform the broader fleet, giving us confidence in our expansion strategy. Digital continues to be a strength and great expression of the Bloomingdale's brand. We have a highly engaged customer who appreciates the depth and breadth of our offering across price points. This has been complemented by Marketplace, which enriches our assortment and content, helps us gain wallet share among loyal customers, and introduce new customers to Bloomingdale's.
At Bluemercury, we experienced our thirteenth consecutive quarter of comp growth, driven by continued strength in skincare and the expansion of key brand partners, including Sisley-Paris, SkinCeuticals, and Augustinus Bader. Our plans to open at least 30 new locations and remodel about 30 others are underway, with 1 new location and 3 remodels slated for the Q2. These stores will incorporate learnings from our recent Bronxville and New Canaan remodels to inform our future stores, including an elevated aesthetic, which improves the luxury perception of Bluemercury, an expanded assortment, and an enhanced selling model, which has had a positive impact on the client experience. Overall, we continue to view fiscal 2024 as a transition and investment year for Macy's, Inc. Although early stages, we are proud of the progress we are making on our Bold New Chapter strategy.
Our teams are collaborating to make quick and strategic decisions, and we're making investments to create an improved experience that will better serve our customer and sets the foundation for our future. With that, I'll hand it over to Adrian to provide more detail on our recent performance and our outlook.
Adrian Mitchell (COO and CFO)
Thank you, Tony, and good morning, everyone. Let me start by thanking our teams for their support of our Bold New Chapter strategy. As I've been out in the field visiting our stores and distribution centers, I've been impressed with the dedication and commitment to our customers. As Tony mentioned, we're encouraged by early progress across all three pillars of our strategy and the positive impact our investments are having on the go-forward Macy's, Inc. enterprise and our largest nameplate, Macy's. Total Macy's, Inc. enterprise comps were down 0.3% year-over-year, and net sales were $4.8 billion, down 2.7% to last year and near the high end of our outlook. For the go-forward Macy's, Inc. business, defined as Macy's, Bloomingdale's, and Bluemercury go-forward locations, plus digital, comps rose 0.1% year-over-year.
We are pleased with the emerging trends. We view our First 50 locations, go-forward Macy's nameplate, and go-forward Macy's Inc. business as evidence that our Bold New Chapter investments are working, and they are what we are tracking most closely as predictors of our ability to return to profitable growth. At the Macy's nameplate, comps were down 0.4% and net sales were down 3.3%, while go-forward business comps were flat to last year. Our First 50, which we view as the leading indicator of go-forward store growth, achieved a positive 3.4% comp. To size that business, these locations represented about 15% of the Macy's Inc. go-forward enterprise and close to 20% of the Macy's nameplate go-forward sales last year.
The first 50 comp results compared to a -1.3% in the remaining go-forward locations, which have not yet received growth investments, a +0.1% for all go-forward locations, and a -4.5% for all non-go-forward locations. At our luxury nameplates, Bloomingdale's comps were up 0.3% and net sales were up 0.5%, and Bluemercury comps were up 4.3% and net sales rose 4%. Turning to the rest of the P&L, other revenues were $154 million, down 19.4% from the prior year. Net credit card revenues declined $45 million, or 27.8%, from the prior year to $117 million. Delinquency rates and net credit losses were both higher than last year, but in line with our expectations.
Macy's Media Network revenue rose 27.6% to $37 million as the team continued to increase vendor engagement. Gross margin rate declined 80 basis points to 39.2%. The decline was steeper than our outlook, primarily reflecting additional discounting for slower-moving, warm weather products. We recognize that our customer is searching for newness at the right value, and we're responding appropriately to ensure we deliver on both. Discounting pressure was partially offset by better delivery expense, which improved 20 basis points as a percent of sales. End of quarter inventories were up 1.7% year-over-year. Entering the Q2, we are delivering fresh goods and are well-positioned for the summer season. Next, SG&A expense was $1.9 billion, down 2% from the prior year and better than our expectations, reflecting our continued cost discipline.
As a percent of total revenue, SG&A was 38.2%, 50 basis points higher than last year due to the decline in total revenue. Adjusted diluted EPS was $0.27. This compares to our previously provided outlook of $0.10-$0.16 and $0.56 in the prior year. Turning to cash and capital allocation. For the quarter, cash generated from operating activities was $129 million, while capital expenditures totaled $229 million. Free cash flow was an outflow of $96 million, a year-over-year improvement of $70 million, and we paid $48 million in cash dividends. We will continue to deploy capital prudently to ensure financial flexibility and a healthy balance sheet that supports our longer term growth aspirations. With that, let's discuss how we are approaching the remainder of 2024.
We are raising our annual EPS outlook and narrowing our sales range to reflect a portion of our Q1 earnings beat. While we are encouraged by recent results and early traction of our Bold New Chapter strategy, we're also cognizant of the dynamic macro environments we are operating in. With continued pressure on the consumer and the majority of the year ahead, our Q2 and full year outlook provides flexibility to respond to the competitive landscape and the promotional environment. For the year, we now expect Macy's Inc comps, inclusive of non-go-forward locations and digital, to be down approximately 1% to up approximately 1.5%, with both Macy's nameplate go-forward locations and digital, and our luxury nameplates to be roughly flat to up 2.5%. Net sales of approximately $22.3-$22.9 billion.
Total revenues of $23-$23.6 billion. This includes other revenue of approximately $665 million-$680 million. Credit card revenues of approximately $490 million-$505 million, which is above our prior forecast, due to better-than-expected profit share, resulting from higher balances within the portfolio. We continue to exclude any potential impact for the late fee ruling. We also expect gross margin rate as a percent of net sales to be 39%-39.3%, benefiting from ongoing inventory controls, higher full price sell-throughs, and private brand expansion, partially offset by elevated discounting of warmer weather spring product and targeted promotions to address a value-conscious consumer.
SG&A rate of 36.3%-36.4% of total revenue as we continue to effectively manage expenses to properly support our new strategy and the associated areas of opportunity. Full year adjusted EBITDA as a percent of total revenue of 8.7%-9%. There is no change to our capital spend, asset sale proceeds, or asset sale gains assumptions for the year. After interest and taxes, we expect adjusted diluted EPS of $2.55-$2.90, which does not assume any share repurchases. For the Q2, we expect net sales of $4.97-$5.1 billion. Total revenues of $5.1-$5.25 billion, with other revenue at about $155 million.
Credit card revenues are expected to be flat with last year's $120 million. As a reminder, 2023 results included the pro rata adjustment for the midyear increase in our annual net credit loss outlook due to the normalizing credit environment. Gross margin rate to be at least 170 basis points better than last year, reflecting the lapping of heightened clearance markdowns on excess seasonal goods, quarter-to-date discounting of the remaining spring assortments, and the planned liquidation of select men's private brands as part of our broader reimagination strategy. Adjusted EPS of $0.25-$0.33, and end-of-quarter inventories to be up low single digits to last year as we reinvest in private brands and conduct additional national brand tests in our first 50 and go-forward locations.
To wrap up, we are encouraged by the momentum in our Bold New Chapter strategy and our future growth prospects. Despite ongoing macro pressures on our consumer, we remain committed to our previously stated fiscal 2025 financial targets and are excited to return Macy's, Inc. to profitable growth. I'll now hand it back over to Tony.
Tony Spring (Chairman and CEO)
Thank you, Adrian. A Bold New Chapter sets us firmly on a path to change our trajectory. Although early days, our investments are gaining traction and reinforce our belief that Macy's, Inc. can return to sustainable, profitable growth, accelerate free cash flow generation, and unlock shareholder value. Our focus on serving the customer is unwavering. We are confident that we have the right team and strategy in place to achieve our goals and look forward to updating you on our progress. With that, operator, we are ready for questions.
Operator (participant)
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit yourself to one question and one follow-up. Again, that's star one to register a question at this time. Today's first question is coming from Matthew Boss of JPMorgan Chase. Please go ahead.
Matthew Boss (Analyst)
Great, thanks, and congrats on the progress.
Tony Spring (Chairman and CEO)
Thank you.
Matthew Boss (Analyst)
So, Tony, could you elaborate on the key initiatives which you saw drive the 3%-4% comp in the first 50 doors? Maybe what you're seeing between traffic and AUR in these stores, and how quickly could you scale this playbook? And then, Adrian, just maybe drivers on Q2 gross margin expansion and any change in your back half merchandise margin expectation.
Tony Spring (Chairman and CEO)
Thanks, Matt. Appreciate the question. Look, we're excited by the early innings of First 50. It's a combination of the things that we have talked about in people, product, presentation, and experience. You know, people, it's having the right people in place at the right time. It sounds easy, but using technology and the data we have on traffic and conversion by day, by hour, making sure that we have people in the shoe department, people in the ready-to-wear fitting rooms, people in the big ticket area and fine jewelry. But the team is all over it, and I think doing a great job and leaning into the opportunities to increase the quality of the experience in our stores. That's why we saw 500 basis point improvement in net promoter scores in the first 50 stores.
It's the product, you know, the team feeling the obligation to meet the needs of the customer, and whether that's the rollout of new brands like Donna Karan or the expansion of brands like French Connection and Free People and Karl Lagerfeld and Hugo Boss. We, we need more variety, we need less redundancy, we need more interest within the assortment, and I think that's making a difference in the customers' reception to the stores. The experience, you know, it's, it's adding animation and events into the stores, and it's also making sure from a presentation standpoint, we look crisp, we look compelling. That's the partnership with the brands to make sure that the impact is in each of the categories of business. And again, I would add that, you know, we're in the early innings, so we're, we're gonna study this.
Capital is something that we care a lot about, capital allocation. We're going to be very discerning in terms of what we decide to do and where, but I feel, I feel good, and I think opportunities exist to expand this as the year progresses. As soon as we see another quarter or more consistency, amongst the, amongst the stores and, and the overall results. Traffic is good. The AUR is up about 4%. So, you know, conversion, I think, is reflective of, you know, the discerning customer who feels under pressure and, and is going to wait to buy the things that they love. So we, we accept the challenge and, and we'll respond to it appropriately.
Adrian Mitchell (COO and CFO)
Good morning, Matt, and thank you for your question on gross margin. Let me set a little bit of context as we think about the Q2 gross margin, because I think what we observed and how we navigated the Q1 is pretty important. As you look at our Q1, Q1 results, we're very much pleased with how we navigated the Q1. As you saw, we delivered earnings that exceeded our outlook. Now, the key thing, as Tony pointed out, is that we're very much focused on delivering on our customer experience. But we also recognize that the customer is under pressure, the macro environment remains uncertain, and that we can only control what we can control. So as we navigated the Q1, we were balancing a number of different variables given that context.
We're balancing sales growth, delivering value for more value-conscious customers as we thought about our markdowns and discounts, ensuring healthy inventory turns, and also managing our operating expenses, particularly our variable expenses, pretty effectively. But really, the headwind in the Q1 was really warm weather products that just simply didn't move as fast as we expected, but we had to respond to maintain the health of the inventory. If I pivot to the inventory, as you know, we have a proven track record on inventory discipline. This is something that we've really leaned into the last several years, and what you saw in the Q1 is that we took actions, the actions needed to maintain the health of our inventory in terms of volume and composition.
What I can tell you as it relates to your question about the Q2, is that we're entering the Q2 with less aged inventory than last year and more transitional products relative to last year. So we feel that we're well-positioned for the summer season as we enter the Q2, but also well-positioned as we enter the balance of the year. And what we're trying to do here is provide ourselves the appropriate level of flexibility to respond to an environment that's more competitive, that's more promotional, so that we can be able to navigate and adjust based on whatever is on the horizon. To your pointed question about the Q2 outlook in the back half of the year, as we look at gross margin outlook forecasted for the Q2, we expect to be at least 170 basis points above last year.
We like that trajectory, especially as the weather gets warmer and we're well positioned on warm weather goods. And as we think about the composition shifting to the fall season, it's all about inventory discipline and inventory control. Watching that level as we enter the Q3 and the holiday season, and making sure that we have the right composition.
Matthew Boss (Analyst)
Great color. Best of luck.
Adrian Mitchell (COO and CFO)
Thank you.
Tony Spring (Chairman and CEO)
Thanks, Matt.
Operator (participant)
Thank you. The next question is coming from Michael Binetti of Evercore ISI. Please go ahead.
Warren Cheng (Analyst)
Hey, good morning. This is Warren Cheng on for Michael. I wanted to follow up on your comment that the vendor partners are engaging with the enhancements you're making in those first 50 stores. Is that driving a lift in the vendor mix or allocations versus what you had planned? I'm also curious if that's driving any impact on the full price sell-through or margins you're realizing in those first 50 stores.
Tony Spring (Chairman and CEO)
Thanks, Warren, for the question. I think the vendors feel a sense of partnership, and there is a natural obligation that we have to each other. You know, we do well when the vendors do well, the vendors do well when we do well. I think that we have seen a level of engagement relative to these first 50. I think, as we talked about on the last call, we hate closing stores or even, you know, rationalizing the store base, but the vendors were very supportive of that idea. You know, meaning they wanted to focus on our most productive assets. They wanted to invest with us. They wanted to offer us better assortments in those stores. They see higher full price sell-through in those stores.
That's really all kind of coming to fruition. Again, it's early innings, so, you know, we're gonna be careful, but we wouldn't do these weekly events if our vendors weren't partnering with us. We wouldn't be able to add the level of staffing if our vendors weren't partnering with us. We certainly wouldn't be able to offer the distinction and variety within our assortment if our vendors weren't partnering with us. And so I, you know, I feel it's a, it's a story of two mutually dependent partners. I think we said private brand was 15% last year. Maybe one day we'll get it back to closer to 20%.
Ideally, we're gonna lean into the partnerships, where 80% of our business is, to make sure that they feel Macy's, Bloomingdale's, and Bluemercury are the best places to do business.
Warren Cheng (Analyst)
Thanks. That's really helpful. I wanted to ask a follow-up on your credit card revenues. 1Q came in a little bit better than expected. You also raised the rest of the year slightly. Can you give us an update on how you're seeing credit losses and delinquencies trend over the last 3 months?
Adrian Mitchell (COO and CFO)
Yeah, I'll go ahead and take that one. You know, when we think about our, our credit card results in the Q1, we're pretty pleased. And to your point, Warren, we did increase our annual outlook by about $15 million. The reality is that we saw higher balances in our portfolio. In terms of the delinquency metrics, the payment metrics, they're very much in line with our expectations, but also what contributed to our beat in the Q1 was also better than expected profit sharing with Citi as well.
Warren Cheng (Analyst)
Thanks. Good luck.
Adrian Mitchell (COO and CFO)
Thank you.
Tony Spring (Chairman and CEO)
Thank you.
Operator (participant)
Thank you. The next question is coming from Ashley Helgans of Jefferies. Please go ahead.
Ashley Helgans (Analyst)
Hey, good morning. For the first 50 locations that were up 3.3%, how much was ticket versus traffic? And then maybe you could talk about the level of promotions at those stores versus the rest of the fleet.
Tony Spring (Chairman and CEO)
Sure, Ashley. You know, there was no difference in the level of promotion in those stores versus the rest of the fleet. So, no change there. The difference was in traffic, a higher conversion rate and a comparable increase in average unit retail. The customers are responding, as we said, to the right recipe. And when I use the analogy of a recipe, because a recipe means you have to get all the ingredients right. Sometimes in our business, the merchants wanna do their part only if the stores do their part, and the stores only wanna do their part if the digital team does their part.
In First 50, we're all doing our part, and we're getting credit for product improvement, we're getting credit for visual animation, we're getting credit for the experiences we're adding, we're getting credit for the service experience. Those net promoter scores are a great indicator, and we drill down to perception on availability of size and color. We drill down to the inspiration from visual animation. We drill down to have the brands and styles and products that I like. We're seeing meaningful increase across all of those metrics, and I think that's a good indicator. Early innings, but the team working together and improving the overall experience at our First 50 stores.
Adrian Mitchell (COO and CFO)
Tony, if I may just add, I just wanna amplify Tony's point about this being early innings. On one dimension, we're 90 days in, and we're still practicing around things like selling and service. We're getting better every day on staffing, on moving the team around, around the store. But also, there are a number of changes that have not been implemented in these first 50 yet. So to amplify Tony's point, it's early innings. We're still experimenting. There's still more changes coming into the store based on what our customers expect of us, but overall, we're encouraged by the early wins.
Ashley Helgans (Analyst)
Okay, that's super helpful. And if I could just squeeze in one more. So what is the high end of your comp guide for the fiscal year assume in terms of the health of the consumer versus current levels? I guess, said differently, would the consumer need to get better to hit that range?
Adrian Mitchell (COO and CFO)
Yeah, you know, from our perspective, we've been pretty consistent that the pressure on the consumer is a given in terms of how we think about our business. So as we think about the range of our comp this year, it does not assume any improvement in the consumer. What it doesn't assume is improvement in how we're executing our business and how well we're serving the customer, given the growth investments that we're placing in our stores, in digital, and the acceleration of growth within our luxury nameplate. The range that you see is really reflective of the competitive environment and the continued pressure on the consumer. But from our perspective, we feel that what we can't control is really what we're gonna be focused on, but the consumer, we believe, will remain under pressure for the balance of the year.
Tony Spring (Chairman and CEO)
Great, that's helpful. I'll pass it off.
Adrian Mitchell (COO and CFO)
Thanks, Ashley.
Operator (participant)
Thank you. The next question is coming from Paul Lejuez of Citi. Please go ahead.
Tracy Kogan (Analyst)
Thanks. It's Tracy Kogan filling in for Paul. I had a question on SG&A. It came in below your expectations this quarter, and I was wondering what the drivers of that were, and then what kind of expense initiatives you have for the remainder of the year. Thank you.
Adrian Mitchell (COO and CFO)
Good morning, Tracy. So to your point, we are pleased with how we're managing expense ongoing. And, you know, from a cost saving standpoint or an SG&A control standpoint, there are really two things that we focused on. The first is managing variable expenses well as we progress through the quarter, as well as really making sure that we're gaining traction on the structural cost savings initiatives that we spoke about on the last call as it relates to the end-to-end operations. The good news is that with regards to end-to-end operations, we're gaining traction. We're seeing the benefits flow through from the consolidation of our tech vendors on routine service contracts. We have fortunately transitioned through the offshoring of a large part of our finance team.
We're better balancing fulfillment activities, but, you know, we're still in the early innings on end-to-end, but it's nice to see the progress that we're making and the value that we've been able to deliver in the Q1. But I would say, you know, to your question, Tracy, the combination of how we're managing variable expenses day-to-day and the traction gained on the longer term transformation work we're doing on end-to-end operations.
Tracy Kogan (Analyst)
Great. Thanks, guys.
Adrian Mitchell (COO and CFO)
Thank you, Tracy.
Operator (participant)
Thank you. The next question is coming from Dana Telsey of Telsey Advisory Group. Please go ahead.
Dana Telsey (Analyst)
Hi, good morning, everyone. As both of you think about the health of the consumer and having come through the Q1 with the unseasonal weather, is staying the same, getting better, getting worse, what are you seeing, and does it differ by income levels? And lastly, can you expand on the small store format, any tweaks or adjustments? What's working, what'll be adjusted or tweaked, and how you're thinking about it? Thank you.
Tony Spring (Chairman and CEO)
Thanks, Dana. You know, the health of the consumer, I never claimed to be an economist. I would say, as we've described, under pressure, discerning, very choiceful. There are certainly categories that are stronger than others. The great part of being a department store is that we can move inventory, we can move people, we can move our marketing and assets and homepage exposure. And the key thing is for us to just keep our ear to the ground on making sure that we understand where the business is happening and move our resources there appropriately. I think the teams, in general, are doing a very good job.
You know, we are reordering, we are canceling, and that's what you'd expect from a good merchant and planning organization, that they are active in the market, making decisions based on what they're seeing in the business. I expect the consumer to remain under pressure. We got a big year in front of us. Maybe there'll be rate cuts, maybe there'll be, you know, one more ending, but it's an uncertain environment, and I think our job is not to assume anything different on the things we don't control, but to play our game with strength, to play our game with confidence, to play our game with agility, and I think the team is doing that.
With regard to the different income levels, we're certainly seeing at the high end, the Bloomingdale's consumer is interested in purchasing, but she's being very thoughtful in the category she's purchasing in. So I think we said that luxury handbag and shoe business is much softer than it was. Still up strong to 2019, but she's investing now in advanced contemporary. She's investing now in parts of the beauty business. She's investing now in aspects of the home. So there's just a difference, I think, as you look at income tier. The customer at the lower tier has to make choices based on rent and family obligations.
The customer at the higher tier is gonna do it based on where she has interest or they have interest and passion and something that we are doing, I think, that creates the motivation to buy. You wanna comment, Adrian, on small format?
Adrian Mitchell (COO and CFO)
Yes. Thank you, Tony. You know, we continue to remain very encouraged by the rollout of our small format stores. On the Macy's side, we just opened up a new store in New Jersey, but we have 11 more openings to go. We continue to be pleased with the small formats that we're seeing on the Bloomingdale's side. They continue to exceed our expectations. So we continue to believe that, you know, we expect to have one additional Bloomingdale's this year. My apologies, Dana. But look, we're encouraged. We're learning a ton. We're seeing how the customer is responding, and we're gonna continue to lean in.
Dana Telsey (Analyst)
Thank you.
Adrian Mitchell (COO and CFO)
No problem, Dana.
Tony Spring (Chairman and CEO)
Thank you.
Operator (participant)
Thank you. The next question is coming from Chuck Grom of Gordon Haskett. Please go ahead.
Chuck Grom (Analyst)
Hey, good morning. Congrats on the success with the First 50. Curious, how quickly you guys can roll these efforts out to more stores to help the total company comp? I'm curious what categories in those stores are seeing the greatest lift, in those locations.
Tony Spring (Chairman and CEO)
Sure. Thanks, Chuck, for the question. I don't think it's a question of if we can, it's when we can. All of these are capital light decisions that we've made. You really revolve around variable SG&A, and so, you know, we're gonna roll them as soon as we see enough continued results. And the good news is, we're seeing them in the majority of the stores, so it's not a handful of stores. That's a really good sign. We're seeing it in the merchandise content. That's a really good sign. We're seeing it in multiple FOBs. That's also a really good sign. As I mentioned, again, the Net Promoter Score, the customer is voting both with her wallet and her commentary, taking the time to give us a lot of feedback.
So I would say it's not a question of if we're gonna roll out, it's a question of when, and that when is gonna be... We're not gonna trip on our way to success. As an organization, we are highly committed to delivering on our commitments to the street and our commitments to our colleagues. So I think that we will have green shoots in this first and Q2. It will allow us to do some things later in the year, and I hope we're in a position to talk to you about more stores in 2025.
Chuck Grom (Analyst)
Okay, great. And then one for you, Adrian. Just can you talk about the cadence of your comps throughout the quarter by month and any early reads on how May and the Q2 has started? Thanks.
Adrian Mitchell (COO and CFO)
Yeah, good question. Look, we have not commented on the monthly cadence. You know, we're navigating the quarter, we navigated the quarter as best we could. We felt good about how we navigated the quarter, and that's certainly reflected in our performance. As we think about quarter-to-date results, we're just simply not gonna comment on that either. We have a lot of the quarter ahead of us, Chuck. You know, we've got graduations, we've got Father's Day, we've got Fourth of July. So I think it would be premature to, you know, think about the balance of the quarter based on just a couple of weeks into the quarter.
Chuck Grom (Analyst)
Okay, great. Thank you.
Adrian Mitchell (COO and CFO)
Thanks, Chuck.
Tony Spring (Chairman and CEO)
Thanks, Chuck.
Operator (participant)
Thank you. The next question is coming from Alex Straton of Morgan Stanley. Please go ahead.
Catie Delahunt (Retail Analyst)
Hi, this is Catie Delahunt on for Alex Straton. My question was on, the CFPB credit card regulations. Can you give us an update on what your latest view is there? And then maybe remind us of your mitigation efforts and as well as if you've had any success so far with those.
Adrian Mitchell (COO and CFO)
Sounds good. Thank you, Katie. You know, our perspective is that it remains uncertain, you know, and so what we plan to do is to disclose the impact of the late fees once it becomes certain. The size of the impact is uncertain, the timing is uncertain. So once the final ruling comes out, we'll be able to share more information at that time. We've not shared a lot of specifics with regards to mitigation strategies, but definitely know that we're exploring them with our partner, Citi. We're exploring a variety of strategies. Some of those strategies are in development, but from our perspective, you know, we're really waiting and seeing what the final ruling will be and be able to proceed at that time.
Catie Delahunt (Retail Analyst)
Great. Thank you so much.
Adrian Mitchell (COO and CFO)
Thanks, Katie.
Operator (participant)
Thank you. The next question is coming from Oliver Chen of TD Cowen. Please go ahead.
Oliver Chen (Analyst)
Hi, Tony and Adrian. I would love your thoughts on targeted promotions ahead and discounting pressure that you're seeing. I know you've been making really good strides on pricing analytics. Also, as we think about apparel, there's great changes in the private label portfolio. What are your thoughts on apparel comping positive and timing for that to happen in relation to the newness that you're introducing? And finally, as we think about marketplace model as well as digital advertising, you've made nice strides there. What should we know about modeling that and how material it'll be as you continue to make progress there as well? Thank you.
Tony Spring (Chairman and CEO)
Thanks, Oliver. You got a number of questions in there. Let me take them one at a time. On promotion, you know, I feel good about the team's work, and we're obviously looking at our discount rate on a daily basis versus last year and comp events and trying to, again, through our personalization engine, apply the value where it's necessary to either incent the customer to buy or to move aged inventory. And again, as Adrian talked about, we come into the Q2 in a healthier inventory position from an age standpoint, but this is a long game, and so we are playing it on a daily basis to make sure that we're making the right decisions on promotion to attract but not overinvest in value.
In terms of ready-to-wear growth, I tell you, this learn from each other without becoming one another has great application. When I look at the ready-to-wear business at Bloomingdale's, which right now is terrific. And it gives me optimism that we are in the early stages of that opportunity at Macy's. We have to get through the remainder of the private brand disposition that we're up against. We have to roll out more of the newer brands to gain the level of materiality to our overall business. But the impact at Bloomingdale's is really good to see, and I think it will be helpful as it relates to the opportunity at Macy's. In terms of marketplace, we had a great quarter, and that was on top of a great year in 2023.
I'm excited about the baby registry, launch, you know, which puts us in the baby registry along with wedding registry, launching over 150 brands with the start and getting good reaction from the consumer. And I think, as Adrian mentioned, MMN, our media network, is up more than 20% to last year. We're seeing good vendor engagement that goes beyond just the important beauty category, where we had an immediate impact, and we're diversifying what we're doing in MMN to include search and other facets of the way in which we engage the consumer. So marketplace, healthy, MMN, growing, promotion, discerning and thoughtful and targeted, and ready-to-wear growth happening at Bloomingdale's and determined to see that result at Macy's, as we progress.
Oliver Chen (Analyst)
Thank you. Best regards.
Tony Spring (Chairman and CEO)
Thank you.
Operator (participant)
Thank you. The next question is coming from Brooke Roach of Goldman Sachs. Please go ahead.
Brooke Roach (Equity Research Analyst)
Good morning, and thank you for taking our question. I was hoping you could talk a little bit more about the trends that you're seeing in luxury and some of those luxury initiatives that could be rolled out to the Macy's network in aggregate, especially in Bluemercury as well. Thank you.
Tony Spring (Chairman and CEO)
Thanks, Brooke. Appreciate the question. Yeah, I think that, again, this portfolio we call Macy's, Inc. offers this benefit that we get to look at the business across different consumer income levels and different value spectrums. And the Macy's team and the Bluemercury team and the Bloomingdale's team are talking, and they're sharing more than ever before. And again, I've no interest in one becoming the other, but I do believe it's an advantage for us as we try and understand where peaks and valleys happen in the business. In terms of luxury trends that are happening right now, obviously, a lot has been discussed about quiet luxury, so you're seeing less logo, and that's certainly playing out in the Macy's business at a more accessible level.
So, you know, we're leaning into opportunities on products, and categories and brands with, with less logo right now. You know, our business is very cyclical, so the minute I say logos are out, it'll be six months or a year, and logos will be back in, in some meaningful way. You know, we're all interested to see what Alessandro will do at Valentino, and, and certainly, that won't be quiet, quiet luxury.
In terms of Bluemercury and the beauty category, you know, I think what they've discovered is the appetite of the consumer for high-end skincare and regimens that the consumer has no price resistance to what will help them take care of themselves, help them look their best, help them to be able to retain their youth, help recognize the difference in people's skin types, is just not the same when you're 20 versus 40 versus 60. And I think the other thing is Bluemercury benefited from looking at the penetration of fragrances and other categories at Macy's and Bloomingdale's, and has done an outstanding job at growing the fragrance business in a short period of time. So you know, we're, as we said on the call, really bullish on the growth opportunities at Bluemercury.
We have 30 stores that we'll open over the next couple of years. We have 30 remodels, and that all begins in the Q2. So, opportunities for growth at Bluemercury, learning between Bloomingdale's, Macy's and Bluemercury, and really trying to react and respond to where the consumer is interested and where she's stepping back.
Brooke Roach (Equity Research Analyst)
Great. Thanks so much. I'll pass it on.
Operator (participant)
Thank you. The next question is coming from Bob Drbul of Guggenheim Partners. Please go ahead.
Bob Drbul (Senior Managing Director)
Hi, good morning. I was just wondering if you could, you know, focus a little more on your asset monetization plans, you know, this, this quarter... I'm sorry, this year and over the next few years, just sort of what you're seeing, how you're approaching it, and just your visibility on, especially the plans for this year. Thanks.
Adrian Mitchell (COO and CFO)
Absolutely. You know, the punchline on asset monetization, Bob, is that we're seeing a lot of traction. We're certainly encouraged by the deal-making activity that we've been seeing, and our focus is very much on quality deals, finding the right buyers and offering, making sure we're, that we're getting the right price. As you know, we have a very healthy balance sheet. We also have an apparatus of strong real estate partners and developers that we're working with to unlock value for our shareholders. But we're very encouraged by the traction that we've seen since we announced the closure of approximately 150 stores back in late February. The strategic importance is still quite critical to us, right?
Which is the sales proceeds that we are able to generate from a large portion of the stores that we will be closing and monetizing, allows us to reinvest in the business, and you see the performance of the first 50 stores, as well as return capital to shareholders. But I would tell you, you know, we, we certainly recognize that we're in an elevated interest rate environment, but I gotta tell you, we're very encouraged by the pace of deal making that we're seeing and very encouraged about how we think about, you know, the closures of these stores and the monetization impact that'll have on our business over the next 3 years.
Bob Drbul (Senior Managing Director)
Thank you very much.
Adrian Mitchell (COO and CFO)
Thanks.
Operator (participant)
Thank you. This brings us to the end of the question and answer session. I would like to turn the floor back over to Mr. Spring for closing comments.
Tony Spring (Chairman and CEO)
Thank you, operator. We hope everyone has a great Memorial Day and summer. Spend some time with your friends and family. Hopefully, get a good vacation in there, and we hope to see some of you or many of you at our amazing Fourth of July fireworks. Should be spectacular this year. Have a good rest of the day, everybody.
Operator (participant)
Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time and enjoy the rest of your day.
