Greetings, and welcome to the Macy's, Inc. First Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to Pamela Quintiliano, Vice President of Investor Relations. Pamela, you may now begin.

Thank you, operator. Good morning, everyone, and thanks for joining us. With me on the call today are Jeff Gennette, our Chairman and CEO; Tony Spring, President, Macy's Inc. and CEO-Elect; and Adrian Mitchell, our COO and CFO. Along with our first quarter 2023 press release, a presentation has been posted on the Investors section of our website, macysinc.com. Unless otherwise noted, the comparisons we provide will be versus 2022. Comparisons to 2019 are provided where appropriate to best benchmark performance. All forward-looking statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today. A detailed discussion of these factors and uncertainties is contained in our filings with the Securities and Exchange Commission. In discussing the results of our operations, we will be providing certain non-GAAP financial measures. You can find additional information regarding these non-GAAP financial measures as well as others used on the Investors section of our website. Today's call is being webcast on our website. A replay will be available approximately two hours after the conclusion of this call. With that, I'll turn it over to Jeff.

Thanks, Pam. So good morning, everyone, and thank you for joining us. Before getting started, I want to take a moment to acknowledge our team and how they have continued to navigate an extremely dynamic macro environment. On that note, let's discuss the current macro landscape. On our fourth quarter earnings call, we said that we expected pressure to be more intense in 2023 compared to 2022. Subsequently, demand trends began to worsen in mid-March and further decelerated in April. We believe cooler temperatures and headlines surrounding layoffs and the banking crisis were factors, but so were the compounding effect of some previously identified macro headwinds. The U.S. consumer, particularly at Macy's, pulled back more than we anticipated as they reallocated spend to food, essentials and services. We have planned our business for the remainder of the year, assuming mid-March through April macro headwinds continue and potentially worsen, and we have taken decisive actions in the second quarter and the back half of the year to ensure we are well positioned to compete. We will go into more detail on these shortly. But first, let's discuss first quarter results. We achieved adjusted diluted EPS of $0.56 versus our expectations net sales were below, gross margin rate was above and inventories were in line at down 7% year-over-year. February and early March performed largely in line with expectations. As previously mentioned, trends worsened in late March. We entered April confident in our product and had several important events, including Friends and Family of Macy's, the spring break season and Easter. As April progressed, demand worsened across nameplates. The decline was most pronounced at Macy's, which has the largest exposure to the lower and middle income consumer with roughly 50% of its identified customers and an average household income of $75,000 or…

Thank you for the introduction, Jeff, and for your leadership and tremendous support. And thank you to our Board of Directors for their confidence and support. I also want to acknowledge the entire leadership team and our colleagues for their ongoing commitment to our brands and business. Please know how humbled and honored I am to have been chosen to take on Macy's Inc.'s CEO role this upcoming February. For those of you I have not met before, let's start with my background and approach to leadership. I consider myself a curious generalist, who brings a high level of self-awareness and ambition to the teams I lead. As many of you know, I began my career at Bloomingdale's roughly 36 years ago. During my tenure, I've split my time somewhat equally between merchandise, marketing, stores and senior leadership. As I look back, I've always viewed the area I was in as the engine that was driving the business. Today, I realize how complementary and intertwined they all are. As a merchant, our products must be curated and compelling. As a marketer, our strategy must be engaging, inspiring and personalized. Of course, our digital experience is closely linked as the window to our brands and a large source of commerce. As a store leader, we must rally our colleagues around an enjoyable and differentiated experience centered on the customer. Finally, as a senior leader, we must ensure that our recipe includes the right balance of all of these elements. Over the last decade, I've had the distinct privilege of leading Bloomingdale's. I want to take a moment to acknowledge my team there. During my tenure, we achieved record sales and customer and colleague engagement. Coming off our 150th anniversary, Bloomingdale's offers a curated merchandise assortment and has a loyal following. Our…

Thanks, Tony, and good morning, everyone. I want to start by thanking Jeff and the Board for their ongoing belief and trust in me. From bringing me on three years ago as Chief Financial Officer to recently expanding my responsibilities to include stores, supply chain and technology. With my new responsibilities as Chief Operating Officer, I have the opportunity to go deeper into the design and execution of our long-term goals. As we aim to maximize opportunity and value, I am hyper-focused on building a faster, more flexible and more efficient operating model that drives sustainable sales and margin growth by creating alignment on those priorities that will have a meaningful longer-term impact on this business. That's a multiyear effort. And as I think about how to tackle it, I have started with several fundamental questions. What can we do to better serve our customers and improve the end-to-end omnichannel shopping experience? How do we optimize our physical store footprint with the small-format stores to accelerate growth while enhancing our inventory flow, merchandise planning and localized assortment capabilities and evaluating our updated growth aspirations, how do we further modernize our supply chain and technology infrastructure to support the omnichannel shopping experience we aspire to deliver in the future. Reflected on the last two months, I've been on a listening tour, spending a lot more time in stores, DCs and with the technology team identifying areas of opportunity. As I have been ramping up on these businesses, I've been highly encouraged to see stability in hiring, retention and turnover and have been impressed with the talent across these teams. I've also spent a significant amount of time with Tony. His experience in merchandising, marketing and stores serves as a nice balance to my years in large-scale transformation and consulting and my…

Thanks, Adrian. We are a modern department store with a rich history that has weathered these storms before, and we will do so again. Our financial health, operational efficiencies and data-driven process and tools are unique advantages that allow us to navigate through uncertain periods as we continue to invest in the future. We are a competitive team here at Macy's. We are not standing still. We are committed to better serving our customers and improving our business. Our teams are fully aligned, and we remain focused on protecting and preserving the second half of 2023 in our future growth opportunities, including achieving our sales and EBITDA goals. And with that, operator, we will open it up for Q&A.

[Operator Instructions] Today's first question is coming from Matthew Boss of JPMorgan. Please go ahead.

Great, thanks. So first, Tony, congrats on the promotion, maybe high level, where do you see the largest low-hanging fruit for acceleration opportunity as you take the helm? Jeff, could you elaborate on the cadence of top line trends? And in particular, where have you seen this most recent acceleration, whether by category or across income cohorts? And then finally, for Adrian, with this dynamic backdrop, what's your comfort with inventory on hand and just your confidence in clearing any excess by the end of this quarter?

So Matt, let me go first, and then we'll turn it over to Tony and Adrian. On the cadence of the top line, what you saw was that when you looked at our demand, and what was happening in the - February hit our expectations as did early March. It started to deteriorate in the latter part of March, and then it decelerated even further in the month of April. So what we saw there was, when you look at the seasonal categories, so we basically had - we thought the appropriate level of carryover in fall and holiday, we had some fresh transitional receipts there. We sold through that pretty aggressively in the first half of the quarter, and did not have enough content in those categories as we look at the back half. We had well transitioned into spring and seasonal, and we did not have the sell-throughs that we expected at regular price and when we started to market down. So that's the piece that when we're starting to see those inventory levels come up, which is where we kind of bucketed where we're going to be in the second quarter to deal with that to have the appropriate units going into the third quarter. So that would be on kind of the cadence of the top line. When you look at the recent trends in the month of May, you definitely saw a bounce back across nameplates, but most pronounced when you look at Bloomingdale's and Bluemercury. So that's the comment that we're making. We're attributing that to two things. One is that it's a pent-up demand for warm weather categories, which is definitely where we saw the acceleration of sell-throughs or is it an improvement in the macro environment. We don't know that answer yet.…

Thanks, Matt. I would say, first off, I'm obviously excited about the opportunity and excited about the team that I see at Macy's as being really dedicated, passionate and certainly committed to the overall business results despite the challenging business climate. Macy's is a beloved brand with a multigenerational customer base. The scale of the business really should be an asset. I do see, however, opportunities to simplify our operation, make the experience easier for our colleagues to execute and more enjoyable for our customer. I believe the Macy's Inc. portfolio should be one that we can leverage more fully from both off-price to luxury. I think we've done a good job of leaning into the opportunity on data science or the STEM part of our business. I think if you think of STEAM, the art part of our business, we have more work to do on curation, imagination, storytelling and inspiration.

Terrific, Matt, good morning to you. Just to speak and close out on the topic of inventory. The simple answer is that we're confident in clearing through the inventory coming out of the second quarter. And as you know, we have the track record around inventory management. Our track record is clear, and we're getting better and better every quarter. Just to put in perspective, we ended last year down 3% in inventory. We ended the first quarter down 7% in inventory. We expect to end the second quarter down low to mid-single digits on inventory. So, we are confident given our capabilities and our tools. Now just to put in context, the way we think about inventories in terms of the volume, the mix and having fresh content. And the reality is what we experienced in the first quarter is that we transitioned early. That was a clear bet for us because we were able to have limited carryover coming out of the fourth quarter and coming out of holiday. So, we entered in a very solid position, but the weather cooled. But when you look at our content, beauty healthy numbers; career sportswear, healthy numbers; men's tailored, healthy numbers; warm weather, spring seasonal for most of the quarter, soft numbers. So, we're putting in our tools and our actions in place, which we have a clear track record on. And we are confident that we'll be able to work through the inventory and get back to a balanced perspective on inventory entering the fall season.

Thanks, best of luck.

Thank you. The next question is coming from Oliver Chen of TD Cowen. Please go ahead.

Hi Jeff, Tony and Adrian, I was curious about merchandise margins and promotions for the back half and what's implied in guidance. As you do take the markdowns in Q2, what's the duration of those? And how do you do those most efficiently? Would also love your take on just things you're monitoring with the consumer and that behavior? And I assume that the comp volatility is likely in transaction counts, would love your thoughts on that. And lastly, Tony, what do you think about the younger customer and the opportunity they are more broadly and how are you dissecting strategies with respect to that? Thanks everybody.

Hi Oliver, let me take two of your questions. So the merchandise margins, when you look at that, as we indicated, we think that we're going to be above last year's levels for obviously we saw that in the first quarter. We're anticipating that in both the third and the fourth as in the second, we thought it was going to be within 100 basis points of last year. Now, the full year will be higher than the previous year. What you see and can expect from us is that when you look at the spring overhang that we have right now and are anticipating that we will take the appropriate price markdowns there. And what we've been doing through the first part before we marked it down as we were doing higher POS on those. So that has a cycle that we're playing through. We've got - we have a number of categories in which we're getting higher AURs and higher margins than we did last year. We're expecting that to continue. And then there's, other categories in which we're getting sharper on our price points as we know that the customer is looking for promotional value right now. You can see what we're seeing in our price arms in both outlet as well as backstage. But what we're doing with specials and what we're doing with [indiscernible] sales. Those are all going to be comparable to where we were last year, and we're looking at the content right now of where that is going to be. So, we have a lot of confidence when we look at the back half with respect to where we're going to be with pricing promotion. Probably more important when we look at the back half is where we're going to be with the newness. And where we're going to be with all of our gifting categories and how we've rebuilt that based on all the learnings that we had from fourth quarter of last year. So that is how merchandise margin. So expect merchandise margins to continue to be stable and the promotional as I've described, so Tony?

Oliver, thanks for the question. Let me say first, we will continue to attract a multi-generational customer. I think it's an advantage of being a department store that we have five generations shopping with us. But in terms of your question and how we target and grow the younger customer base, I start as I'm proud of the fact that the Bloomingdale team has generated more business with the younger customer than we did years ago. It starts with first having the brands consumers are looking for, so challenging our merchant team to be in the market and inquiring through marketplace or through our own distribution channels, those brands. Second is obviously a strong digital strategy. We know the younger customer starts first online and then thirdly, making sure that we have a powerful presence in the social space. I think, we've made some progress. We still have more work to do. I would also add remember, all of our brands are great at being a part of life moments. And so whether that is sweet 16s, birthdays, anniversaries, wedding, first house, first job, all those can know are younger customer. And I think we have an opportunity to own a greater share of that business.

Good morning, Oliver, it's great to be with you. Let me amplify a point that Jeff made on margin, and then I'll speak to the consumer. With regards to the merch margin, just want to be very clear that the deterioration of no more than 100 basis points is isolated to the second quarter. When you look at our annual outlook for the year on gross margin, it is going to be higher than last year. And as we think about the back half of last year, we had the opportunity to actually beat just given the softness on margin that we experienced in the third and fourth quarters. With regards to the consumer for the year, we're being cautious about the consumer. Now in the month of May, we have seen slightly better trends than what we saw coming out of April. But it's too early to tell from our perspective. So, we're actually taking a cautious approach to the high end of our guide, which reflects the March and April trends, the low end of our guide assumes worsening of consumer trends. As we think about May and that favorability on the trends there, is it warm weather? Is it more compelling values? Is it pent-up demand? Is it a new trend? For us, it's too early to tell, so we're taking a cautious stance.

Thank you, best regards.

Thank you.

Thank you. The next question is coming from Brooke Roach of Goldman Sachs. Please go ahead.

Good morning, and thank you, for taking our question. Jeff, I was wondering if you could provide a bit more context on the customer engagement trends that, you're seeing between your higher-income demographic cohorts and your lower-income demographic cohorts, as you ended the quarter and moved into May. Are you seeing evidence of trade down or further pressure on traffic or ticket among any specific sub demographic? And then for Adrian, can you provide a little bit more context on the additional cost savings that you identified. Where are these cost savings being sourced from? How much do you expect to drop to the bottom line? And are there further opportunities to continue to optimize your cost structure? Thank you.

So Brooke, let me start with your question on customer behavior. As we've reported in past quarters, we're not seeing a trade down not yet. What we have seen is that all customer types, I'll speak to the Macy's brand it's been basically down, about the exact same percentage. What we're seeing is that in some cases, with customers that are responding to either backstage or they're responding to Market by Macy's, it's entailing another trip, and we're seeing more spend out of them. When you look at the dynamics of our transactions, what you see across all of our customers is basically an increase in AUR about the exact same - basket size is what they had in their visits last year. So what they're doing is they're buying, less units. They're buying with the higher AUR, so the basket size is about the same. They're coming with the expectation of spending x and that's what they're going out with. But we're not seeing where you're seeing that - but when you look at the income types that you're seeing, one showing up in backstage is didn't before. The ones that are showing up in backstage are in the main house, and we're getting more spend out of them in aggregate. So what we saw in the month of May, though was a separation of the trend, the improvement in the trend at both Bluemercury as well as Bloomingdale's. So, there is something that's on our radar screen to see does that more affluent customer. Are they - is it showing up right now that they're healthier than the Macy's customer, Raj, obviously, watching that one very carefully.

Brooke, good morning to you, great to be with you as well. With regards to cost savings, let me give a little bit of context. We started this work about six months ago. And so, what we've been doing, given the trends that we saw in the first quarter and year-to-date is really accelerate those activities. The source of the savings comes from two places. The first is gross margin, which represents about 30%. The second is around SG&A. Within gross margin, we really focus on our inbound freight, our carrier network, our delivery expense, and we've been able to contract lower rates. So this is something that should actually trickle into future years for us. The remaining balance is really around SG&A, and it's about reducing the complexity within the business, repositioning the organization for growth and identifying operating expenses on the non-payroll SG&A side that we can actually take out of the system. This year, we've identified an incremental $200 million of opportunity. Next year, the annualized run rate is $300 million to $350 million. In addition to responding to the environment, we've actually reduced our CapEx forecast if you love to add that dimension from $1 billion to about $950 million. But to be clear, the growth vectors are protected. We're investing appropriately in the team, and the initiatives to get back to growth in 2024. So, we've been very surgical, very disciplined in where we're making adjustments, and it's just going to be good for the business longer term.

Thank you very much.

Thank you, Brooke.

Thank you. The next question is coming from Dana Telsey of Telsey Advisory Group. Please go ahead.

Welcome, Tony, can you please expand on the AUR improvement you're expecting to see in the back half of the year, which categories. And also, can you expand a little bit on the store strategy, both for Bloomingdale's and for Macy's in the small store component? And lastly, welcome, Tony, what do, you see as bringing over from Bloomingdale's to Macy's? Thank you.

Hi Dana, so let me take the one on AUR. And what you saw from our first quarter post was about almost 5% - a 4.7% increase. We do expect that we're going to have a higher AUR in the back half. A lot of that is category mix. So when you look at some of the higher AUR categories are trending for us and that, is driving up that what you see there. There's other categories in which our AUR is below last year based on where we see the environment. How we're looking at price matching, when you look at our competitive cycle, ensuring that we've got the best value for our customers as they're searching in that particular time. So, we do expect an improvement in AUR year-over-year. I think that outlook reflects our expectation for all of the heightened markdowns that we're talking about in the second quarter and the planned markdowns that we have for what we're doing in the back half both POS as well as clearance. What I bring up is just that our inventory is in really good shape. So while we are heightened right now in spring merchandise, we are chasing opportunities in other categories, we are very committed to that. We have inventory reserve across all of our categories, even the ones that are down trending because freshness is the name of the game in our business, and we always have available content that's out there in the market to purchase. So any demand signal that our merchants have, just remember that our merchants are all rewarded based on the collective Macy' s brand and how it's doing. So there's huge opportunities for us to ensure, that the right customers are being addressed with the right content at the right time. So, there is going to be AUR improvement and - but through all of that, but at the end of the day, we're making sure that our receipts are consistent with where our customers are going.

Dana, nice to connect again, I appreciate the question. No one is a bigger fan of the Bloomingdale's brand in business than I am. But I would reframe your question is how do we develop a stronger portfolio. We can learn from each other without becoming one another. Bloomingdale's strength is certainly curation, bringing variety versus redundancy to the expanded assortments that we offer. Bloomingdale's has a great, strong, best customer base, representing a large portion of their business, but how do we create stronger best customer programs for each of our brands. While Bloomingdale's gets credit for retail as theatre, the Parade, the Fireworks, the Flower Show are all a part of Macy's heritage. Each brand needs to develop compelling programs to motivate their customer base to engage more frequently, both in-store and online. So, I'm looking forward to what we can do going forward.

Dana, good to be with you as well. With regards to our store strategy the focus is on growth and our small format stores is actually part of that. As we think about the store strategy, we feel good about the box size we're looking at, the format we're looking at the locations and the power centers that we've been having conversations with. But the thing that we're very excited about is what Tony spoke to earlier in the conversation, which is on a comp basis on small stores, what we're seeing is no cannibalization against, the big box as well as comp positive growth in those stores, that are not able to comp. So, we're on to something quite special here, and we'll share more information as things progress.

Thank you.

Thank you. The next question is coming from Paul Lejuez of Citi. Please go ahead.

Hi, thanks guys. Curious how your e-com business performed over the quarter versus stores, if you saw a similar fall off at e-com or was it more isolated to the store level? And then I'm curious if you could just talk about how you came into the year thinking about how you would manage inventory in the second half versus how you're planning inventories currently? Thanks.

Hi Paul, so .com and stores were very similar in terms of what happened to their performance in the first quarter. We came into the year expecting that, that was going to be the case that, however, we were modeling .com and stores. So just remember where we were in terms of penetration in .com. This is basically the resettling of that as customers are coming more back to the stores channel. Obviously, very influenced by what they see digitally, either they transact there or they do research there. But in 2019, we were at a 25% penetration of digital. And in '22, we were 33% after a high in the pandemic of 40%. That settles in '23 at 33%. So the .com business was off one point for where stores were in the first quarter, pretty consistent with what we expected. I would tell you that on the big headline with respect to both stores and digital is, the traffic has been relatively good. So, basically flattish online, slightly up in stores, conversion down in both at about the same rate. So, we do expect that this is, the reset year with the penetration between them, but we do expect more aggressive growth in digital in the future versus stores as we think about '24 and beyond. And that's going to be hoisted by a lot of ideas and strategies, the one of the big ones is going to be what we're doing with marketplace. Marketplace had an outstanding first quarter. We're in the beginning stages of it. But to Oliver's earlier question, we're very excited to have our marketplace is really attracting the Gen Z customer, particularly in categories where it was not economically feasible for us to carry in the past. So, when it relates to the…

Paul, good morning. The one thing I would add, just to amplify a few things on the inventory going back to the question earlier around the importance of volume mix and content. As we think about the volume, we've already made adjustments for the back half to align with our sales volume expectations for the balance of the year. The important actions were taken in Q2 to minimize liability going into the back half really gets into the mix for the back half of the year. The one thing I would amplify that Jeff spoke to earlier is we're gifting the destination. And when you think about the shift in our content getting into the back half, we're going to be leaning more into beauty and gifting, which is 30% of our business in the first quarter, but exceeds 40% in the fourth quarter. And the beauty business has been growing going through the first quarter. So, we feel that we're really moving ourselves into a position of strength. And with newness, we'll have more newness this year than we did last year. And you don't want to forget about the Disney distortion in toys as well as Nike being in the fourth quarter.

Thank you. Good luck.

Thanks Paul.

Thank you. The next question is coming from Alex Straton of Morgan Stanley. Please go ahead.

Great, thanks so much for taking the question. I just have a couple for the group here. First, I know that higher private label penetration was an opportunity for the year. So I'm just wondering where that stands now and if your view has changed at all there? And then second, just a quick follow-up on the cost savings question from earlier do you still plan to invest in people and talk in the same way you've outlined last quarter? Or has anything been pared back there on the demand slowdown? Thank you.

Alex, could you repeat your question on the SG&A or of the cost savings, we didn't quite catch it, our apologies.

No problem. The question was just do you still plan to invest in people and tech in the same way that you outlined last quarter or if that's been pared back at all on the demand slowdown?

Got you.

Alex, let me take the private brand, and then Adrian will take the second part of your question. Our ambition on private brands remains the same. So it was 16% of our penetration. We do see that growing over time. And as you've heard us talk about in this particular call about INC and Club Room, which have been brands that have been touched and basically - they basically have been burnished. So they're performing quite well. And then when you look at what we've got coming, we've got a whole portfolio. We have 24 private brands that are all being touched over the next 2.5 years. So, we're in the middle of that right now. So the first brand new one is coming in the summer, and we'll stay tuned on all the details of that, but it is across accessories, it's across women's. It does address those key basics that we're talking about seasonal based - seasonless basics. We're actually quite excited about where that will be, and we'll give you a full rundown on that. But we do think that the private brands will raise in penetration in out years and it is why it's one of the big growth factors, not only is the - when you look at the mugs opportunity, the margin opportunity. But really importantly, when you look at the five things that we are doing with private brand, brand identity against customer types, original design, really strong strategic sourcing, relevant size and fit, which is one of the biggest pain points for our customer and, of course, compelling value. So, we're very bullish on private brands and look forward to sharing all of those learnings and as we develop those strategies and launch them.

Alex, I think what you're hearing from Tony, Jeff and I today is the importance of navigating the near term in terms of what's in front of us, but not losing sight and clarity about the long-term. So in terms of being prudent about what's happening in the current environment and the uncertainty that's out there, we've accelerated the $200 million this year, which will translate to $300 million to $350 million in cost savings next year. We've reduced our capital spend from $1 billion to $950 million in terms of our current projections for this year. The key thing to keep in mind is that we will continue to invest in growth, whether that be tech, whether that be people. So as we move through this uncertain period, we're taking the necessary aggressive actions to protect growth investments that will get us to positive growth and profitable growth in future years. So, we'll continue to drive efficiencies in our operating model. We'll continue to invest in the growth vectors, and we'll find ways to be more productive with our assets

Thanks a lot. Good luck.

Thank you.

Thank you. The next question is coming from Chuck Grom of Gordon Haskett. Please go ahead.

Hi, thanks very much. Jeff, you talked about flowing product closer to need, and I think that's interesting and important for the business. And I'm wondering if you could just elaborate on that a little bit further and how deep the conversations have been on that front with some of your suppliers?

Yes, Chuck. So as I mentioned, when you look at the receipt reserve, that is always available to respond in season. So, we're not allocating that in advance. So when we cut back, we went to kind of the upfront cost model versus the MDA model that gave us all of the liquidity that we wanted to build into the system, and that when a customer is signaling something in season, we're able to jump on that. So that is a discipline that has been well honed over the past year, that you will see play out for the balance of the year. We did, though, do receive cuts when you look at total to make sure that we retain that liquidity, and we didn't take our full reserve to respond to where we took sales down for the balance of the year. So there were conversations that we had with brands. We see down trending categories that are not doing well to ensure that we're able to put the right receipts against those categories that are trending. This is a balanced conversation for us. Every single merchant knows that those receipts are really company assets to serve our customers and not, their own. And that has - expect that discipline to continue with us. So as soon as - I mean we're ordering every single week based on how things are trending. And as I mentioned, we find there's plenty of inventory in the market to be able to respond to that.

Okay helpful. Thank you very much. And then from a category perspective, I wonder if you could just elaborate across the board, what you saw in apparel and other areas. And in particular, you called out textiles and top of table and housewares improving which is interesting. So, I was wondering if you could just elaborate on that and what that tells you about trends over the next few quarters in that area?

Yes, so what we're seeing right now in apparel is that when you think about the bulk of our drop in the first quarter from our expectations was been in the seasonal categories in men's, women's and kids. So that would be all the spring and early summer content. And again, too early to tell whether or not that is content or whether or not that is environment. So, we're working through that right now. But we're going to - as mentioned, all the pricing that we are taking is to ensure that we have the right number of units going into the third quarter. What's going on in the rest of the business is that you've got pockets of strength in center core. The beauty category continues to be strong across fragrance, color and treatment. You've got the home categories, as you mentioned, things like textiles has been a real turnaround for us with newness coming, like our [indiscernible] opportunity that you're going to see from us in the fourth quarter. The housewares and the tabletop, they were quite depressed based on coming out of the pandemic and the demand curve there. We're starting to see signs of life there. On our last call, we talked about looking for signs of life there. We started to see that in the first quarter. We really see it in the Bloomingdale's brand right now where the home business is quite robust. We're starting to see signs of that in - on the Macy's side. So again, when you look at the overall categories, I think to a comment that Adrian made to Paul Lejuez' question earlier, what you need to look at is look at the categories and how they penetrate in each quarter. So this idea about beauty and gifting being our two strengths that are trending positively in the first quarter and having a much higher penetration of those in the fourth quarter is our confidence in where we completely derisked our plan for what we know today with our customers today for the back half of the year. And we feel like our guide is appropriate and conservative for what we see in the customer underpinning.

Great, thanks Jeff.

Thank you. We're showing time for one final question today. The final question is coming from Jay Sole of UBS. Please go ahead.

I wanted to ask about this new Nike partnership. Maybe can you just tell us a little bit about how that partnership came together? And maybe how big was Nike as a percent of sales back the last time Macy's had it? And do you expect this to be like a long-term partnership? Or is this getting inventory for a couple of quarters and then sort of we'll see from there? Thank you.

Hi Jay, long-term partnership so, I look at it as we took a pause. We've been out of the Nike brand outside of where we are in footwear and certain license businesses and kids really for the last year and a half. And we're committing to a long-term partnership together and our opportunity to basically provide our customer a multi-brand or a multi-category experience that is elevated and enhanced. And so, we're not quoting what we used to do, but obviously, it's one of the most important brands for our customer. We had lots of customers that were disappointed that we didn't carry it over the past year. So this is very important to uniform for many of our customers. It gives [indiscernible] to the balance of our active assortments. We're excited about things like our Reebok engagement, obviously, what we're doing with the other brands. So this is going to be, we believe, a real catalyst without cannibalizing much else in the balance of the apparel assortments. So this is a win for us. And we think it's a win for Nike, when you look at our 40 million-plus customers that come to us for curation across multi-categories and wanting Nike. So those are the conversations that we have with Nike management on the pause that we took. So, you're going to see it come in, in the month of October. You have it in apparel, that's including plus size women's, it's big and tall men's - it's the kids area that we weren't carrying it through the licensed areas. It's bags, it's gear. It's going to be in key locations, obviously, online and then expands out to many, many more locations as we get into '24. Our finish line business has been quite strong, and so that will continue in all the doors that we have in today.

Got it, thank you so much.

Thanks Jay.

Thank you. At this time, I'd like to turn the floor back over to Mr. Gennette for closing comments.

Just thank you, everybody, for your interest in Macy's, and everybody, have a great summer. Look forward to talking to you again in August with our first - with our second quarter results.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines and log off the webcast at this time, and enjoy the rest of your day.