Greetings, and welcome to the Macy's, Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to 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 Tony Spring, our Chairman and CEO; and Tom Edwards, our COO and CFO. Along with our fourth quarter 2025 press release, a Form 8-K has been filed with the Securities and Exchange Commission, and the presentation has been posted on the Investors 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 2024. All references to our prior expectations, outlook or guidance refer to information provided on our December 3 earnings call. On today's call, we will refer to certain non-GAAP financial measures. Reconciliations of these measures can be found in our earnings presentation and SEC filings available at www.macysinc.com/investors. All references to comp sales throughout today's prepared remarks represent comparable owned plus licensed plus marketplace sales or OLM unless otherwise noted. Go-forward Macy's, Inc. comparable sales and other go-forward metrics include Macy's go-forward locations in digital and Bloomingdale's and Bluemercury nameplates inclusive of stores in digital. As a reminder, we recently announced an update to our non-GAAP financial disclosures, the details of which are available in the Form 8-K filed on February 18. These changes do not impact our historical or future GAAP metrics and disclosures. The updated disclosures, which encompass comparable sales, OLM dollar sales, revenues and non-GAAP earnings are intended to both simplify disclosures and provide increased clarity on the key metrics that support our growth profile and go-forward operating performance. For fourth quarter and full year 2025 results, we reported non-GAAP earnings consistent with previous disclosures and prior guidance. All prior and updated non-GAAP metrics will be available in our investor presentation located on our website. Beginning with the first quarter of fiscal 2026, adjusted earnings metrics will reflect our new non-GAAP metrics. Please note that all forward-looking statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today. A detailed discussion of these factors and uncertainties is contained in our filings with the SEC. 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, let me turn it over to Tony.

Good morning, everyone, and thank you for joining us today. 2025 was a year of transformation. Solid execution of our Bold New Chapter strategy, supported by our strong balance sheet drove enterprise-wide improvements. We're gaining measurable traction and delivering meaningfully positive results. As we look back on 2025, we achieved several major milestones. First, we returned to positive comparable sales for total Macy's, Inc. and Macy's nameplate, marking an important inflection point. Second, we achieved better-than-expected top line and bottom line results in every quarter, demonstrating strong and consistent execution. And third, we delivered adjusted diluted EPS well above our most recent guidance. Results were also above our initial guidance despite the unanticipated impact of tariffs and lower-than-expected asset sale gains. I'm thankful to our colleagues. Their leadership, talent and commitment are the driving force behind our performance. Our teams have worked collaboratively with our partners to deliver the Bold New Chapter. And together, we are making meaningful progress towards our long-term sustainable profitable growth. Now let me provide a brief overview of fourth quarter results before turning to our full year performance and fiscal 2026 expectations. In the fourth quarter, Macy's, Inc. net sales, comparable sales and core adjusted EBITDA all exceeded guidance. Results were driven by better-than-expected performance across key line items and positive go-forward comparable sales at each nameplate, led by Bloomingdale's impressive 9.9% growth. Adjusted diluted EPS of $1.67 was well above our guidance range of $1.35 to $1.55. During the fourth quarter, customers responded favorably to our merchandising, marketing and promotional events, supported by an improved omnichannel shopping experience. Macy's Thanksgiving Day Parade drew a record 34 million-plus viewers and had over 3 billion earned social media impressions, up about 30% to last year. We leveraged the power of the parade into our retail offerings.…

Thanks, Tony, and good morning, everyone. We are encouraged by our fourth quarter performance, which capped off a year of meaningful advancement of our Bold New Chapter strategy. For both the quarter and the full year, we achieved better-than-expected net sales, comparable sales, go-forward comparable sales, adjusted EBITDA and adjusted diluted EPS. Let's begin with a detailed view of the fourth quarter. Macy's, Inc. net sales of $7.6 billion were above our guidance range of $7.35 billion to $7.5 billion and compared to $7.8 billion last year. Excluding the approximately $200 million impact from the 64 non-go-forward stores that closed at the end of fiscal '24, Macy's, Inc. sales grew 0.9%. Macy's, Inc. comparable sales rose 1.8%, materially above our guidance for down 2.5% to flat, led by go-forward business comparable sales growth of 2% compared to guidance of down 2% to flat. By nameplate, Macy's go-forward comparable sales rose 0.6%, including Reimagine 125 growth of 0.9%. Both the first 50 and next 75 locations were positive. Bloomingdale's comparable sales rose 9.9%, benefiting from its best holiday result on record, and Bluemercury comparable sales increased 1.3%. Turning to revenue. Macy's, Inc. total revenue was $7.9 billion, down 1.1% to last year. Similar to net sales, the decline was entirely attributable to last year's store closures. Revenues included $277 million of other revenue comprised of credit card and Macy's Media Network. Credit card revenue was $205 million, up 17.1% versus the prior year, driven by our healthy credit portfolio. And Macy's Media Network revenue was $72 million, up 12.5%. Gross margin was $2.7 billion or 35.2% of net sales compared to 35.7% last year. Excluding an approximately 60 basis point tariff impact, which was in line with our expectations, gross margin rate would have expanded about 10 basis points. For the…

Thanks, Tom. The Bold New Chapter strategy is centered on creating a more focused, resilient company. It balances the art and science of retail. We combine customer insight, data and creative merchandising to meet customers where they are. Recent performance reflects accelerating momentum across each pillar of our strategy and reinforces our confidence in the direction. We have a clear path to growth. Our balance sheet relationships and initiatives position us to build on recent financial and operational success and pursue new opportunities. And with that, operator, we're now ready for questions.

[Operator Instructions] Our first question today is coming from Blake Anderson of Jefferies.

Congrats on the nice quarter here. I wanted to ask Tony to start, given the continued macro and consumer volatility, just how are you feeling about the ability for Macy's, Inc. to be more resilient going forward despite the headwinds to the consumer? And what gives you confidence you can continue to build on the momentum you made this past year?

Thanks, Blake, for the question. I feel terrific about how we closed 2025, growth across Macy's, Bloomingdale's and Bluemercury, Reimagine stores continuing to outperform 7, 8 quarters of growth, Bloomingdale's running on all cylinders, growth in digital, growth in physical, growth in full price and growth in off-price. And we end the year with a healthy balance sheet and inventories below the prior year. There is a lot of uncertainty. And so our guidance reflects this tension between how good we feel about our strategy, how good we feel about our team and the level of uncertainty relative to macro and geopolitical environment. So I feel good about the things that we control. The team is clear-eyed and focused on delivering for the customer, making sure that we build on the Net Promoter Scores that we are at record levels and the level of traction that we're getting across all 3 nameplates.

And Blake, I'd just add here that we have a business model that puts us at an advantage in this situation. We're multi-brand, multi-category, multichannel sort of off-price to luxury, so we can react and adjust depending on circumstances to serve the consumer and meet their needs.

Great. And Tom, if you could add on AUR versus units. Just curious how you think about that for the guide this year.

Sure. Happy to. So we've been very pleased with AUR continuing to grow, and we saw that continue in Q4 as well as in Q3 and before that. And it's really a reflection of our strategy to improve our assortment to bring in better brands, to reimagine our stores, to modernize our digital channels. So we're feeling good that that trend will continue, and that's included in our expectations going forward. Overall, basket is also increasing. So while units may be down slightly, we're seeing an overall basket in our consumer buying more on a dollar basis. We see traffic steady and more predictable. And on the conversion side, maybe a slightly more choiceful consumer, but feel good about going forward from an AUR perspective.

Our next question is coming from Matthew Boss of JPMorgan.

So Tony, on performance across nameplates, could you elaborate on the inflection at Bloomingdale's the last 2 quarters? How much of this you believe is execution relative to luxury consolidation? Just -- and then what is the range of outcomes for Macy's go-forward banner comps next year within the flat consolidated guide? And then, Tom, on the cadence, maybe could you just touch on top line guidance for the first quarter relative to the 100 basis points or so of moderation that's baked into the full year? How much of this is near-term trends that you're seeing in the business today versus macro uncertainty that maybe you've prudently baked into the full year guide?

Thanks, Matt. Look, we feel terrific about the Bloomingdale's business. There is every indication that the growth continues because it's so broad-based. It's in the apparel business. It's in the home business. It's in the accessories business. It's in our flagship stores. It's in our smaller stores. It's off-price and Bloomies. The vendor community has rallied around Bloomingdale's like never before. They are delivering for their customers at an exceptional level right now. So we are continuing to fund from both a capital and from an SG&A standpoint, the growth potential of Bloomingdale's. It's important to the overall architecture of Macy's, Inc.'s go-forward business. So I feel strong about the opportunity for Bloomingdale's. The disruption in the marketplace only gives more fuel to the fire. Relative to Macy's, I'm pleased that we are to 200 stores now in the Reimagine program. That's 60% of our go-forward Macy's fleet and 75% of the Macy's store go-forward sales. You've moved from test to iterate to now we're at the scale point. And I think the Reimagine program has the opportunity to continue to deliver comp growth for the Macy's brand. As we mentioned on the call, our digital business at Macy's is healthy, 1/3 of our business and growing with a nice balance between 1P and 3P. So the external environment is where we have concern. The performance of our business relative to the fourth quarter, the first quarter so far and the broad-based growth across all 3 nameplates gives us confidence in what we control.

And Matt, I'll continue with the quarter -- Q1 trends and into the rest of the year. So we are encouraged by Q4 performance. Our consumer skews more to the higher income, and we're seeing them be more resilient. So we're seeing the trends continue into Q1 and pleased with that. However, we're cognizant of that broader external environment and want to take a prudent and measured approach to guidance. And we also have 60% of the quarter from a volume basis left to go. When we look at the rest of the year, we're looking at our comps on a multiyear stack. And on that basis, they're more evenly paced through the year. So we're really thoughtfully considering that as we guide it for the full year on a comp basis. But we're very confident of our strategies and continue to build on the Bold New Chapter momentum as we move through the year.

Our next question is coming from Brooke Roach of Goldman Sachs.

Tony, with some competitors leaning into value in a bigger way this year, what actions are you taking to appeal to a more price-sensitive consumer amidst the inflationary macro backdrop in '26. What are your plans for promotion and marketing on this?

Thanks, Brooke, for the question. We have value as a part of our overall architecture as being a department store -- promotional department store at Macy's. Remember, we have Backstage. We have regular promotional events. We have a private brand portfolio that offers meaningful value in the different categories that we play. So to me, it's always a balance. We want to offer promotion to make sure that we are continuing to capture the customer that is looking for deals or for value. And at the same time, we don't undershoot the customer who's looking for the better brands and the range of price points that we can offer across our entire portfolio in both 1P and 3P and from off-price to full price and certainly from Macy's to Bloomingdale's. So I like how we're positioned. We're really being requiring of ourselves and the market to make sure that we get the balance right, call it, a barbell approach, but from good, better, best, we're looking at it from every brand type and every price point to make sure that we're executing and doing everything we can to capture all different levels of consumers.

Great. And then just a follow-up for Tom. Can you detail the puts and takes to gross margin this year beyond tariffs? What are the core operational drivers of the improvement that you're forecasting? And how should we be thinking about the cadencing and magnitude of that improvement as you move into the back half?

Sure. Thanks for the question, Brooke. The core underlying performance, and if I look at the full year guide, we're guiding down flat to 20 basis points and tariffs are 20 to 30 basis points. So the underlying trend is positive. We expect gross margin to be strong and improve and expand as we move through the year. We would see that as well in Q1, except there's a slightly higher tariff impact of 40 to 60 basis points in the quarter. The items that are driving our gross margin performance, which is exactly what we saw in Q3 and Q4 are really the fundamental Bold New Chapter initiatives of improving and creating a more relevant assortment, bringing in better brands, having greater -- better experiences across our omnichannel platform, both in stores and in digital, and that is supporting AUR and gross margin as we move forward. So we do expect that trend to continue through the year. We haven't guided to specifics on a quarterly basis, but we would expect that fundamental trend to be positive, reflecting our strategy.

Our next question is coming from Dana Telsey of Telsey Advisory Group.

Good morning, everyone, and nice to see the progress. Bloomingdale's 59th Street, that fourth floor looks terrific with the brand expansion. On the Macy's additional 75 stores being added to the Reimagine bucket, how are you thinking about the progression there versus the original stores that you added to the bucket? Do you expect the same type of results? Is there a different timing, different things you would add up or down? And then just on the number of store closures this year, how many will there be in 2026? And are you thinking of any number of store openings even for the smaller Bloomies.

Thanks, Dana, for the question. The Reimagine program, we're very proud of and pleased with the contribution. We've had 7 of 8 quarters of growth in the Reimagine and growth from the first 50 on forward. So as we added the next 75, we began that in February. Those tactics roll out over the course of the first few weeks of the spring season. That's additional colleagues in the store, that's additional brands within the assortment, that's better execution in the store, better storytelling, localized events. As a part of that program, we certainly have iterated before we got to scale. So I would tell you that as opposed to directing top-down centrally every aspect of the program, we are empowering locally more so in the next tranche of stores and even going back to the original stores, allowing our local leaders to determine where those colleagues can be best utilized -- we're also trying to make sure that we're customizing local events so they resonate more meaningfully with the consumer base. And we're obviously amping up our work in visual and storytelling because we can see what a difference it makes in selling regular price and in selling the new brands that we're adding to our assortment. I'll let Tom cover the store closures.

Thanks for the question on the store closures, Dana. So as we look at the non-go-forward stores, our goal is to have an optimized fleet on a market-by-market basis that supports our broader Macy's omnichannel business. And we've rigorously evaluated the future current performance of our stores and the real estate value. As a result, we're extending the closure timing of the remaining approximately 65 stores through 2028. While we don't provide in advance closure guidance, I would look to that 3-year time frame for the remaining approximate store closures. And that will allow us to wait for the most favorable real estate market in order to get the most value for our shareholders and for our business. And the way we can do that is we can be patient because of our strong balance sheet and cash flow and still invest in the business to drive our overall growth. As a result of this, we're expanding and increasing our cash expectations from this initiative from a previous $500 million to $650 million to a total of $650 million to $700 million. And that leaves us after we've monetized approximately $400 million, $250 million to $300 million to go, which is worth about $1 a share. We look forward to running an optimized fleet that will support our broader business going forward.

The next question is coming from Oliver Chen of TD Cowen.

Tom, which categories drove upside this quarter? And also, as you think about private brands, where are you there? More simply, what are your thoughts on what it will take to positive comp above 2% to 3% more consistently? And then finally, in the realm of AI, which -- what's live today relative to the use cases and the KPIs you're thinking of? I know AI is applying to supply chain as well as customer experience as well as marketplace. But are there thoughts in terms of how you're evaluating proof points there? The Media Network had impressive momentum. It could probably be $500 million to $1 billion though. So would love thoughts there as well.

Thanks, Oliver. So in terms of categories, let me start there. Good to see the growth in women's contemporary apparel at both Macy's and Bloomingdale's, continuing to see the strength in the dress business and the tailored clothing business, which I think underscores the dress up and return to office and the mix of both a little bit dressier and casual tops and bottoms. Seeing growth in the accessory category, particularly fine jewelry, lab-grown diamonds, watches. So we feel good that there's a broad-based interest in fashion across a multitude of categories. Fragrances, obviously, a strength for both brands. Private brands is still an area of development. So we're still at the 12% or so of our total business. And we have reworked all of these brands. And I would say that the team is keenly focused on improving the quality and improving the value offering despite the impact of tariffs. I'll let Tom cover the future 2% to 3%. We're obviously not guiding that in 2026. But I think we intend to be a growth company. We are reworking the framework of this portfolio because we believe we can be a growth company. And the fact that we had growth in Macy's, Inc., growth at Macy's, growth at Bloomingdale's, growth at Bluemercury says that we're on the right track. I would just close with AI for us is an opportunity to combine the improvements in technology and data science with humanity and deliver a relationship-oriented business that is focused on the consumer. Our initiatives are focused on growing the business, on providing a simpler experience for our customers and our colleagues and taking cost and driving efficiency throughout the operation. So it's not any one initiative. We are not buying shiny objects. We are solving problems and helping the overall business grow and improve the architecture of how we run the business. Tom, what would you add?

On the positive comps, Oliver, I think there are a number of things that are already growing and we can continue to expand on. First is bringing in better brands and having a more relevant assortment. That is working, and I think we have a long runway there to continue to expand. The other is to look at our overall owned, licensed, marketplace. And we've been in our new 8-K sharing our OLM sales and focus more on OLM comp because we can and are managing the business across all different areas. That's how the consumer shops us. They don't know exactly where it may be coming from or who owns the inventory, but we can create the best experience and provide more relevant assortment across all of our different means of delivering to the customer. The last thing I talk about, which I mentioned in the script is this Macy's ecosystem. I think there's a huge value here. And I talk and see the 40 million customers we know of that are in our loyalty programs. We know not just what they're buying on a given day, but what their history is and what their preferences are. And that's where I look at the credit card, the Macy's Media Network and our knowledge and our capabilities in AI and data science that are all coming together, I believe, very nicely with strength to allow us to build and scale up in this area.

Follow-up. Digital has been impressive. It's a big percentage of mix. What should we know about profitability rate versus dollars and any initiatives we should focus on gentlemen?

Thank you, Oliver. Digital is a very important part of our business. It's approximately 1/3 of the business, and it is benefiting from the overall initiatives that we're doing in stores as we build up better brands. It is also -- we're also doing some things in digital specifically to modernize the look and feel and make digital and our various sites place for fashion authority that builds on the Bold New Chapter. As we look forward, we're going to continue to grow it along with the rest of the business. It is profitable, and we're happy to sell via stores or digital. And I just would end by saying that the stores are a foundation for the business. That's what gives us a market-by-market presence that supports digital and again, pulls everything together into one system.

Our next question is coming from Paul Lejuez of Citi.

Curious what it cost from a CapEx and SG&A investment to bring a store into the Reimagine program and also what kind of sales and EBIT dollar risk do you expect in year 1 and year 2, and then apologies if I missed it, but can you talk about CapEx plans for F '26, just how that breaks down?

Let me take the first part of that, Paul. Obviously, we're pleased with the fact that we had 7 of 8 quarters of growth in the Reimagine program, the fact that we're adding 75 additional stores, the fact that we're continuing to comp positive quarter-to-date. We are now at 60% of our Macy's go-forward fleet in the Reimagine program and 75% of the store sales. It is accretive to what we're doing. Our job, Tom and I, is to make sure that we are getting a return on the investments we're making. The stores continue to be capital light with minor, little to no in the first tranche of stores in terms of CapEx. And in terms of OpEx, it's designed per location based on the volume level and what we believe to be the incremental sales opportunity. So we've now got it down to more of a science to go with the art and make sure that, again, with -- along with the Net Promoter Score continuing to improve in these locations, we're delivering a better experience that's resulting in a better business.

And Paul, I'll build on that on the Reimagine stores as they came into the company, I wanted to understand better those exact returns and how much we're investing. And there was an analysis -- detailed analysis done of how things were working out. And what we saw was the investments, of course, are driving growth, which you saw and as Tony mentioned, 7 of the last 8 quarters, Reimagine stores are growing. What we're also seeing is a good return on investment, and it's meeting our expectations over the years and as we progress. And in addition, as we iterate, we'll be even more effective in allocating resources and improve our returns. On a CapEx basis, our CapEx was lower this year as we completed some major projects, most notably the China Grove new distribution facility. As we look to next year, our guidance is approximately $800 million. And the main part of that increase will be in Bloomingdale's. We're increasing our CapEx allocation because we think there's a significant growth opportunity there, both organically and as we look at opening potentially some stores, as Tony earlier noted. The other part of our investments are in the Macy's store, our technology and supply chain.

Just one other P&L item. You gave some guidance on the other line, but can you talk about the split between credit card and media revenues? And maybe anything you could share about the underlying health of the credit card portfolio.

Sure. I'd be happy to. So our guide for other revenue is approximately $920 million. It's up 7% versus prior year. And both the credit card and Macy's Media network are very healthy. When we look at the credit card, we're up 24% in 2025, and that's due to a big improvement in the net credit quality of our customers. As we look forward, we expect it to grow along with the business. And our portfolio remains healthy. We're getting higher applications and working very carefully across digital and in stores to expand usage. Macy's Media Network, we expect to grow relatively stronger, and that is supported by our whole business and all of our partner brands and others in addition to an Amazon ad initiative that we announced earlier. And I'd also just like to add with a note that we call it other revenue, but it's really an integral part of the business. I want to say that the credit card and the Macy's Media Network exists because of the broader Macy's business and customers and brand strength, and we look forward to talking about it more in the future.

Our next question is coming from Simeon Siegel of Guggenheim.

Did you say traffic was up and how much was AUR up in Q4? And then, Tom, just really helpful to get the go-forward breakdown and framing. Can you help us think about maybe following up on the credit card revenues, how do we think about how credit card revenues are associated with go-forward versus non go-forward? And then maybe similar, how should we think about the gross margin SG&A profiles for the go-forward versus non-go-forward businesses? I'm assuming that the latter is going to be a healthier margin. So that would be helpful.

Sure. Thanks, Simeon. In Q4, we continue to see, as we've seen through the year, AUR being positive versus prior year, driven by our Bold New Chapter initiatives. In the quarter, we did have some weather events and traffic was a little softer. But overall, as you can see by our results, we were pleased that we're growing and continue to grow revenue and comp sales. From a credit card basis, our credit card exists across the whole business, and we're very careful as we're looking at go-forward versus non-go-forward to make sure we maintain a market presence on a store basis as well as a digital basis. So I wouldn't expect a material change as a result of our go-forward initiatives. And similarly, on a GM basis, our non-go-forward stores are profitable. We have to call them underproductive, but we're really looking at them from a can we grow them profitably over the long term. And I wouldn't look at a major difference in gross margin between the 2.

I would just add that -- yes. Simeon, I would just add that the traffic outside of the weather event was essentially flat in stores and up online in both of -- all 3 of our brands, and that our AUR continues to improve and increase again across all 3 brands mainly based on the mix of products more so than just the impact of tariffs.

That's great. That's really helpful. And then any help how to think about go-forward store expectations by banner?

Go-forward store expectations by banner?

Yes.

When you're talking go-forward, mainly talking about the Macy's banner, and we plan to close an additional 65 stores over the next 3 years. In the 8-K that we provided that updated our disclosure metrics, we're really pleased to focus on our OLM go-forward sales. And I would say this shows a significant improvement over the last 3 years, in '23 down almost 6%, in '24 down almost 1% and this year up 1.7%. So I'd focus on a return to growth for those businesses.

Our next question is coming from Michael Binetti of Evercore ISI.

Could you just walk us through some of the flow-through metrics in the first quarter EBIT guidance? It looks like you're targeting EBIT down about 130 to 150. It was only down 20 basis points in the fourth quarter. First quarter comps still slightly positive and the tariffs are about the same impact as fourth quarter. So I'm just -- I'm curious about what deteriorates a little bit in 1Q. And then maybe could you just walk us through how the Reimagine 200 stores now contribute to the comps in 2026 guidance and how that evolves from first quarter through the rest of the year? Maybe I can ask it as when we look at the spread of the Reimagine store versus the go-forward comps or the total business comps, as you expand into more stores and start to push the initiatives out sequentially through the year, does Reimagine start to break away and push the comps higher? Do we see that spread widening?

Thanks for the question, Michael. I'll take the first part and the Q1 flow through to EBIT. So we are seeing gross margin impacted by tariffs, 40 to 60 basis points and expect gross margin on the whole to be down in the quarter, but importantly, up through the remainder of the year. The other change is in SG&A. We are expecting some additional investments in SG&A through the year, including in Q1, and those are really to support and drive growth. Our investments have driven growth in the past, and we're looking forward to continue to invest, including in the Reimagine 200 to continue that pace. So that's really the key difference.

And relative to the Reimagine stores, Mike, you have a convergence that I think begins to happen by the time you get to the latter part of the year and certainly going into next year where the majority of our fleet is in the Reimagine program. And while they continue to outperform the remainder of the go-forward fleet, the differential is smaller. But we expect comp growth in our Reimagine stores, and that will help build our confidence for growth in the Macy's brand going forward.

Our next question is coming from Bob Drbul of BTIG.

I guess 2 questions for me. The first one is can you outline a bit around the progress that you think you're making with younger consumers. I think you mentioned the prom event, but just sort of where you're really focused and what you're seeing with that consumer segment? And I guess the second question I have is just around some of the newer brands that you're bringing in. Can you just detail a bit on full price selling and sort of what you're seeing with the promotional environment versus your ability to obtain full price as you sort of work through the program?

Sure. Thanks, Bob, for the question. Continuing to focus on 5 different generations that are shopping with us, we believe we have a tremendous opportunity with the next generations of customers. As you mentioned, we held a prom event in over 200 locations, had tremendous turnout, activating high schools across the country, continue to be a resource and destination for Sweet 16. As I mentioned, 25,000 people getting married registered at Bloomingdale's. 75% of them are in the Gen Z and Gen Alpha, I guess more so Gen Z kind of population. But other categories like time pieces, fragrances tend to skew younger and I think give us the opportunity to continue to grow with that cohort. We are a destination for first job, first home, marriage and the moments in life that I think expose you to these multiple generations of consumers. The newer brands, we're very pleased with. And I think the best indication of our full price sell-through and of our performance is the fact that the brands are expanding distribution with us and adding more stores. We believe in the breadth of good, better, best. We need to have the right mix of assortment and opening price point as well as not undershoot the customer in terms of their interest in most wanted or sought-after brands. So we want to have that breadth of Polo Ralph Lauren and Coach and Reiss and Theory. And at the same time, we want to have the right good and better brands within our mix so that we can be a destination for customers that are looking for a variety of brands and price points.

And Bob, I'd add that we ended the year with inventories down and in a very good position with increased newness, and we have ample open to buy, so we can chase into these trends should they occur and also flexibility otherwise. So we're looking to maintain our flexibility to deliver against these consumers.

Our next question is coming from Jay Sole of UBS.

Tom, 2 questions for you. One is you just talked about some of the SG&A investments. If you could elaborate a little bit more on what you're spending on. And then within the interest expense guide of $110 million for fiscal '26, can you just maybe talk about what's driving that? I think interest expense was $20 million in 4Q. So I was just kind of wondering why it's going up on a run rate basis if we look into '26?

Sure. I'd be happy to help, Jay. On the SG&A investments, first and foremost, is in the Reimagine 200 as we expand that. And then in others, it's across Macy's and Bloomingdale's and investments in digital and our technology areas. As I look at this year's SG&A increase of approximately 1% to 2%, it also includes lapping greater savings last year when we had more significant number of store closures impacting the year. In 2024, we closed 64 stores. In the past year, beginning of this year, announced 14 store closures. So that's also a factor in our SG&A. I would say that we maintain an always-on approach to generating savings. We have seen that pay off and deliver results through 2025, and we're continuing that into 2026. From an interest expense point of view, we're really looking at a more consistent. Our overall debt level hasn't changed aside from the refinancing at the very beginning of last year. So we would expect the $110 million or the $100 million very consistent with the prior year.

Our next question is coming from Marni Shapiro of Retail Tracker.

Congratulations. The stores look absolutely fantastic. Congratulations on that, especially very impressive with what I'm seeing at Macy's. Can you talk a little bit about the customer coming into Macy's? Are you getting -- I know Bloomingdale's, I think you've talked about it quite a bit and you're seeing the generational shopping also. Are you seeing that at Macy's beyond, say, the prom event? Are you getting a younger customer back into the store? Is the online shopper a different shopper? Are you getting the younger customer in through online? And then I just have one quick follow-up on the beauty business. If you could just give us a quick update there about what's changing there or expected to change in '26?

Sure, Marni. Thanks for the question. Both Macy's and Bloomingdale's have an opportunity with the younger consumer. I think it's both being a destination for all of these life's moments that begin from Bar Mitzvahs, Bat Mitzvahs, Confirmations, Sweet 16s and yes, the prom events and the first jobs and the weddings that happen and that we are definitely driving those consumers along in some cases, with their parents or sisters or siblings into the stores. And digital certainly is an opportunity for us to capture a younger consumer who's looking for a broad array of price points and brands. And marketplace gives us the opportunity to lean into baby and into maternity and into other aspects of life that give us more exposure to the younger consumer. The prom event, just as an example, because I was in our stores at both Macy's and Bloomingdale's, there's just a tremendous amount of traffic in the stores. And it is all these young consumers. The activation of these high schools across the country was phenomenal. And I think it just underscores the interest that these local communities have in national retailers kind of stepping up and doing something distinctively different to make sure that we are obviously a part of their life's moments. What was your question on beauty?

I was just kind of curious, you guys have a stronghold in fragrance. Obviously, there are a lot of new brands in beauty that are targeting a younger consumer. I see some of them filtering in, especially Bloomingdale's. Are you pushing the envelope on that? And just an update on Bluemercury, any changes happening there?

Sure. We had growth again in the fourth quarter at Bluemercury, finished the year with growth across the nameplate. We are continuing to see the strength of Bluemercury in dermatological skin care and brands that are not as available in more mainstream stores. And as it relates to Bloomingdale's and Macy's, we are absolutely leaning into newness as well as partnering with the major brands on how we make the counter a greater destination, greater interest, how the beauty adviser with the free services offers her consultancy and helps people with their beauty regimen because we know we're seeing back to young people, kids as young as 12, 13, 14, starting a skin care regimen. And the mother is looking for someone to help with that. So you're not just putting anything on your skin, you're trying to find actually what's going to work with your skin. And so we're proud of the breadth of the assortment that we carry and that we continue to expand brands like Sisley and La Mer, and that we also introduce newness from Clarins, as well as play in the color space with brands like Victoria Beckham Beauty and others.

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

Thank you, everyone, for your thoughtful questions. We appreciate the interest in Macy's, Inc., and we look forward to updating you on our progress on the first quarter call. Have a great day and rest of the week. Take care.

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