梅西百貨 (M) 2014 Q1 法說會逐字稿

Good morning, and welcome to Macy's Incorporated first-quarter earnings release conference call.

Today's conference is being recorded.

I would now like to turn the call over to your host, Karen Hoguet.

Please go ahead.

Good morning, and welcome to the Macy's conference call scheduled to discuss our first-quarter performance.

I'm Karen Hoguet, CFO of the Company.

Any transcription or other reproduction of the statements made in this call without our consent is prohibited.

A replay of the call will be available on our website, www.MacysInc.com, beginning two hours after the call concludes.

Please refer to the investor relations section of our website for discussion and reconciliations of any non-GAAP financial measures discussed this morning.

Keep in mind that all forward-looking statements are subject to risks and uncertainties that could cause the Company's actual results to differ materially from the expectations and assumptions mentioned today, due to a variety of factors that affect the Company, including the risks specified in the Company's most recently filed Form 10-K.

While sales in the first quarter were below what we had expected, we were pleased both with our earnings in the quarter and also with the momentum change towards the end of April, when the weather finally warmed up in the northern part of the country.

In fact, our year-to-date sales are already back well into positive territory.

While we aren't sure that all of the weakness in the quarter was weather-related, we continue to believe that the underlying customer demand is strong enough to enable us to achieve our annual guidance for comp sales of 2.5% to 3%, and our earnings per share guidance of $4.40 to $4.50.

We are also pleased to announce that given the confidence in the Company's prospects, our Board approved a 25% increase in our dividend to $1.25 per share on an annual basis, as well as a $1.5 billion increase in authorization to buy back our stock.

We now have total authorization remaining of approximately $2.5 billion.

Sales in the first quarter were $6.3 billion, down 1.7% from last year.

Comp sales were down 1.6%, and on an owned plus license basis, comp sales were down 0.8% versus last year.

Looking at owned plus license comp is the right way to be measuring customer spending with the Company.

We had expected sales growth in the first quarter to be well below that in the second quarter, due to the shift in the timing in our Friends and Family event, with the last two days happening in May this year.

We also knew that we were up against a strong first quarter last year of plus 4.4% on an owned plus license basis, making this year's comparison tough.

Having said that, we were expecting sales to be stronger than they were, at both Bloomingdale's and Macy's.

And as I just stated, the weather clearly played a major role in the weakness.

As you would expect, geographically, the south did far better in the quarter, in terms of sales performance, than the north.

Our strongest families of business in the quarter were handbags, impulse apparel for our millennial customers, active, kids, and intimate apparel.

We also continued to see positive momentum in juniors, or our younger millennial customer, which is very encouraging.

The license businesses performed very well in the quarter.

Some weather-driven businesses, such as shoes and apparel, were weak overall in the quarter, but performed much better in better in the south than in the north, giving us confidence for the second quarter, now that the weather has finally warmed up.

The area of our business that was toughest in the quarter was home, which experienced weakness across the board, including big ticket.

We believe this is in part due to year rounding very strong performances over the past couple of years, and may also relate to fewer housing starts and lower existing home sales.

And some of the weakness, such as in outdoor furniture, was in fact weather-driven.

And interestingly, like apparel, the trend has improved in early May.

Average unit retail in the quarter was flat, with average units per transaction up approximately 1%, leaving transactions down about 1.5%.

Our gross margin rate in the quarter was up 10 basis points over last year, at 38.9%.

Merchandise margin was up by approximately the same amount.

At the end of the quarter, inventory was up 4.7% over last year, or 4.2% on a comp basis.

Although stock levels are a bit higher than we would have liked, relating to the weak first-quarter sales, the builds include many strategic investments in customer favorites and summer essentials, that should pay dividends in the second quarter.

SG&A was $2 billion, 2% below last year and 20 basis points lower as a percent of sales.

We are very pleased that we were able to accomplish this, even with the ongoing investment we are making in our omnichannel strategy.

Some of the reasons behind this variance include: One, retirement expense was favorable to last year by $39 million; two, benefits from the cost reduction initiatives implemented at year end; three, credit was $5 million better than last year.

While usage of the card slipped 60 basis points to 44.7%, which in part actually was due to the Friends and Family shift, the profitability of the portfolio continues to be very strong.

Four, the flexing of expense in sales variable areas.

And, five, some timing shifts, particularly in marketing, which will impact subsequent quarters.

Operating income in the quarter was $443 million, or 7.1% of sales, up from $435 million, or 6.8% of sales last year.

It is worth noting that we were able to increase the operating income rate as a percent of sales by 30 basis points in a declining sales environment.

Interest expense in the quarter was $100 million, $3 million above last year.

This is mostly because of the incremental debt issued last year, the $400 million that we issued, relative to the $109 million that matured.

Tax expense in the quarter was $119 million.

The tax rate in the quarter was 34.7%.

We still expect the effective tax rate for the year to be 36.4%.

The rate in any quarter, as you know, will be impacted by the timing of settlements and other discrete items.

Net income was $224 million, up $7 million versus last year.

Diluted share count in the quarter was 372.6 million shares, down 5.6% from last year.

And earnings per share on a diluted basis were $0.60, up 9% over last year.

Cash flow provided by operating activities in the quarter was $212 million lower than last year, due primarily to the different timing of receipts in the quarter, which impacted merchandise payables, the change in retirement expense, the payout of costs associated with year-end restructuring, and timing.

Cash used by investing activity was $96 million, slightly better than last year's $107 million.

And during the quarter, we utilized $432 million to repurchase approximately 7.4 million shares.

As we look forward, we continue to believe that we can achieve our annual guidance of 2.5% to 3% comp sales growth and $4.40 to $ $4.50 in earnings per share.

The second quarter will hopefully benefit from pent-up demand from earlier in the year, as well as our improved strategies for driving business.

Remember that we had a disappointing second quarter last year, and we concluded at that time that our marketing support was insufficient.

We then reacted with renewed and strengthened promotional strategies in the third quarter.

The customer responded very well to these changes, and we hope we will experience a similar reaction as these same strategies are executed in the second quarter this year.

As you know, one of our philosophies at Macy's is to focus on what we know, and what we can control.

We cannot control the weather or the macroeconomic environment, or where a major holiday falls in the retail calendar.

There's been a lot of talk about these subjects in recent months.

But we can make sure that we have the right assortments, a customer-centric approach to omnichannel, the best talent, training and coaching that energizes our associates, and very compelling marketing.

We spend a lot of time at Macy's and Bloomingdale's thinking about execution, solid blocking and tackling, to serve the customer every day...managing the business with discipline and sensitivity to the perspectives of our associates, our vendors and our communities.

This is how we are winning, and will continue to win.

As I say quarter after quarter, our MOM strategy, My Macy's, Omnichannel, and MAGIC Selling, are our road map going forward.

We do not tire of it.

In fact, we are exploring and finding new ways to make MOM better every day.

At a regional management meeting last week, one of our executives noted that M, O, and M, are the first three letters of the word momentum, and he is absolutely right.

As we look forward into the remainder of 2014, we see a lot about which to be optimistic.

We can see the momentum at work in driving results, and we will remain focused on what we can control.

I'll now take your questions.

(Operator Instructions)

Our first question today comes from Charles Grom from Sterne Agee.

In February, you outlined I believe 10, 11 assumptions to hold our hands throughout the year in 2014.

Just wondering if you still believe in those 11 assumptions, or if there's any changes to what you think?

I confess, I don't have the 11 in front of me, but I don't think there's any change.

Tax rate hasn't changed, margin expectation hasn't changed, sales haven't changed, depreciation.

I don't think there's any changes, but I'll go back later and look at the 11 to be sure.

Okay, and just regarding the first-quarter friends and family shift, just wondering if you wanted to quantify that?

And anything on gross margins in the second quarter that we should think about, given inventory levels being a little bit heavier at the end of the first quarter?

In terms of the friends and family shift, we haven't quantified it, but it is material, which is why we had talked about it on the call in February, because we wanted people to make sure we knew from the beginning that our first quarter was going to be tougher than the second quarter.

And in terms of margins, our guidance for the year has been flattish to down slightly, so I would still hold that guidance, as I think about the full year.

Obviously, we outperformed that annual guidance in the first quarter, but I would not change the guidance for the remainder of the year.

It's obviously hard to forecast quarter by quarter.

Okay.

Fair enough.

My last question just on the $100 million in cost saves.

How should we think about that flowing through the P&L throughout the year?

Pretty evenly by quarter, or is it expected to be front-end loaded?

No, it should be pretty evenly.

Most of the changes that happened by the end of the year, and therefore, fairly evenly through the year.

Okay.

Makes sense.

Thanks, Karen.

Next we'll move to Lorraine Hutchinson with Bank of America.

Just wanted to follow up on the comments you made about the stronger momentum in your younger millennial, or juniors categories.

Is that an area that you could envision turning positive during this year, and what other initiatives do you have planned for that important older millennial, as the year progresses?

Yes, the whole millennial strategy is working really well.

As you know, a lot of the new brands in the impulse of the older millennial began to gain traction last year, and it's taken us a little longer on the junior business, but that's now doing very well, and we feel much better about the total.

And you combine that with the active strategy, which is on fire both for men and for women, and we are very excited about the prospects.

And when you think about that millennial customer, we tend to focus on the apparel sides of it, but there's a lot going on in shoes, handbags, cosmetics, and also home.

One of the strengths in our furniture business has been the smaller scale furniture, which is really appealing to that millennial customer.

We've now got strength in kids' furniture, so there's just a lot going on for that millennial customer throughout the entire store, not just the apparel areas.

Great.

Thank you.

And our next question comes from Matthew Boss with JPMorgan.

So last year's second quarter is when we all started talking about this durable spending shift, and weaker trends in apparel.

Can you just -- can you back up and talk about your confidence in the consumer today, and are you seeing anything in terms of leading indicators from a category perspective, that really just gives you the comfort, as opposed to just what you're seeing out there?

Really gives you comfort in the back half of the year.

Well, I think it starts with when we gave our guidance at the beginning of the year, we were not expecting the consumer to be all that strong, so that really hasn't changed, with anything we've seen in the first quarter.

Obviously, it could make it a little more challenging, but we still think that the consumer is okay, but not great.

And as we look at the second quarter last year, we do believe that a lot of the weakness was self-inflicted, and those are the things we've tried to correct this year.

Great.

And then as we look at the competitive backdrop, clearly people talk about online a lot more.

Off-price is a stronger force.

What do you think separates the winners and losers here, as we think out the next three to five years?

What do you think Macy's is doing to really separate from the pack here?

Well, I think you know we're doing a couple of things.

One is the whole omnichannel approach is obviously really critical.

I don't know how a retailer could compete going forward without a really strong online presence, and investing heavily to keep up with all that's happening technologically in that world.

However, I also think we wouldn't be strong without our terrific stores, and so we're continuing to invest and make sure our assortments are right through My Macy's.

Our sales associates are more engaged in MAGIC Selling, so I believe it's having great stores, but also having a fabulous internet presence or digital presence, whether it be in mobile devices, smartphones or the traditional laptop desktop application.

Great.

Best of luck.

And Paul Trussell with Deutsche Bank has our next question.

You mentioned that retirement expense savings would be helpful to you this year, but is that front-end loaded, or will that continue to be a benefit throughout the balance of the year?

Well, no, we had said it would be about $150 million for the year, so I wouldn't change the annual forecast, and some of that is offsetting increases in health care, which we anticipate happening more towards the end of the year.

So we've got more net benefit in the first quarter.

Thank you.

And then, also last quarter, you mentioned that Bloomingdale's was a better performer than Macy's.

I know both were a little bit below expectations this quarter, but can you just give a little more color on what you're seeing out of Bloomingdale's?

Yes, no, Bloomingdale's had a tough first quarter, as did Macy's, and again did better in their southern stores than the northern stores, so that would be the case again.

Then lastly, just the home comment that you made stuck out, with that being challenging.

Is there anything different that you're seeing from a competitive landscape, or in terms of how others are discounting that worries you?

Or do you think it's solely weather and macro?

Well, honestly it stood out for us, too, because as you know, home has been so strong for so long.

I'm hoping it's just an outlier and by the second quarter that will no longer be the case.

Early May is making us feel a lot better, but there's really nothing we're seeing on the competitive front that would lead us to be concerned about home longer term.

Thank you.

Next we'll move to Paul Lejuez with Wells Fargo.

Karen, can you maybe quantify for us the difference in comp performance between the south and the north in the first quarter, and how much has that gap closed, or has it closed entirely in these first couple of weeks of May?

We don't split it out.

But the gap -- the south has been growing faster than the north separate from the weather, so that's -- the gap has closed quite a bit, but there's still going to be a gap as there was all last year.

But it has -- the gap has closed significantly since late April.

Okay.

And then on the -- on the gross margin front, I assume that the first quarter benefited from the shift in friends and family, but please correct me if that's wrong.

If you looked at the first-quarter merch margins excluding that shift, what would things have looked like?

I don't really think that's a big factor in terms of the margin.

Okay.

And then --

I think that the 10 basis point improvement was real.

Okay.

Helpful.

And just last, inventories, what do you expect?

How do you expect to end at the end of the second quarter, and is there any change in plan for the second half of the year?

No change in plan, and do expect the inventories to be less of an increase relative to last year by the time we end the spring season.

Okay.

Great.

Thanks and good luck.

And Bernard Sosnick with Gilford Securities has our next question.

Your management changes were internal, so I imagine there won't be anything great to say about it, but I'm wondering if there are things that you'd like to highlight as a result of the change?

Well, I think Jeff's elevation to President is a good thing for the Company and as you probably saw, he's picking up responsibility for the private brand organization, and I think that will help with the congruency of our merchandise strategies, and allow us to make our private brands that are already very strong even stronger, so I think that's going to be very positive.

And as regards to marketing, you say that you need to have it very compelling.

We've seen what happened in the third quarter, but could you remind us of what very compelling means, and particularly the use of coupons?

Yes, I don't think you'll see a major change in coupons, but in the second quarter last year, we did more regular price events, particularly around the American Icon, and so we again are making it a little bit more promotional this year and tweaking some of the other probably strategies that -- in the quarter.

Right.

Okay.

Thank you very much.

And Bob Drbul with Nomura will go next.

The first question is on -- we talk about the economics versus weather.

When you think about it, you think there's more at play versus just the weather.

What really are you focused on, or what are you concerned about that you are seeing within the customer base?

Honestly, we are so focused right now on executing, and as I said, on the things that we can control.

Yes.

So that's -- we're keeping our heads down and executing our strategies as we had anticipated, and trying to get as much as we can.

Okay.

And any inventory increase?

Are there any areas on the inventory side that you are uncomfortable with?

Levels right now?

There's no major areas, but as you would expect at any point in the year, there's always glut somewhere within the inventory, but nothing that we're concerned about at this point.

Okay.

And then my last question is, given how the quarter played out, when you look at the e-comm business like in the first quarter, omnichannel, e-commerce, how did the profitability change during a quarter like this, or is there a big delta between the way it was a year ago versus the first quarter?

I'm not sure I understand what about the first quarter that would have led the profitability to change?

Just with the slowdown in sales, did you see a big difference on the e-commerce trends first quarter 2014 versus first quarter 2013 and did that impact at all profitability?

Weather impacts online sales as well as store sales, but that doesn't impact the profitability.

If anything, we're trying to get more profitable with every kind of transaction we do, so that's happening to some degree, but I don't know how that relates to the first quarter in specific.

Yes.

Okay.

Thanks very much Karen.

And our next question comes from Stephen Grambling with Goldman Sachs.

Just a couple of follow ups.

The first is, as we think about the consumer, can you just maybe provide a little more color on any trends you're seeing among households at different income levels?

We don't -- I can't really comment on that.

We don't have great data on income levels.

But as I said, both Bloomingdale's and Macy's had tough quarters, if that helps you to get some insights into that.

Our weakness was across price points, opening price points were better.

Again that leads back to the weather discussion now, as opposed to the consumer, so I think until we see the second quarter with the warm-up in weather, it's going to be hard to really judge the answer to your question.

That makes sense, thanks.

Then one other follow up to Bob's question on e-commerce, can you provide a little more color on how e-commerce momentum has been, and maybe how the millennial offering is faring online versus in store?

The millennial is doing well both places.

The assumption that many people have, that it's all online, is actually not the case.

Millennials love shopping in stores as well as online, and browsing in one channel and shopping in another.

So both have been doing well.

And in terms of overall trends, it's really hard to measure now because we have so many people buying off smartphones on the selling floor.

So it's, again, we don't talk as much about digital sales versus store, because I'm not quite sure where that line is drawn.

Okay.

That's helpful.

Thanks so much.

And next we'll move to Michael Binetti with UBS.

I was hoping you could talk a little bit about -- obviously the brick and mortar fleet for retail has been in the news a lot lately, and it's been a big topic with investors.

Obviously, store closures from some competitors are the topic of the day.

You have had a very calculated approach to how you look at the fleet and any closings you might do.

How do you think about some of the news we've heard lately about some of the big boxes and malls you're in are going to be stepping up store closures.

I think we do the exact same thing we've always done, which is, we're constantly analyzing our store base and analyzing which, if any should be closed, and I would expect that to continue.

There's no question that there's some stores and perhaps some malls that won't be in existence in five years, but there's a lot of malls that are going to be invested in and be even stronger than they are today.

So, yes, we will continue to close stores as we've done, and yes, we will continue to grow and invest in good stores, good malls.

Okay.

And then just a follow up, I was hoping you could talk a little bit more about some of the specific omnichannel initiatives you've talked about over the last few quarters with us, versus obviously store-to-door.

You also have talked about buy online and pick up in store.

Can you talk about how you view the impact on profitability of those initiatives today, versus where they could be going, and then maybe some metrics you could give us to get us excited about pick up in store.

Let me start with that.

The buy online and pick up in store that we just tested in Washington is going to be rolled out by the end of the summer across the country, and we are really very excited about this, and finding that customers are using it in all different kinds of ways.

In some cases, it's somebody working that wants to order something at the office and pick it up on their way home, and doesn't want a package sitting on a doorstep.

In other cases, it's wanting to browse online and be sure that what you want is in the store when you get there.

In some cases it's convenience, not having time to shop the whole store, so they shop online, and pick it up.

And in other cases, it's a way of getting something same day, which again people like, as opposed to having it shipped.

I do think we'll be doing same day delivery at some point, but for now, this is the way most customers will get things same day.

And it's very exciting.

We're finding a lot of people like it.

It hasn't even been marketed yet, so we think the potential is huge, and the good news is that when the customer comes to the store, they're usually buying other things while they're there.

And so obviously, that's a good thing as well.

Thank you.

The store to door or search and send, as we call it, has also been very helpful, allowing us to get wanted goods to customers when either we're out of a particular size or color at a store, or in some cases, we don't carry that brand or that item in a store, getting it to the customer easily also.

And that just continues to grow and be a terrific source of customer satisfaction as we go forward.

Our next question comes from Paul Swinand with Morningstar.

Just to follow up on the last question, I know the store fleet has been pretty flat for a while, and obviously on the cash flow lines, the software and the investment in PP&E has been pretty flat, too.

Do you see that staying flat on a dollar basis over the long run or have we come through some peak period with the software spending, and maybe it's going to go down a little?

How do you see that developing over the next five years or so?

And in fact our CapEx this year is a little bit higher than it has been, at about $1.1 billion, so I don't see the investment in software going down, because there just continues to be new ideas that you want to invest in, and grow with.

Fortunately, we have the size and scale to make that profitable, but we will continue to invest in technology quite heavily as we go forward, but we're also investing to maintain the store base, so it's doing both.

So will that grow as the sales go up, or because you've got a pretty big store base, will it be more growing just on a dollar basis?

I don't know exactly how to predict it.

My guess is that the $1.1 billion-ish is probably the right number for the next couple of years.

Beyond that, it's hard to know right now.

Okay.

Great.

I don't anticipate a major increase.

Great.

That's very helpful.

And real quick on the license business, it sounds like you're pleased with the license businesses you've had.

Do you see that continuing to grow as other vendors approach you with the same type of situation?

Well, we start with the objective of pleasing our customers, and finding great assortments in categories that they want to find at a Macy's.

So when you think about Sunglass Hut or Finish Line, both of those enabled us to bring product to our customers that we weren't able to do, as Macy's alone.

So yes, there may be other opportunities.

We've been very successful.

We're starting the rollout of Locker Room by LIDS which will be for team apparel and accessories, and we're very excited about that, too.

And so, yes, there may be other opportunities to do this.

Interesting.

Thanks.

Thanks a lot, and best of luck.

And our next question comes from Oliver Chen from Citigroup.

The merchandise margins were a nice upside this quarter.

What are your thoughts going forward on that?

And as you think about holiday, you are doing this prudent tweaking strategy, in terms of ensuring you have the right promotional balance.

What may be new this year versus last year, as we move forward throughout the quarters?

I can't tell you that.

Then the competitors would know.

In terms of the margin, as I said a few minutes ago, we are expecting for the year still flattish to down slightly.

Yes, the first quarter was great, but I don't change the annual guidance for gross margin at this point.

Okay.

And I'm encouraged by your statement on pent up demand.

If you can highlight for us why you have conviction there, and what you're thinking in terms of how that could play out?

Well, in part I say that because once the weather warmed up, there was a significant change in the trend.

So again, a couple of weeks doesn't a quarter or a year make, but it is encouraging to see that, and particularly in the northern climates.

So that's part of why we're feeling confident.

Got it.

And our last question is just about traffic.

And traffic, if you could speak to what you're most excited about, about your traffic driving strategies, and I'm curious about this as it applies to online as well as bricks and mortar, or however may be most prudent to talk about what's --

Well our number of transactions, which is as close as we can come to traffic were down in the first quarter as I said, but again, I think a lot of that was weather-related, plus the shift in friends and family.

We'll be able to judge better as we get the through the second quarter.

Our marketing approach is trying to drive traffic to our stores, but also to our mobile devices, to laptops, desktops, et cetera and smartphones, so our traffic-driving strategies today are broader than they used to be, when we were completely focused on stores.

Okay.

And our final question, just about your brand portfolio, which is outstanding.

Are you very comfortable with the current mix of national and exclusive brands?

Is there anything there in terms of how you're thinking about your strategy going forward?

Well, as you know, we love our private brands, and we love our national brands as well, and so, we will continue to build our business with both.

And wherever we see white space or available customer demand, we'll ask ourselves, are we better off developing it ourselves, or is there a partner we can develop it with?

So if we looked at for example the millennial businesses, Ralph Lauren's Denim & Supply has been a big part of that, as has Maison Jules, which is the private brand.

Or we're in the midst right now of building an enormous brand geared at the Latina customer, Thalia and we are extraordinarily excited about that.

And this is one where we felt our team was better equipped to build it out.

We do make those decisions, but for Macy's to be successful, we need our very strong private brands, our exclusive brands to do well, and also the national brands.

The Thalia innovation has been impressive.

Thanks.

And congrats.

Wait until you see the product.

I got a glimpse of it a couple of weeks ago.

It looks terrific.

I think she's very excited about it, and our team spent a lot of time down in Mexico making sure we get the size right, the coloring right, the fit right, and I think it's just going to be a huge success when it hits stores next spring.

Cool, thank you.

Best regards.

And our next question comes from Jeff Stein with Northcoast Research.

Question on gross margins.

It's kind of been beaten to death here a little bit, but I'm trying to understand --

You think?

I'm trying to understand how you improved your gross margins in the first quarter.

Given the fact that I think you came out a little bit heavy coming out of the fourth quarter, sales were not up to expectations.

I'm assuming your online may have grown a little bit faster than in store, which is lower margin.

So how did you do it?

And the follow-up would be are you just -- are you being conservative in your outlook for the balance of the year on gross margin, given that you were able to show improvement in an extremely tough quarter?

Well, I hope that I'm being conservative, but I don't think that I am.

And I think Jeff and the merchants did a very good job of anticipating some of the risk and managing it as they went through the quarter, and did a terrific job.

One of the great strengths of Macy's is our merchant organization, and their ability to flex and forecast and anticipate risk, and at the same time, maximize what they see working.

And it all played out quite well in the first quarter, in terms of the margin performance.

But again, it's one quarter, maybe I will in the end, end up having been conservative.

I hope so, but I don't think so, in terms of the prospect for the year.

How did your private label brands perform relative to national brands in the first quarter?

They performed quite well.

We had unbelievable strength with some of the big ones like INC, Alfani, Karen Scott, American Rag.

I mean, I could keep going.

Bar III, Material Girl.

We had a very strong quarter with a lot of the private brands.

Perfect.

And finally, question on your assortments online versus in store.

I guess how congruent they at the present time, and what is your goal as you move through the year?

Congruency is a very tough subject.

What I would say is that most of what we carry online is covered in a Macy's store.

But remember, we have lots of different assortments in different stores, so I can't tell you it's congruent with every store, but we do try very hard to make that happen.

Okay.

And what areas would you say online are under-penetrated, and I guess, again, where are you taking the online business from an assortment standpoint, as you move through the year.

Well, historically, home has been where online started first, and so now we've been seeing outsized growth in the apparel areas, but again, that's just because of where they started.

But our strategies online are actually quite comparable in terms of growth plans to what's happening in the store.

A key item tends to be a key item in both channels, and also brands, so our strategies really have become omni, as we look at the future.

Got it.

Thank you very much.

And next we'll move to Kimberly Greenberger with Morgan Stanley.

I wanted to just clarify what I think I heard in your prepared remarks.

You talked about, obviously, Q1 sales were a little bit below your expectations.

I think the total sales number was down about 1.5% or so, or just a little over 1%, but you said year-to-date sales are well back into positive territory,.

Including May.

That suggests in the first 2.5 weeks of May, not only did you make up for the deficit in Q1, but that total revenue number has actually got a plus sign in front of it.

Yes, that is what that means.

Terrific.

Thank you.

And again, I don't like calling a quarter based on a couple weeks, but given the inflection point in the weather, I think it is relevant.

So post that inflection point in the weather, obviously there were some categories in the first quarter that didn't meet your expectations.

Many of them were probably impacted by the weather, what we've got going on in the housing market.

Now that you've seen four or five, six weeks of, I guess we'll call it more normal weather, are there any categories that are still not performing to where you would expect them?

Well, the truth is most of the categories that had the weakness, home, a lot of the apparel, shoes, have strengthened a lot.

I think let's wait and wait and see the quarter, though.

Again, I really don't want to make too much of a couple of weeks.

Very fair.

And lastly, how should we think about SG&A as we work our way through the year?

Here in Q1, SG&A dollars on a year-over-year basis were actually down 2%, which we clearly didn't expect, and we have SG&A dollars growing in our model by a little bit over the next three quarters.

But do you think it's possible that you could hold SG&A dollars flat, or were there some anomalies in Q1 that just won't repeat?

Well, one of them was the sales was below last year, so in part, we brought expense dollars down, and flexed the staffing in the stores, in reaction to the sales.

So I would not expect SG&A for the year to be down for sure, or flat.

I do expect it to be up, as we go through the remainder of the year.

Thanks so much, Karen.

And next we'll move to Richard Jaffe with Stifel.

A question on marketing and some of the new or relatively new opportunities to market online, the social marketing initiatives that we've seen, and wondering what your take on these new marketing opportunities, how much you've pushed into those areas and how much we should look for in the balance of the year?

Well, I'm not really the marketing expert, but as you might imagine, we are spending a lot more of our budget on digital in all kind of ways.

Particularly as you talk about the millennial customer.

He or she is getting their information differently than perhaps I am.

So there is a lot of change happening.

But still much of what we spend is in the traditional media.

Is there a way -- it's always tough to judge the impact of advertising.

Perhaps with the e-commerce channel, it's a little bit easier.

Are you seeing it working for you or encouraging to you to pursue more aggressively in the balance of the year?

Well, I don't think -- I mean, we're pleased with how our marketing is working if that's your question, both digitally and the more traditional media.

Our team spends a lot of time analyzing media effectiveness, and is putting our dollars where we're getting the biggest result, and we're fine tuning that constantly.

Okay.

So we'll just have to wait and watch online and see how that plays out.

Yes.

Okay.

Thanks so much.

Next we'll move to David Glick with Buckingham Research.

Question on the second quarter, obviously your guidance implies meaningful acceleration in sales trends, and you're off to a good start.

I'm wondering, as part of your plan for the second quarter, whether you added some sales promotion events?

Obviously, last year, you had some take aways from the quarter that you wanted to be harder-hitting and that was pre-planned, but were there any things you had to react to earlier this year to add to your game plan for Q2?

No, we have not changed our plans at all.

We changed -- as we looked at the second-quarter performance last year and moved into the third quarter, we did make changes, and at that point started planning spring of 2014.

And so we have, as I said earlier, added some promotion into the second quarter.

But that was purposefully done and done six months ago.

Okay.

And in terms of the opportunities, clearly Mother's Day, I guess you can check the box, given the start to the month that you just described.

Are there time periods where you feel like you're -- where you have the biggest opportunity?

I think we have opportunity really throughout the quarter.

Thank you.

And then one follow-up.

Just curious, the announcement by Federal Express to change to this dimensional pricing model, versus pricing by weight.

I'm wondering what, if any, impact that has on how you approach fulfilling e-commerce orders from a cost standpoint, or an execution standpoint.

Yes, I don't know the specific answer on the FedEx change.

But as you might imagine, we have a team of people doing everything we can to lower delivery expense, and so understanding how those changes impact that, I don't know how, but I guarantee we have a team working on it.

Okay.

Great.

Thank you very much, and good luck.

And our next question comes from Liz Dunn with Macquarie.

My first question is another question on this brands versus private -- national brands versus private brands.

I think historically, there was maybe a thought that private brands and the exclusivity that you get there were really something special, that maybe some companies were chasing for a bit, and maybe went too far.

But in terms of your positioning now, is it fair to say that because of your dominance in the marketplace, you have a better assortment of the branded goods, so even if it's a broadly distributed national brand, you'll have a better assortment in that brand than maybe some of your competitors?

Is that part of what's working so well for you?

I hope so, because that's the strength of our merchandising team.

That's what Jeff and the team, and then Julie Greiner, our Chief Merchandise Planning Officer, plus Jeff Kantor's team at dot-com, that's what they do.

They curate the market and find the best assortments within national brands, as well as obviously helping on the exclusive brands.

And we do also try to get exclusive items from our national brands, to make the assortment of those even better.

And, again, remember part of our secret sauce there is not only finding the right items, but it's assorting them appropriately, size, color, et cetera, store by store, which is the whole My Macy's strength.

So even if you -- we theoretically had the same assortment from a brand as someone else, I think we would do better on the sales line, because of what we're doing with My Macy's.

Understood.

In terms of looking at some of these licensed, like the Finish Line, and sunglasses, those areas, are you -- can you share any analysis that you've done just to suggest that customer may be cross-shopping other areas of the store, and perhaps that's part of the lift that you're seeing in the juniors area?

Sure, absolutely and we obviously track that quite closely.

And they shop those areas just like they're part of Macy's.

Sometimes they don't even know that they're shopping in a licensed department.

They come in to buy sunglasses.

They just happen to buy them, and may not even recognize that it's Sunglass Hut.

But they're also spilling over into --

Absolutely.

Okay.

And then finally, just how are you and the Board thinking about the dividend?

Obviously nice increase there.

Are you looking at it just kind of wanting to be competitive with other companies out there in terms of the yield, or how do you think about dividends versus buyback?

I think the Board has been relatively consistent in terms of looking at yield as well as payout ratios and trying to keep the yields competitive, so I think you'll continue to see, absent something changing, the Board making the same kind of decisions they've been making for years, between the dividend and the buyback.

Okay.

Great.

Thanks.

Stacie Rabinowitz with Consumer Edge Research has our next question.

Hi, I actually had two, and hopefully they're relatively quick.

Number one, you had mentioned thinking about same-day delivery, and I know that ebay now does one to two-hour delivery for you in some markets.

So my first question was just if you could comment on how successful that's been, or what the impact has been in those markets, that's causing you to maybe think about doing same-day shipping more broadly?

And then number two, just I know it's hard with the shift to compare, but anything on how Easter did this year versus last year in terms of the holiday specific products or sales events would be fantastic.

Yes, no, it's really hard to compare Easters, given the weather change, because that was a big factor.

Obviously we were quite pleased with our kids' business which is a big Easter business, and also our dress business was pretty good, given the weather.

As you think about Easter, I would say, hard to judge because of weather, but clearly did a lot of business in those categories, which tend to go with the holiday.

In terms of same-day delivery, I don't think we have done anything yet in terms of a test that gives us any sense of how big it could be.

So we're beginning to think about, should we test, should we not, where, how, et cetera, and probably will.

Okay.

Thanks.

And next we'll move to Richard Church with DISCERN Investments Analytics.

Just a question for you, that expands on an earlier question about digital marketing.

Beacon Technologies has been gaining some traction and some momentum, and I know you're testing this technology in your stores.

I was wondering if you have any insights or learnings that you could share with respect to how the customer might be responding or accepting of Beacons.

Sorry.

I can't comment on that.

Okay.

And then I think you alluded this to an earlier answer, but any mix shift with respect to in-store or omnichannel online sales, when you -- when you're in a quarter like the first quarter, which was somewhat disrupted by weather or whatever may be disrupting traffic, any mix shift that you think is important to call out?

No, not really.

Okay.

Thank you.

Rick Snyder with Maxim Group has our next question.

I was wondering if you could go over those comp components again, because my numbers don't quite match.

And also, you -- if I'm not mistaken, you've anniversaried the Finish Line licensed departments, and are the LIDS also licensed?

Did I understand that?

Correct.

Okay.

So the gap between comp and owned plus licensed gap will narrow in the second quarter, third and fourth, because of year rounding on the Finish Line.

Okay.

And could you just go over the AUR UPT numbers again?

Yes, and again it's all tracking back to the comp of down 0.8 on an owned plus licensed basis.

Oh, down point --

Because that's how we're evaluating our business internally.

Okay.

Thank you.

I think that's probably where you were off.

Okay.

Thank you.

(Operator Instructions)

We'll move to Steve Kernkraut with Berman Capital.

I have one question that's more of a longer term, rather than a short-term quarterly question.

Terry has talked in the past about how he's not interested in Canada, and he's very interested in China, and I just wanted to know if you could update us on what your thoughts are there?

Whether or not anything has changed, whether anything more aggressive is going to happen in China, and would Sears likely try to fill the assets that they have in Canada, whether or not that's of any interest to you?

Yes, I don't really think anything has changed, Steve, from that.

As you have said, Terry's not been interested in Canada, and has been more interested in China, and we're continuing to explore international opportunities for both Bloomingdale's and Macy's.

As you know, Bloomingdale's has a license deal in Dubai, which has been a very successful venture for both the partner and for us, and so we may broaden that partnership as well.

So I would say international is still something that's intriguing, but nothing imminent in terms of significant.

Not something that's we'll see dollars put down in trying to invest in China, something like that?

Well, at some point, you may.

I mean it's obviously -- if we ever decided to do it, there would be dollars involved.

Right.

So I would say it continues to be interesting.

Okay.

And with your e-commerce business so successful at this point, are you getting many international buyers along that line?

Has that been an avenue that's been working for the international customers?

Some, but we really haven't focused on it.

I would say that we're so focused on getting the omnichannel and the domestic business doing well, plus tourists, that's really where the focus has been, and we do believe that there's more international growth to be done.

It just has not been a priority.

Just not a high priority.

Right.

Thanks very much.

And next we'll hear from Margaret Moore with DuPont Capital.

You called out [instant] as a positive trend, and I was wondering if you could discuss whether that was a function of new product innovation or the positive impacts of better sales associate training, because that has been an area where department stores in general have been losing market share historically.

And do you expect these trends to continue for the rest of the year?

Yes, no, I think it starts with an assortment that was better edited, and our in-stock position on key sizes was improved.

And I think a version of My Macy's was executed there, in combination with improvement in terms of training and MAGIC Selling, in terms of the store execution.

But I think a lot of the strength started with merchandise strategies, and we do expect the strength to continue through the year.

Thank you.

We'll move to Brian Rounick with BLR Capital.

I know that you have addressed this, but if you could sort of talk about, just so we can get a better idea of the trends that are going on, what maybe the March-April combined comps were?

We're not disclosing anything that specific.

Okay.

Could you say if they were positive or negative?

No, we're not disclosing.

Okay.

Fair enough.

Okay.

How about Easter week versus Easter week last year?

How about let's wait until the end of the second quarter, and then we can talk about it.

Fair enough.

All right.

Sorry.

Thank you very much.

It appears we have no further questions at this time.

Ms. Hoguet, I'll turn the call back over to you for any closing remarks.

Great, thank you all for your interest and your support.

If you have further questions, feel free to call me, Matt, or Sarah, and we'll do our best to get your questions answered.

And thanks.

Take care.

And once again, that does conclude today's conference.

We thank you for your participation.