Karen Hoguet - Chief Financial Officer

Charles Grom - Sterne Agee Lorraine Hutchinson - Bank of America Matthew Boss - J.P. Morgan Paul Trussell - Deutsche Bank Paul Lejuez - Wells Fargo Bernard Sosnick - Gilford Securities Bob Drbul - Nomura Stephen Grambling - Goldman Sachs Michael Binetti - UBS Paul Swinand - Morningstar Oliver Chen - Citigroup Jeff Stein - Northcoast Research Kimberly Greenberger - Morgan Stanley Richard Jaffe - Stifel David Glick - Buckingham Research Liz Dunn - Macquarie Stacie Rabinowitz - Consumer Edge Research Richard Church - Discern Investment Analytics Rick Snyder - Maxim Group Steve Kernkraut - Berman Capital Margaret Moore - DuPont Capital Brian Rounick - BLR Capital

Please standby, we are about to begin. 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 am 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 approximately 2 hours after the call concludes. Please refer to the Investor Relations section of our website for discussion and reconciliation 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 county. 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 a $1.25 per share on an annual basis, as well as $1.5 billion increase in authorization to buyback 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 & 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, a 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, a strongest families of business in the quarter were handbags, impulse apparel for a Millennial customers, active, kids and in Men apparel. We also continue 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 perform much better in the south than in the north, giving us confidence for the second quarter, now that the weather is 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 at 38.9%. Merchandize 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 like, relating to the weak first quarter sales, the builds include many strategic investments in customer favorites and summer essentials, it 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 initiative 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 & Family shift the profitability of the portfolio continues to be very strong. Four, the flexing of expense in sales variable areas and five, from timing shift particularly in marketing which will impacts 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 effect of 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 shares down 5.6% from last year and earnings per share on a diluted basis was $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 merchandize payables, the change in retirement expense, the payout at cost associated with the 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 utilize $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 strength in promotional strategies in the third quarter. The customer responded very well to these changes and we hope we will experience the 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 retail calendar. There has been a lot of talk about these subjects in recent months. But we can make sure that we have the widest assortments, a customer-centric approach to omnichannel, the best talent training and coaching that energizes our associates and very compelling marketing. We spent a lot of time at Macy’s and Bloomingdale’s, thinking about execution, solid blocking and tackling to serve the customer everyday, managing the business with discipline and sensitivity to the perspectives of our associates, of vendors and our communities. This is how we are winning and we’ll continue to win. As I say quarter after quarter, our M.O.M. strategies, My Macy’s Omnichannel and MAGIC Selling are a roadmap going forward. We do not tire of it. In fact, we are exploring and finding new ways to make M.O.M. 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 it work in driving results. And we will remain focused on what we can control. I’ll now take your questions.

(Operator Instructions) And our first question today comes from Charles Grom with Sterne Agee. Charles Grom - Sterne Agee: Hey Karen. It’s Chuck. How are you?

Hi Chuck. Good. Charles Grom - Sterne Agee: In February, you outlined at least 10, 11 assumptions to kind of hold our hands throughout the year in 2014. Just wondering if you still believe in those 11 assumptions, if there’s any changes there to what you think?

I confess I don’t have the 11 in front of me. But I don’t think there is any change. Tax rate hasn’t changed. Margin expectation hasn’t changed. Sales hasn’t changed, depreciation, so I don’t think there is any changes but I’ll go back later and look at the 11 to be sure. Charles Grom - Sterne Agee: Okay. And then just regarding the first quarter, Friends & Family shift, just wondering if you wanted to quantify that in any thing on gross margins in the second quarter that we should think about given the inventory levels being a little bit heavier at the end of the first quarter?

Yeah. In terms of Friends & 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 want the 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. Charles Grom - Sterne Agee: Okay. Fair enough. My last question is 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. Charles Grom - Sterne Agee: Okay. Makes sense. Thanks again.

And next we’ll move to Lorraine Hutchinson with Bank of America. Lorraine Hutchinson - Bank of America: Thank you. Good morning.

Good morning and welcome back. Lorraine Hutchinson - 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 you have planned for that important older millennial as the year progresses?

The whole millennial strategy is working really well. As you know, a lot of the new brands in the impulse of the older millennial again began 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 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 is a lot going on in shoes, handbags, cosmetics and also home. One of the strengths in our furniture business has been smaller scale furniture which is really appealing to the millennial customer. And we’ve now got strength in kid’s furniture. So there is just a lot going on for that millennial customer throughout the entire store, not just the apparel areas. Lorraine Hutchinson - Bank of America: Great. Thank you.

And our next question comes from Matthew Boss with J.P. Morgan. Matthew Boss - J.P. Morgan: Hey Karen. Good morning.

Good morning. Matthew Boss - J.P. Morgan: So last year’s second quarter, when we all kind of started to talk about this durable spending shift and weaker trends in apparel. Can you just -- can you back up and kind of talk about your confidence in the consumer today and have you seen anything in terms of leading indicators from a category perspective. It really just gives you the comfort as oppose as just kind of what you’re seeing out there. It 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, 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. Matthew Boss - J.P. Morgan: 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 kind of separate from the pack here?

Well, I think we are doing a couple of things. One is the omnichannel approach. It’s 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 to 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 source but also having a fabulous internet presence, a digital presence whether it’d be a mobile devices, smartphone or traditional laptop, desktop application. Matthew Boss - J.P. Morgan: Great. Best of luck.

Thank you.

And Paul Trussell with Deutsche Bank has our next question. Paul Trussell - Deutsche Bank: Good morning Karen.

Good morning Paul. Paul Trussell - Deutsche Bank: You mentioned that retirement expense savings would be helpful to you guys 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 have 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 healthcare, which we anticipate happening more towards the end of the year. So we got more net benefit in the first quarter. Paul Trussell - Deutsche Bank: Thank you. And then also last quarter, you mentioned that Bloomingdale’s was better performer than Macy’s. I know both were a little bit below expectations this quarter. But can you just give a little bit more color on what you’re seeing out of Bloomingdale’s?

Yeah. No, Bloomingdale’s had a tough first quarter as did Macy’s and again did better in their Southern stores and the Northern stores. So that would be the case again. Paul Trussell - Deutsche Bank: And then lastly, just the home comment that you made kind of stuck out with that being challenging. I mean, 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 kind of weather and macro?

Honestly, it stood out for us too because as you know, home has been so strong for so long. So I’m hoping it’s just an outlier and by the second quarter that would 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. Paul Trussell - Deutsche Bank: Thank you.

Next we’ll move to Paul Lejuez with Wells Fargo. Paul Lejuez - Wells Fargo: Thanks. 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 is 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 the gap has closed significantly since late April. Paul Lejuez - Wells Fargo: Okay. And then on the gross margin front, I assume that the first quarter benefited from the shift in Friends & Family. But please correct me if that’s wrong, if you looked at the first quarter margins excluding that shift, what would things have looked like?

No, I don’t really think that’s a big factor in terms of the margin. Paul Lejuez - Wells Fargo: Okay.

I think that the 10 basis point improvement was real. Paul Lejuez - Wells Fargo: 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. Paul Lejuez - Wells Fargo: Okay. Great. Thanks and good luck.

Thank you.

And Bernard Sosnick with Gilford Securities has our next question. Bernard Sosnick - Gilford Securities: Good morning.

Good morning, Bernie. Bernard Sosnick - Gilford Securities: 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 will, 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. Bernard Sosnick - Gilford Securities: And as regards to marketing, you said 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?

Yeah, I don’t think you’ll see a major change in coupons. But in the second quarter last year, we did a more regular price event 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 promotional strategies in the quarter. Bernard Sosnick - Gilford Securities: All right. Okay. Thank you very much.

Thanks Bernie.

Bob Drbul with Nomura will go next. Bob Drbul - Nomura: Hi Karen.

Hi Bob. Bob Drbul - Nomura: The first question is on -- you talked about the economics versus weather, just when you think about you think there is more play versus just weather, what really are you focused on or like, what are you concerned about that you guys were seeing within the customer base?

Honestly, we are still focused right now on executing and as I said on the things that we can’t control. Bob Drbul - Nomura: Yeah.

So that’s -- we are keeping our heads down and executing our strategies as we had anticipated and trying to get as much as we can. Bob Drbul - Nomura: Okay. And any inventory increase, are there any areas on the inventory side that you guys are uncomfortable with levels right now?

Well, there is no major areas, but as you would expect at any point in the year, there is always glut somewhere within the inventory but nothing that we are concerned about it at this point. Bob Drbul - Nomura: Okay. And then my last question is just 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 the 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. Bob Drbul - Nomura: Just with like the slowdown in sales, like did you see a big difference on the e-commerce trends first quarter ‘14 versus first quarter ‘13 and did that impact at all the profitability?

Weather impacts our online sales as well as store sales, but it doesn’t impact the profitability. If anything, we are 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. Bob Drbul - Nomura: Okay. Thanks very much, Karen.

And our next question comes from Stephen Grambling with Goldman Sachs. Stephen Grambling - Goldman Sachs: Good morning. Thanks for taking the questions.

Sure. Stephen Grambling - Goldman Sachs: Just a couple of follow-ups. I guess the first is just as we think about the consumer, can you just maybe provide a little bit more color on any trends you are seeing among household to different income levels?

No, we don’t -- I mean, 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 and our weakness was across price points and our opening price points were better. So, again, that leads back to the weather discussion that was 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. Stephen Grambling - Goldman Sachs: That makes sense. Thanks. And then one other follow-up or just related 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 fairing online versus in-store?

Interestingly, the Millennial was doing well in both places. There is sort of 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, not quite sure where that line is drawn? Stephen Grambling - Goldman Sachs: Okay. That’s helpful. Thanks so much.

And next, we will move to Michael Binetti with UBS. Michael Binetti - UBS: Hey. Good morning, Karen.

Good morning. Michael Binetti - UBS: I was hoping you could talk a little bit about -- obviously, the brick-and-mortar fleet has been -- for retail has been in 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 guys have had a very calculated approach to how you look at fleet and any closings you might do. How do you think about some of the news we’ve heard lately at some of the big boxes and malls you are in are going to stepping up store closures?

I think we do the exact same thing. We’ve always done, which is we are constantly analyzing our store base and analyzing which, if any, should be closed and I would expect that to continue. There is no question that there is some stores and perhaps some malls that won’t be in existence in five years. But there is 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. Michael Binetti - UBS: Okay. And then just a follow-up, I was hoping you could talk a little bit more about some of these specific omnichannel initiatives you talked about over the last few quarters with us. The first obviously would be store-to-door and then, you also talked about buy online and pick up in-store. Can you talk about -- how do you view the impact on profitability of those kinds of initiatives to stay versus where it could be going and maybe some metrics you could give us to get excited about pick up in-store?

Yeah. Let me start with that. The buy online, 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 the customers or 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. Some cases its convenience, not having time to shop the whole store, so they shop online and pick it up. And in other cases, it’s same day, a way of getting something the 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, 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. The store-to-door or Search & Send as we call it, is also been very helpful, allowing us to get wanted goods to customers when either were 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. Michael Binetti - UBS: Thanks a lot.

Our next question comes from Paul Swinand with Morningstar. Paul Swinand - Morningstar: Good morning and thanks for taking the question.

Sure. Good morning. 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, is 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. Unfortunately, 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. Paul Swinand - Morningstar: So will that grow as the sales go up, or because you’ve got a pretty fixed store base? Will it be more flat at growing just on a dollar basis?

I don’t know exactly how to predict it. My guess is that the $1 billion-ish is probably the right number for the next couple of years. Beyond that, it’s hard to know right now. I don’t anticipate a major increase. Paul Swinand - Morningstar: Great. That’s very helpful. And then real quick on the licensed business, it sounds like you’re pleased with the licensed 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 to rollout 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. Paul Swinand - Morningstar: Interesting. Thanks a lot and best of luck.

Thank you very much.

And our next question comes from Oliver Chen with Citigroup. Oliver Chen - Citigroup: Hi. 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 now as we move forward throughout the quarters?

I can’t tell you that then the competitors would know it. But in terms of the margin, as I said a few minutes ago, we are expecting for the year still flattish to down slightly. So yes, the first quarter was great. But I don’t change the annual guidance for gross margin at this point. Oliver Chen - Citigroup: Okay. I’m encouraged by your statement on pent-up demand. If you could highlight for us why you have conviction there and what you are 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 climate. So that’s part of why we’re feeling confident. Oliver Chen - Citigroup: Got it. And my last question was just about traffic and traffic. If you could speak to what you’re most excited about, about your traffic driving strategies and I’m kind of curious about this as it applies to online as well as bricks and mortar or however, maybe most prudent to talk about?

Our number of transactions, which is as close as we can come to traffic, we are down in the first quarter as I said. But, again, I think a lot of that was weather related, plus the shift in Friends & Family. We will be able to judge better as we get through the second quarter, but obviously our marketing approach is trying to drive traffic to our stores, but also to our mobile devices, to laptops, desktops, etcetera, and smartphones. So our traffic driving strategies today are broader than they used to be when we were completely focused on stores. Oliver Chen - Citigroup: Karen, a final question is just about your brand portfolio, which is outstanding. Are you very comfortable with the current mix of national and exclusive brands? Or is there anything there in terms of how you are 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 those. And wherever we see white space or available customer demand, we will ask ourselves, are we better off developing it ourselves or is there a partner we can develop that with? So if we look at for example the millennial businesses, Ralph Lauren, Denim & Supply has been a big part of that as has Maison Jules, which is a private brand or we are 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. So 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. Oliver Chen - Citigroup: The Thalia innovation has been impressive. Thanks and congrats.

Yeah, no, wait till you see the product, I got a glimpse of it a couple of weeks ago, it looks terrific. I think she is 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 the stores next spring. Oliver Chen - Citigroup: Thank you. Best regards.

Thank you.

And our next question is from Jeff Stein with Northcoast Research. Jeff Stein - Northcoast Research: Karen, thanks for question. Question on gross margins, so it’s kind of been beaten to death here a little bit, but 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 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. And maybe I will in the end, end up having being conservative, I hope so, but I don’t think so in terms of the prospect for the year. Jeff Stein - Northcoast Research: 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 BRAG, I mean, I could keep going, Bar III, Material Girl. We had a very strong quarter with a lot of the private brands. Jeff Stein - Northcoast Research: And finally, a question on your assortments online versus in-store. I guess how congruent are they at the present time and kind of 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 what’s congruent with every store, but we do try very hard to make that happen. Jeff Stein - Northcoast Research: And what areas would you say online are underpenetrated? And I guess, again, where are you kind of 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. Jeff Stein - Northcoast Research: Got it. Thank you very much.

The next we will move to Kimberly Greenberger with Morgan Stanley. Kimberly Greenberger - Morgan Stanley: Great. Good morning, Karen.

Good morning, Kimberly. Kimberly Greenberger - 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 two and a half weeks of May, not only did you make up for the deficit in Q1, but that total revenue number had actually had a plus sign in front of it.

Yes, that is okay with me. Kimberly Greenberger - Morgan Stanley: Terrific, great. Thank you. I don’t like calling a quarter based on a couple of 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 sort of four, 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-see the quarter though. Again, I really don’t want to make too much of a couple of weeks.

Very fair. And then lastly, just how should we think about SG&A as we work our way through the year, because 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, did you think it’s possible that you could hold SG&A dollars flatter, 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.

Next we will move to Richard Jaffe wit Stifel. Richard Jaffe - Stifel: Thanks so much Karen, and good morning.

Good morning. Richard Jaffe - Stifel: A question on marketing and some of the new -- relatively new opportunities to market online, the social marketing initiatives that we’ve seen. And I am wondering what’s your take on these new marketing opportunities; how much you 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 and all kinds 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. Richard Jaffe - Stifel: Is there a way -- it’s always tough to judge the impact of advertising, perhaps the e-commerce channel is 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 are getting the biggest result, and we are fine-tuning that constantly. Richard Jaffe - Stifel: So we’ll just have to wait and watch online and see how that progresses?

Yes, correct. Richard Jaffe - Stifel: Okay. Thanks so much.

You bet.

Next we will move to David Glick with Buckingham Research. David Glick - Buckingham Research: Thank you. Good morning, Karen.

Good morning, David. David Glick - Buckingham Research: The question on the second quarter, obviously your guidance implies a meaningful acceleration in sales trends and you are off to a good start. I am wondering as part of your plan for the second quarter, whether you added some sales promotion events. Obviously, last year, you had some takeaways from the quarter that you wanted to be harder hitting and that was preplanned. 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 ‘14. 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. David Glick - Buckingham Research: Great. And then 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 your -- where you have the biggest opportunity…

I think we have opportunity really throughout the quarter. David Glick - Buckingham Research: Thank you. And one follow-up, just curious the announcement by Federal Express to change to this dimensional pricing model versus pricing by weight. I am wondering what if any impact that has on how you guys approach filling e-commerce orders from a cost standpoint or an execution standpoint?

Yeah, 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. So understanding how those changes impact that, I don’t know how, but I guarantee you, we have a team working on it. David Glick - Buckingham Research: Okay, great. Thank you very much and good luck. Thanks, David.

And our next question comes from Liz Dunn with Macquarie. Liz Dunn - Macquarie: Hi, Karen, how are you?

Good. I guess my first question is sort of another question on this brand 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 I 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 and 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. I mean, that’s what Jeff and the team and then Julie Greiner, our Chief Merchandise Planning Officer, plus Jeff Kantor’s team at dotcom, 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 brand. 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, 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. Liz Dunn - Macquarie: Understood. In terms of looking at some of these license like the Finish Line and sunglasses, those sort of areas, are you -- can you share any analysis that you’ve done to suggest that the customer maybe 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. In Macy’s 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, yeah… Liz Dunn - Macquarie: But they are also…

Yeah… Liz Dunn - Macquarie: … selling over into…

Absolutely. Liz Dunn - Macquarie: 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 payout ratios and trying to keep the yield 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. Liz Dunn - Macquarie: Okay. Great. Thanks.

Stacie Rabinowitz with Consumer Edge Research has our next question. Stacie Rabinowitz - Consumer Edge Research: Hi. I actually had two and hopefully, they are relatively quick. Number one, you had mentioned thinking about same-day delivery and I know your, 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?

Yeah. No. It’s really hard to compare Easter given the weather change but 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 is pretty good given the weather. So 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 the test that gives us any sense of how big it could be. So we are beginning to think about, should we test, should we not, where, how, et cetera and probably will. Stacie Rabinowitz - Consumer Edge Research: Okay. Thanks.

And next I move to Richard Church with Discern Investment Analytics. Richard Church - Discern Investment Analytics: Thank you. Good morning, Karen.

Good morning, Rick. Richard Church - Discern Investment Analytics: Just a quick question for you that expands on earlier question about digital marketing. Beacon technology 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. Richard Church - Discern Investment Analytics: 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’re in a quarter like the first quarter, which was somewhat disrupted by weather or whatever maybe disrupting traffic. Any mix shift that do you think is important to call out?

No, not really. Richard Church - Discern Investment Analytics: Okay. Thank you.

You bet.

Rick Snyder with Maxim Group has our next question. Rick Snyder - Maxim Group: Good morning, Karen.

Hi Rick. Rick Snyder - Maxim Group: I was wondering if you could go over those comp components again, because my numbers don’t quite match. And also if I’m not mistaken, you’ve anniversaried the Finish Line licensed departments and are the LIDS also licensed? Did I understand that?

Correct. Rick Snyder - Maxim Group: Okay.

So the gap between comp and owned plus licensed gap will narrow in the second quarter, third and fourth because of your rounding on the Finish Line. Rick Snyder - Maxim Group: Okay. And could you just go over the AUR, UPT numbers again?

Yeah, I mean and again, it’s all tracking back to the comp of down 0.8 on an owned plus licensed basis. Rick Snyder - Maxim Group: It’s down point.

Yeah. Because that’s how we’re evaluating our business internally. Rick Snyder - Maxim Group: Okay.

So I think that’s probably where you were off. Rick Snyder - Maxim Group: Okay. Thank you.

(Operator Instructions) We’ll move to Steve Kernkraut with Berman Capital. Steve Kernkraut - Berman Capital: Yeah. Hi, Karen.

Hi, Steve. Steve Kernkraut - Berman Capital: I have one question that’s more of a longer term rather than a short-term quarterly question. But 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 kind of update us on what your thoughts are there, whether anything has changed, whether anything more aggressive is going to happen in China? And would Sears likely try to -- there’ll be assets that they have in Canada, whether or not that’s of any interest to you guys?

I don’t really think anything has changed Steve from that. As you 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… Steve Kernkraut - Berman Capital: Right.

…which has been a very successful venture for both the partner and for us. And so we may broaden that kind of partnership as well. So, I would say, international is still something that’s intriguing but nothing eminent in terms of significance. Steve Kernkraut - Berman Capital: It really is an intriguing thing and that’s something that we’ll see dollars put down and then trying to invest in China or 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. Steve Kernkraut - Berman Capital: Right.

So, I would say, it continues to be interesting. Steve Kernkraut - Berman Capital: 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 with 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 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. Steve Kernkraut - Berman Capital: This is not your priority. Okay. Thanks very much.

You bet. Steve Kernkraut - Berman Capital: Okay.

And next, we’ll hear from Margaret Moore with DuPont Capital. Margaret Moore - DuPont Capital: Good morning, Karen.

Good morning, Margaret. Margaret Moore - DuPont Capital: You called out Intimate 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?

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. Margaret Moore - DuPont Capital: Okay.

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 that strength to continue through the year. Margaret Moore - DuPont Capital: Thank you.

We’ll move to Brian Rounick with BLR Capital. Brian Rounick - BLR Capital: Hi, Karen. Thanks for taking the call. I know that you have sort of 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 and April combined comps were?

We are not disclosing anything that specific. Brian Rounick - BLR Capital: Okay. Could you say if they were positive or negative?

No. We’re not disclosing. Brian Rounick - BLR Capital: 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 we can talk about it. Brian Rounick - BLR Capital: Fair enough.

All right.

Thank you very much. Okay.

You bet.

It appears we have no further questions at this time. Ms. Hoguet, I’ll turn the call back over to you for any additional or closing remarks.

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