Karen M. Hoguet - Chief Financial Officer Terry J. Lundgren - Chairman, President & Chief Executive Officer

Matthew Robert Boss - JPMorgan Securities LLC Jeff S. Stein - Northcoast Research Partners LLC Joan Payson - Barclays Capital, Inc. Oliver Chen - Cowen and Company, LLC Paul E. Trussell - Deutsche Bank Securities, Inc. Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC Paul L. Lejuez - Citi Michael Binetti - UBS Securities LLC Todd Duvick - Wells Fargo Securities LLC Priya Joy Ohri-Gupta - Barclays Capital, Inc. Lorraine Maikis Hutchinson - Bank of America Stephen White Grambling - Goldman Sachs & Co. Laurent Vasilescu - Macquarie Capital (USA), Inc. David J. Glick - The Buckingham Research Group, Inc. Omar Saad - Evercore ISI Michael Block Exstein - Credit Suisse Securities (USA) LLC (Broker) Stacie Rabinowitz - Consumer Edge Research LLC Bob S. Drbul - Nomura Securities International, Inc. Lawrence J. Haverty - GAMCO Investors, Inc Charles P. Grom - Sterne Agee CRT Dana L. Telsey - Telsey Advisory Group LLC

Please, stand by, we're about to begin. Good morning, and welcome to the Macy's, Inc. Third Quarter Earnings Release Conference Call. This conference is being recorded. I would now like to turn the conference over to your host, Karen Hoguet. Please, go ahead. Karen M. Hoguet - Chief Financial Officer: Great, thank you. Good morning, and welcome to the Macy's conference call. I'm Karen Hoguet, CFO of the company. I'm joined this morning by Terry Lundgren, Macy's Chairman and CEO. 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 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 our most recently filed Form 10-K and other SEC filings. Terry Lundgren will start us off this morning to discuss the company's results and strategic imperatives. I will then discuss three subjects in more detail; the third quarter earnings, our work on real estate and the outlook for the fourth quarter. And then we'll open the call up for your questions. So let's get started. It's a lot to cover. Terry? Terry J. Lundgren - Chairman, President & Chief Executive Officer: Good morning. I wanted to join the call today to help give my perspective to you directly on the third quarter earnings, to talk about the outlook and to discuss our analysis on real estate and other strategic decisions that we've made. These decisions are all being made to enhance shareholder value by strengthening our core business and accelerating changes in this new retailing climate. As you see from our press release, we had a very tough quarter, and we are clearly disappointed with the 3.6% decline in comp store sales of owned and licensed businesses, and the 8% drop in earnings per share. We believe that the retail industry is going through a tough period that we seem to experience something like this every five years to seven years or so, and this one feels familiar in that regard. As many of you know, this is a management team that has navigated through difficult times in the past and we've done so successfully. As we've demonstrated in the past, we use these challenging times to move decisively forward. We use these times to reset our ambitions and determine how we're going to win and where we're going to play, while maintaining a financial objective that we set for our shareholders, which is to grow sales profitably, maintain an industry-leading profitability rate and improve return on invested capital. We know this is what will enable us to maximize total shareholder returns. We've done this in the past and we'll do this again. You will recall our decisions in 2008 and 2009 that made us a much stronger and much more successful company. We have a track record of strong financial performance and return of capital. We are taking significant steps on these important fronts, all designed to improve our operating results and enhance shareholder value. We're taking a series of actions specifically aimed at strengthening our core business. These are designed to restore our owned plus licensed comp sales growth to the 2% to 3% range that we've had in the past and an EBITDA rate of 14% over the next few years. We continue to believe that the M.O.M. strategies are right, but they need to evolve over time. The first M in our M.O.M. strategy is for My Macy's. We continue to focus on localization and getting the right mix of merchandise in our stores for our customers at a local level. We are now taking this to an even more granular level with more focus on personalization. This will happen both in-store and online. Our aspiration is to help personalize shopping experience and offers to our customers as they walk into our stores or enter our website. We also need to help attract new customers in ways that we will make them feel like it is My Macy's for each and every one of them. The second letter, the O for Omnichannel, now embraces our mobile strategy as well as some new services and models that we've begun testing such as subscription services. We intend to fully push the digital frontier utilizing our innovative culture with more and more testing and faster learning. We also are helping customers get merchandise however they wish, whether it be same-day delivery, Buy Online Pickup in Store, whatever is their preference. The last M, Magic Selling, has been expanded to encompass magic experiences beyond just the selling floor. We need to keep making progress with our service, particularly in-store. Although operating over 750 locations with approximately 150,000 associates and providing good service in every transaction does present its challenges, it is an essential part of our mission. As part of this strategy, we are pushing to improve shopping experiences through our people as well as through technology. We have piloted our approach in jewelry and watches in 40 locations this fall, and based on its early success, we are rolling it out companywide in mid-2016. We have had great success with licensed businesses, which help us acquire new customers and make our stores more productive. As you saw this morning, we announced another new partnership, this time with LensCrafters, to open optical departments in as many as 500 Macy's locations. In addition to the evolution of our M.O.M. strategies, I wanted to discuss two other subjects which are important to our core business and will help us achieve our goals. First, as we discussed last quarter, we are concentrating our resources on strengthening our top doors in our best locations. These locations have tremendous growth potential and we believe with greater focus we can improve their already-strong results. We also recognize that we have the opportunity to condense our network of stores. We expect to close roughly 35 stores to 40 stores in early 2016, as previously announced, and we expect to continue to close more stores in the future. We will reduce expense and tighten capital spending additionally to operate more efficiently, while funding the highest potential growth initiatives. Our target is to reduce SG&A by $500 million on an annual basis by 2016. But be clear that we're going to make significant incremental progress in 2016 and 2017 as well. We expect part of this reduction to result from a greater use of technology. We will also reduce capital spending for the next year to be somewhere around $1 billion, and that compares to $1.2 billion which we expect to spend this year, and that's just the right decision for us to make after the challenging year that we're having. In addition to strengthening the core business, we are also testing new directions for future growth. We look for places where the growth is complementary to our core business. We want to invest in attractive businesses that meet three criteria. One would be, the business is attractive on its own; two, where we would bring something new to the table; and three, where assuming we win, we'll strengthen our core capabilities. The three areas which we are focused currently on is – one is Backstage, which you know about, but over the next two years we intend to open approximately 50 free-standing Backstage stores. In addition to spring – into spring 2016, we're going to pilot Backstage stores within up to 10 existing Macy's store locations, creating a new hybrid model and we believe that these stores within our stores can help bring new vendors and new categories, which will appeal to existing customers, but also attract new customers to the full-line store. We are finding that Backstage is definitely attracting a younger consumer. And assuming these pilots work, we'll be ready to roll this concept out as a hybrid model quickly. Second idea is Bluemercury, where we've opened 16 free-standing Bluemercury stores this year, taking that total to 76. Over the next two years, we expect to open another 40 or more locations. In addition, we're rolling out Bluemercury shops in Macy's stores and we'll utilize the Macy's capability to greatly enhance the experience and grow our online business at bluemercury.com. And also we will appropriately expand Macy's in China. I was just there last week as we watched on Alibaba's Tmall Global site, and we are also opening Macy's and Bloomingdale's stores in Abu Dhabi in 2018. These tests may also lead to further international opportunities. Before I turn the call over to Karen, I want to make a few comments about real estate. I'm particularly pleased that Tishman Speyer has become our partner, and they're going to help us to capture more value from our real estate. This is something we believe in and Tishman Speyer is a company that has an outstanding track record of creativity in developing world-class real estate assets and they are as excited as I am about the possibilities to unlock potential value in many of our real estate locations, including our mall locations. So we're going to begin by focusing our efforts on potential partners or joint ventures for the four major flagship properties, but don't misunderstand me; this is just the beginning. But we're going to start with Herald Square, Union Square, State Street and Downtown Minneapolis. From our work so far, we believe there is material shareholder value that could potentially be created from these efforts. And these partnerships could extend, as I said, into the mall store locations as well. We will also intensify our current efforts with selected real estate monetizations and redevelopments in instances where the retail business could be enhanced or where the value of the real estate simply exceeds the value to operate it as a retail business. And we've demonstrated this in the past and we think there's more of these opportunities. As Karen will discuss in a few minutes, we and our board concluded there was not enough value to be created from the establishment of a REIT at this time, even before factoring in the operational and tax risks associated with doing so, but we did put these unconcluded risks aside for our valuation process and still came to the conclusion that a REIT just does not create significant value or enough significant value at this time. And so we've studied it, we've used great outside advisors to help us think this through, and I just want you to know that we've given this a very, very thorough, thorough look. Also know just that I'm just not happy with our current overall results and I'm committed to fixing it. Our team is among the deepest, most experienced and most determined team in retail. That's been clearly recognized for the last several years as we've proven to have strong success. And while we are quite dissatisfied with our current results, we're quite confident that we'll be able to return to delivering profitable growth. We know this is what you expect of us and I guarantee you, that's what I expect of ourselves. Our expectations are based on our demonstrated ability to respond to market challenges and emerge stronger. No other retailer has a track record of mastering change and remember that some of our boldest and best ideas are developed during these down cycles. Our success since the beginning of fiscal 2009, which includes a 540% total shareholder return versus the Dow of 121% over the same period, means that we have demonstrated our ability to do this and we're operating from a position of financial strength. So, let me turn this over to Karen now, who's going to fill you in on some more of the details. Karen M. Hoguet - Chief Financial Officer: Thanks, Terry. As Terry said, the third quarter was disappointing. The sales trend unexpectedly weakened versus that experienced during the first half of the year. Comp sales on an owned plus licensed basis were down 3.6%, and on total sales of $5.9 billion were down 5.2% below last year. As discussed last quarter, the total sales declined more than comp due primarily to the reduction in sales of our private brand merchandise to a third-party. Traffic was clearly a problem for us in the quarter, as I'll discuss in a minute, and I have to say, we're anxious to see how other retailers fared in the quarter. But in the absence of that perspective, I'll describe the factors that we believe led to the weakness. First, sales performance in our tourist doors weakened versus the second quarter, with a significant decline in international tourist sales. Using international credit card sales as the proxy, we estimate the impact of the lower international tourist sales to be approximately 1.5 points in the third quarter, which compares to the one point that we talked about for the first quarter and the second quarter. As you might imagine, these are also our most profitable doors. And remember that we are significantly more weighted to tourist markets than our major competitors. Second, the weather has not helped with the warm temperatures experienced across the country. Our sales of cold weather merchandise, such as coats, sweaters, boots, et cetera were significantly below last year in the quarter. Third, the Center Core businesses are still growing, but experiencing slower growth than in recent years. This is in part related to the slowdown in tourist sales. And fourth, some of our major brands experienced weakness during the quarter, as you've heard mentioned on the various calls recently. In spite of disappointing overall sales, there were some bright spots. First, digital growth continued to be very strong. Our furniture and mattress business also continued very strong and soft home categories like textiles, tabletop, et cetera strengthened in the third quarter. Active continues to be a very strong category for us across the store, whether it be in men's, women's, or kids. In fact, our kids and younger Millennial businesses also did relatively well in the quarter. Geographically, we did the best in the West, particularly the Northwest. As I referenced a few minutes ago, the total number of transactions was down 3.6% versus last year in the third quarter, which compares to a flattish trend in the first half of the year. Transactions are a proxy for traffic, and clearly, something changed in the third quarter. Average unit retail was down 1% and units per transaction were up 1% versus last year. Both of these trends were similar to those in the first half of the year. Gross margin rate in the quarter was 39.8%, up 60 basis points versus last year. Merchandise margin was up slightly in the quarter, but the gross margin rate also benefited from the reduction in the low margin third-party sales versus last year. Inventory at the end of the third quarter was up 4.6%, and on a comp basis, inventory was up 3.1%. This is higher than anticipated and higher than we'd like it to be, but it is the result of the disappointing sales performance. We will need to liquidate this inventory in the fourth quarter so that we can maintain the flow of fresh, new merchandise. SG&A in the quarter was $1.968 billion, down $39 million or 1.9% versus last year. During the third quarter, we booked a $57 million gain on the sale of the upper floors of our Seattle store, which occurred a quarter earlier than we had planned. In total, in the third quarter, we booked $78 million of asset sales which compares to $48 million last year. Marketing expense was less than last year in the quarter due primarily to a timing shift into the fourth quarter. We also benefited in the quarter from the savings associated with the restructuring implemented earlier this year and also a reduction in the bonus accrual due to our weak performance. The reductions were offset in part by our investment in growth initiatives, investments in digital, Bluemercury, Backstage and China. Credit income in the quarter was $177 million, which is $5 million lower than last year as anticipated due to the costs associated with reissuing our co-brand credit cards with chips. Credit usage or penetration was 49.3% in the quarter above last year by 60 basis points. Remember also that we are consolidating the results from the China joint venture, which at this point is only a small amount of expense. Operating income before the asset impairment charge was $369 million or 13% below last year. We also booked non-cash asset impairment charges of $111 million in the quarter. These are primarily related to the potential 35 store closings to 40 store closings which we announced in September. The estimate will be fine-tuned, if necessary, when the decisions on specific locations to be closed is finalized later in the year. Interest expense in the quarter was $80 million; tax expense was $61 million, an effective rate of 34.6%. Also, as I just mentioned, we're consolidating the results for China that flow into our operating income. We then will break out the portion of, in this case, the loss attributable for our joint venture partner, which was $1 million in the quarter. Net income attributable to Macy's shareholders is $118 million, or $186 million, excluding the asset impairment charges, which is 14% below last year. Average share count on a diluted basis was 329.7 million shares, down 8% from last year. And therefore, earnings per share, excluding the asset impairment charge was $0.56 a share which is down 8% from last year's $0.61 a share on this basis. Moving on to cash flow; year-to-date cash flow from operating activities was $278 million, $563 million below last year. This is due to less net income, more inventory and lower payables. Cash flow from investing activities is about the same as last year, excluding our acquisition of Bluemercury earlier in the year. In the financing section, you will note that we showed $791 million of debt issued, which is all commercial paper. These borrowings are expected to be gone long before the end of the fourth quarter. You'll also note that we bought back $1.8 billion of stock this year, or 30.6 million shares. Let's move on now to real estate. As Terry said, we and our board have been studying numerous alternatives for utilizing our real estate to create value. We engaged multiple advisors and have spent countless hours examining alternatives. Our primary focus in recent months has been related to the potential for spinning off some of our properties into a REIT. The premise of a REIT, as you know, is that we would create a separate real estate business that would presumably trade at a higher multiple than we do as a retailer and that this new entity would be able to then grow into a separate business on its own. That opportunity for valuation arbitrage and creating a new business sounds promising. But as we analyzed it further, we realized that its creation would not create nearly as much value for our shareholders as we had hoped. We reached this conclusion before taking into consideration the operational and tax risks associated with the creation of a REIT, which also would be relevant. Our analysis addressed several key factors; first, the size of the REIT. This is a function of the rent that the retailer can pay and therefore the amount of earnings for the REIT that could be then capitalized at a potentially more attractive valuation multiple. Second is how the REIT would be valued. Honestly, there aren't any true comparables to look at for a Macy's REIT, which would at least at the outset, be a single-tenant department store REIT. Some of the factors influencing valuation include the quality of the properties, the diversification of geography and brand, as well as the lease terms themselves. And the third key factor would be how would the pro forma retailer trade? In other words, would the separation of real estate impact the valuation attributed to Macy's by the public markets, given the leveraging effect of incremental rent and the loss of control of properties? Even assuming no change in the retailer's multiple, a conservative assumption on a pro forma basis, any resulting value creation is not significant. So, each of these three factors played a part in driving the conclusion. The most significant was the amount of incremental leverage in the form of rent that the retailer could support. This, in turn, is driven by the financial flexibility needed at the retailer to manage through ongoing secular changes in the sector. Our industry can be cyclical and you don't have to look far back for evidence that swings in leverage can be material through this cycle. We've lived through enough downturns and bankruptcies to know that there is a real benefit to the retailer of maintaining the flexibility of an investment grade rating and having access to capital in all markets, particularly when the industry is in flux. In addition, our real estate advisors indicated that the REIT would trade better if the retailer was investment grade, since at least initially it would be a single-tenant REIT. As I said a few minutes ago, the leveraging impact is highly material. When we capitalize the potential rent that the retailer would pay the REIT, at the 9.3 times factor for Macy's that Moody's is using for us for 2014, or potentially higher given that these leases would be long-term in nature, cash generated through leverage of the REIT can offset that somewhat by paying down existing debt, but leverage is still a limiting factor on the size of the REIT transaction that we could pursue. There would also be material transaction leakage in any REIT formation. These friction costs would include items, such as debt prepayment costs, transaction fees, incremental property taxes and transfer taxes. We would also be required, under the relevant tax rule, to affect what is known as an earnings and profits purge, whereby we would distribute a portion of pre-transaction accumulated earnings and profits. While our shareholders would ultimately benefit from this distribution, it would limit proceeds available for debt paydown at the retailer and consequently, the size of the REIT transaction that we could prudently pursue. In the end, the value creation was not significant and as such our board decided not to proceed. This is something we will continue to monitor as circumstances and markets could change. As Terry mentioned, we are encouraged by the possible value creation from partnership or joint venture opportunities for our flagship properties at Herald Square, Union Square in San Francisco, State Street in Chicago and Downtown Minneapolis. These transactions could be for individual properties or could be more broad-based. We are open to all possibilities that will create sustainable value. The board agreed that we should immediately begin a process to explore these opportunities. The ultimate structures will be determined by our process. Our expectation though is that we will be able to create significant value. It is possible that these partnerships and joint ventures, as I mentioned a minute ago, would extend to our mall-based stores and be significantly more broad-based than these four properties. We're seeking creative ways to strengthen our retail presence, while monetizing or highlighting value of the less productive space. These will take some time to execute. In the case of these four buildings, they are very complex and the best answers are likely to be very site specific. As examples, both Brooklyn and Seattle took over a year from inception to completion. We have also recognized through all this work that we could benefit by adding resources to help us create more value with our real estate. As Terry mentioned earlier, we've engaged Tishman Speyer in an expanded relationship to advise and support our management team in identifying and advancing potential store redevelopment projects nationwide. We are very excited to have their help with these efforts. And as always, we will give you progress reports as we proceed. So, let's move on now to our outlook for the fourth quarter. As you saw in our press release, we are forecasting our comp sales on an owned plus licensed basis to be down 2% to 3%, which would lead to the year being down 1.8% to 2.2% on this basis. Total sales for the year are now assumed to be down 2.7% to 3.1%. The fourth quarter sales assumption incorporates an improvement in trend from the third quarter. I would point to three factors that should contribute to this improvement in trend. The first is that Macy's and bloomingdales.com both penetrate higher as a percent of sales in the fourth quarter than in earlier quarters. Therefore, the higher growth rate of the online business is mathematically more of a help to the sales increase in the fourth quarter than it is in the third quarter. Second, weakening international tourist business reaches the one-year point in mid-December and that will help the comparison be a bit more favorable in the back half of the quarter. And three, we feel very good about our gift assortments, given early reads in our prototype store. The trend in that store has improved significantly since we set it up for the holidays. The newness in some of our gifts is great, items like faux fur, tech watches and novelty gifts. The gross margin is expected to be well below last year in the fourth quarter due primarily to the higher-than-desired inventory position going into the quarter. For the fall season as a whole, we are expecting a lower gross margin rate than last year. SG&A in the fourth quarter is expected to benefit from the $250 million gain on the Brooklyn transaction. Excluding this gain, SG&A dollars are expected to increase versus last year. While we will continue to benefit from the restructuring completed earlier this year, the benefits are offset by the investment in growth initiatives, the shift in the timing of marketing expense in the third quarter, as well as lower asset sales gains this year outside of the Brooklyn transaction. Interest expense is assumed to be $96 million in the fourth quarter. And as you saw in the release, we are now assuming annual earnings per share on a diluted basis, excluding asset impairment and other store closing costs, of $4.20 to $4.30. This equates to fourth quarter earnings per share of $2.54 to $2.64 on this basis. Let me now turn it over to Terry to recap and wrap up. Terry J. Lundgren - Chairman, President & Chief Executive Officer: So, as you can see, we have a lot going on in our company, both in terms of delivering improved results in the fourth quarter and looking ahead to the future. It's not unusual for us to focus on a combination of strategy and execution at this time of year. Ours is a company that has always embraced change and continuous improvement. But what is different this year is the breadth and intensity of activity, given disappointing results, together with the exceptional opportunities we see emerging from the rapid evolution of shopping patterns and preferences in the future as well as in the real estate marketplace category. We also know that our company must continue to change and we have done so year-after-year. We have a clear vision of where we need to go. We have a strong sense of urgency and we have the talent and resources to move ahead in a manner that is intelligent and is in the best interest of all shareholders as well as of our customers and our associates. I know today's announcements are a lot to digest, but you can be sure that we are well coordinated and managing each element with a holistic view for creating long-term shareholder value. Thanks for your interest and for taking the time to understand all that we talked about today, and now Karen and I are prepared to take your questions.

Thank you. We'll go first to Matthew Boss with JPMorgan. Matthew Robert Boss - JPMorgan Securities LLC: Hey. Thanks, guys. So, Terry, you spoke to restoring same-store sales back to positive 2% to 3% over time. Underlying all the noise this year, what base do you think we're at today, and is it fair to think about next year as sort of the stepping stone as you roll out some of these initiatives across the base? Any help on a potential bridge back to the 2% to 3% would be really helpful. Terry J. Lundgren - Chairman, President & Chief Executive Officer: Well, we'll come out with our forecast for 2016, as you know, as we typically do, at the beginning of the fiscal year coming, but it is what you've described, Matt, and that is, we don't expect to go from our current trend and forecast for the fourth quarter into the plus 2% to 3% immediately. All of these steps that we've described are aimed toward restoring that growth that we've seen in the past, but they're going to take time. All of these subjects are going to take some time. So this is going to be an adjustment period. We're going to be aggressively moving forward with the ideas that we think are working, investing in our top locations; that work has already begun, beginning to roll out the Backstage initiative, beginning to roll out the Bluemercury initiative, all these things that we've talked about. Many are underway, either planned, in the planning stages or even begun to execute in some cases. But they are going to take time to get traction. So I think you've described it well in your question. Matthew Robert Boss - JPMorgan Securities LLC: Great. And then just a follow-up; Terry, I'm curious your thoughts on the upcoming holiday. Could you help break down the negative 2% to negative 3% comp forecast as we think about tourism, AUR, as you're reducing some of the inventory, and just how you're thinking about traffic and spending behavior from the consumer this holiday? Terry J. Lundgren - Chairman, President & Chief Executive Officer: Well, first of all, Matt, as difficult as the 2% to 3% is, it's a slight improvement versus how we have been in the third quarter. And frankly I think part of that is the fact that we will anniversary the weakness of the international tourist business which we felt in the middle of December last year and throughout January. But we're not expecting any major trends and change, as you can tell, other than that. So I wish I could say it's going to get ice cold across the country, I wish I could say that tourists are going to begin to show up and start spending, but you can see in our forecast for fourth quarter, we're not expecting that. And therefore, of course all retailers who are in the fashion business like us, we're not selling lumber, so I can't carry the lumber over to 2016 and sell it at the same price next year. We're selling fashion apparel and so we're going to mark that inventory down. That will be good for consumers, but it will obviously put pressure on our own margins in the fourth quarter. But our goal is to be clear about making sure that we're prepared with fresh inventory receipts coming into spring 2016, and the only way to do that is to address the markdown needs of the short – to the sales plan that we're experiencing in third quarter and will in the fourth quarter as we've forecasted. So that's why the numbers look the way that they do in our fourth quarter forecast. Matthew Robert Boss - JPMorgan Securities LLC: Great. Thanks. Best of luck and thanks for all the color. Terry J. Lundgren - Chairman, President & Chief Executive Officer: Thank you.

We'll go next to Jeff Stein with Northcoast Research. Jeff S. Stein - Northcoast Research Partners LLC: (38:06) guys have done a great job of keeping your inventories in line and I'm a little bit surprised that your comp inventories ended on such a high note. Maybe you can just talk a little bit about why you decided – it sounds like you kind of held the line on your pricing. Wondering why perhaps you didn't accelerate markdowns and then enter the fourth quarter a little bit cleaner? And then I have a follow-up question. Terry J. Lundgren - Chairman, President & Chief Executive Officer: Well, I'll just start with saying that you have to shoot when the ducks are flying, and they're flying in November and December. That's when the traffic is there. And so – clearly, we talked about with the warmer weather, we have build-up in inventory in all of those cold weather categories of outerwear and in boots and even the down comforter throughout the home. But throughout the entire company, we've got that issue. You want to believe that it eventually is going to get cold, and so when it does, that consumers will – and traditionally, they have reacted to that. So you don't necessarily need to mark all of that inventory down. At some point, we will; but you'd like to be able to get some of that business in the higher margin and at the higher average retail early when the weather does break before you have to mark down. You'll have to mark it down eventually because there's just too much of the inventory we predict, because of what hasn't been sold in October and what we expect going forward, so that's basically why you would wait on – you wouldn't take unnecessary markdowns. On the fashion stuff, you definitely would take the markdowns, and we think we've done that, but our lumps are clearly in the cold weather category, and we'll have to address that. Jeff S. Stein - Northcoast Research Partners LLC: Understand. Okay. And with regard to Backstage, I'm wondering if you could talk about the learnings that you've had so far, and how the initial locations are performing? It seems like taking kind of a leap forward and planning to open 50 over the next two years would suggest that you're pretty pleased with what you've seen so far. And then with regard to the hybrid model, how much selling space would you anticipate carving out from your existing mall-based store to accommodate the off-price portion of that model? Terry J. Lundgren - Chairman, President & Chief Executive Officer: Sure. First of all, I will tell you, it's still early days in the evaluation process for Backstage, but our belief is that the model has certainly been proven by others. And I think in the last – particularly the last two years to three years, there has been a consumer migration to these lower price point options, and so that's where we know that there's a consumer interest there. So our belief is that there's a consumer interest there; we just need to get our share of that. We're also seeing the younger consumer migrating to that space, and with our intense focus on the Millennial consumer, which we're getting inside of our Macy's stores, we think this is another way to attract that younger consumer. So it's more of a bet on the fact that the category has been proven mostly by others. It's early days for us in our testing, but we like the model. We like what we offer. We think we offer something different than a lot of the other guys in the off-price space have done. And as far as the hybrid idea, we haven't done it yet. We're just getting ready to do so. But honestly, I think we've got space in the apparel floors. So we could take somewhere between 20,000 square feet and 30,000 square feet to create a significant space for the Backstage within the store. And I believe that lots of these stores, particularly in that mid-tier performance group that are not as productive as they need to be, and the way they're going to get more productive is bringing new ideas in, like a LensCrafters or a Finish Line or Sunglass Hut, which we've done. But now perhaps with this hybrid model, which will also allow us to bring in new categories like home décor, which has been – we've tried this in the stores in the past at the Macy's stores. It's very complicated to do on a regular basis, but it's easier to do on a one-off basis of buying coat hangers and buying mirror sets and buying these other home décor items that have been successful in Backstage. And so we think that we can create some new interest in product categories, but also attract more of these younger consumers in the hybrid model. So I'm excited about this test and what this could bring, mostly to make those mid-performing stores more productive. Jeff S. Stein - Northcoast Research Partners LLC: Thank you.

We'll go next to Joan Payson with Barclays. Joan Payson - Barclays Capital, Inc.: Hi. Good morning. Thank you. You mentioned some of the real estate optionality around the flagships. I was just wondering if you could talk about how much value those could ultimately unlock and how we should think about the real estate gains per year going forward. Karen M. Hoguet - Chief Financial Officer: Yes, honestly, I don't know the answer to that question. We do think it's going to be a significant value creation, but it is hard to predict. So, I'm sorry, I can't be really helpful with that. Joan Payson - Barclays Capital, Inc.: Okay. And then just in terms of the environment and some of the partnerships that you've been launching over time, have the views or priorities around M&A changed at all? Karen M. Hoguet - Chief Financial Officer: I don't think so. I mean... Terry J. Lundgren - Chairman, President & Chief Executive Officer: Yes, no, I don't think so either. We've said this in the past. We look at everything that we think is reasonable in terms of its potential to add value to our overall portfolio. But, we've not made any investments in the period of 2005, when we bought The May Company, which was a massive investment which we all feel very good about, until we just bought Bluemercury, which is a relatively small investment. So we look at all of these ideas and our belief is that there still are other ideas out there but we're going to continue to be very, very selective about M&A opportunities. Joan Payson - Barclays Capital, Inc.: Great. Thank you.

We'll go next to Oliver Chen with Cowen and Company. Oliver Chen - Cowen and Company, LLC: Hi. Thank you. Terry, regarding your comment on the cycle and thinking about the five years to seven years, how do we think about the evolution of how you may pursue promotional strategies in this new context? And also, as we look at retail and we kind of try to reconcile the low unemployment and certain gas benefits, what do you think is happening with the nature of the consumer? And, Karen, I just had a question on vendors, I was just curious on the vendor side, in terms of the near-term experience, what relationship you will have with the inventory positions in the gross margins? And on a longer-term basis with the vendors, I think your store experience is quite different and unique in your bargaining positions, so just curious about pure-play Internet and Macy's? Terry J. Lundgren - Chairman, President & Chief Executive Officer: Okay, so, a series of questions. First of all, one of the things that you mentioned about the consumer is that the nature of the consumer is that they're – they have – at least in the first quarter they were spending in categories such as automobiles, in home improvement, certainly in technology and healthcare. You could find the specific categories where the consumer was spending and that did demonstrate that there is reason to believe in the GDP forecast. However, that dropped off, we all saw how that dropped off in the third quarter and yet some of those categories continued to perform. So, they have – and their savings accounts still indicate – well they're a little less than they were in second quarter, they still indicate that there is money to spend if the consumer chooses to do so in the fourth quarter. We're just waiting now to see if, in fact, they will. So, I think the state of the consumer is actually reasonably okay. One of the things that I've said on a macro basis that does concern me is that we have not seen productivity in the United States improve, in fact it's deteriorated somewhat, while the unemployment rate continues to be very, very low and it just seems that those two numbers are in a bit of a conflict with one another. You'd think that productivity would have to increase to continue to see unemployment go down and that hasn't necessarily happened. So, that piece of macroeconomic news does concern me about the nature of the consumer longer-term, but we'll have to see how that plays out in 2016 with job growth with other companies. As far as the vendor relationships go, we have very, very strong relationships with our vendors. As you indicated, we are generally the largest or one of the largest customers for most of the major vendors that we do business with. But we obviously have a close working relationship. It's extremely important for them and for us. And Karen mentioned this in her comments, when you see some of these big designers, these big vendors releasing their performance, you can be sure that an important part of their overall result is directly related to their results with Macy's, just because of the size of our business relationships. So having said that, there are vendors that have been highly supportive of us in difficult times, I know they will be in this particular time and we're counting on that, but look, there's only a limit to what everybody can do in terms of assisting us through this difficult period and that's what we've got baked into our fourth quarter forecast. Oliver Chen - Cowen and Company, LLC: Thanks, Terry. And just a quick follow-up; so, from a bigger picture perspective, how do we think about promotions in a brand-appropriate way and kind of the next generation of how you think about promoting in the context of your store experience and what consumers are really looking for? Terry J. Lundgren - Chairman, President & Chief Executive Officer: Well, we are a promotional department store and always have been at Macy's. So that will continue. But I do think that there's got to be new and different and creative ways to attract customers to our business in the forms of loyalty, in the forms of our Plenti program, which is an alliance among many retailers that we now have 9 million people signed up or participating that can buy their gasoline at Exxon and they can buy something at AT&T and they can use those accumulated points and purchase something at Macy's. It's more of a points program as opposed to an outright discount or coupon. I do think there will be different forms of creating the value for the consumers. But in the end, it has to fill the obvious. And so we're working through that. Interestingly, as we've done the Backstage work, there are no coupons with Backstage. There is the price you see is the price that you get. It's more of an obvious value approach. We've tried everyday low price inside the Macy's store in the past with minimum success, so it's not that you can just change over to an everyday low price at Macy's and assume that the customer will get that and understand that value. In fact I think other retailers have tried that and gone away from that, other department stores have tried that and gone away from that in the last few years. So it's not that simple, but I do think that there are opportunities for us to find new handles and new ways to create value for customers without the typical discount that you're used to seeing. Oliver Chen - Cowen and Company, LLC: Thanks, Terry, for the vision, and thanks, Karen, for the real estate details. They're really helpful. Karen M. Hoguet - Chief Financial Officer: Great. Thanks, Oliver.

We'll go next to Paul Trussell with Deutsche Bank. Paul E. Trussell - Deutsche Bank Securities, Inc.: Hi. Good morning. Karen M. Hoguet - Chief Financial Officer: Good morning. Paul E. Trussell - Deutsche Bank Securities, Inc.: Just wanted to again touch on sales. The comments you've provided have been very helpful, Karen and Terry, but just wanted to dig into the weather perhaps a little bit more. You did speak to certain seasonal categories down significantly. Is there any color that you could help us with in terms of how coats and scarves were during the quarter; any cadence of the comp throughout the quarter, particularly perhaps in the warmer weeks of early October? And just any breakthroughs or silver linings perhaps as the weathers have gotten slightly cooler over these past few weeks? Karen M. Hoguet - Chief Financial Officer: Well, when the weather gets cooler we do see more traffic and we have seen more sales. So, yes, there's some reason to be optimistic, as Terry said. The weather will get cold. But those businesses have been tough and obviously often you go to the store to buy the coat when it gets cold so it's impacting other categories as well because it's less traffic. The 3.6% drop in transactions was pretty significant and was particularly tough in October. So I do think – and that's when the weather had gotten colder last year. So I hate complaining about the weather but in a quarter like this it's really hard not to talk about it. Paul E. Trussell - Deutsche Bank Securities, Inc.: Got it, got it. And from an expense standpoint, you mentioned that the fourth quarter, despite the sales drop, will have dollars going higher, ex the real estate asset sale. If you can just remind us of what some of those headwinds are that you're facing this year? Obviously, historically, you've been able to offset sales declines with benefits in SG&A, and to that point, you did mention in the release that you do target to reduce SG&A by another $500 million over the next few years. What are some of the areas that you think those opportunities lie in? Karen M. Hoguet - Chief Financial Officer: So, in terms of the fourth quarter, the headwinds would be the investment in the growth initiatives that we've talked about; digital, Bluemercury, Backstage, as well as China. So we are investing in growth and we are obviously looking for offsets to that. The other issue that will cause an increase in the fourth quarter is that we shifted marketing dollars from the third quarter into the fourth quarter. And lastly, we're anticipating lower asset sale gains outside of Brooklyn. So last year in the fourth quarter, we had $36.8 million of asset sale gains and this year we're expecting that to be less again excluding Brooklyn. So those would be the big factors in the fourth quarter and as you know we're constantly looking to do better and with the sales trend we're all focused on that and as we go to look for the $500 million, maybe we'll get some good news in the fourth quarter but it would be wrong for us to predict that at this point. And in terms of the $500 million, obviously it's a large number and as you know each and every year if you go back over our releases in the early part of the year, we have constantly been evolving the expense structure and announcing restructurings and different ways of doing the business that has saved money. This year it was $140 million that we decided to reinvest in growth, the year before it was $100 million. So we have stepped up the pace at which we're making changes, but it's not like we don't do this on a regular basis. When you get to a number that's as big as $500 million, obviously there will be no stone unturned and we are looking across the company for opportunities to use technology perhaps to be able to do some things more efficiently, that's a big area and we're looking everywhere. And obviously we'll update you as we go. Paul E. Trussell - Deutsche Bank Securities, Inc.: Thank you. Good luck.

We'll go next to Kimberly Greenberger with Morgan Stanley. Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC: Great. Thank you, Terry and Karen, for all of the great detail. I'm wondering if you can talk about traffic. It seems that, that was the piece that really did step down in the third quarter. Are there some strategies or initiatives that you can put in place near-term, for example, in the holiday season, to include that traffic trend? And secondarily, as you step back and look at the next one year, two years, three years, do you have any initial thoughts on a way to evolve or update your strategies that would help to fortify that traffic number and perhaps at least stabilize it and maybe potentially start driving a positive traffic trend in your stores? Thanks. Karen M. Hoguet - Chief Financial Officer: Well, as we saw with traffic soften earlier in the quarter, we did begin to focus on what could we do in the fourth quarter to help the traffic. Part of it, again, I hate to keep saying it, relates to the weather. But to the part we can control, we have been developing strategies both in terms of our marketing for the store business and also some online specific strategies to help drive traffic. So we are hoping to be able to impact it and also with weather, we hope it will do better and obviously we're on that issue, Kimberly, since we saw it developing early in the quarter. Longer-term, I think in addition to always starting with product and trying to have the best most-curated, most-wanted assortments, we're also working on categories that we think will be particularly relevant as we go forward. Areas like health and wellness for example. And other product categories that we already do today, how can we do those better; for example, the jewelry and watch test that Terry had alluded to earlier. The other thing I would say is there's a renewed focus on finding new customers and attracting new customers to our stores. We will continually try to get more trips and more business from our already loyal customers, but we do recognize the need to keep building a new customer base, and again, that relates to our Millennial customer. So I would say that would be a big part of our traffic driving going forward. Terry J. Lundgren - Chairman, President & Chief Executive Officer: I think that's well said. Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC: Great. Thank you so much.

We'll go next to Paul Lejuez with Citigroup. Paul L. Lejuez - Citi: Hey. Thanks, guys. Two questions; one on the Backstage stores, just wondering if you saw any impact, negative impact, on the nearby Macy's stores? And then second, Terry, when you talk about a return to 2% to 3% comps looking out in a couple of years, where do you think that share comes from? And just to be clear, are you talking 2% to 3% in the core Macy's concept or do you anticipate Backstage becoming a driver to help get to that 2% to 3%? Thanks. Terry J. Lundgren - Chairman, President & Chief Executive Officer: I'll answer your second question first, and that is that we're looking at the 2% to 3% to be all in, on a comp store basis, to be all in, so that includes the new initiatives with Backstage and Bluemercury. So we're clearly seeing the shift there. I also will say that – and the other answer to your question is – to your first question is we haven't seen a deterioration in the nearby Macy's stores. As an example we have Macy's store in Queens and literally right next door, we have a Backstage store there as well, and we haven't seen a negative transfer of business from the main store to the Backstage store. So that gives us more encouragement about the possibility of putting the Backstage stores within Macy's stores when we do that test. And so I will also say on the 2% to 3%, there's going to be a growing percent of the business is going to be on our digital platform, certainly related to omnichannel. One of the complicated things about our business is that we're going to continue to aggressively support omnichannel shopping, but in many cases the customer is actually looking at her phone first, deciding where to go, coming in to the store, spending time inside the store, talking with our associates, maybe even trying the product on and then buying the product from us later, either that day or putting it in her basket and buying it a day or two days later. And so we don't necessarily believe that that sale would take place if they didn't have the store experience, but when you look at the store impact, that's a negative for the store in terms of time invested, expense invested versus – and a positive for the online business, who is getting the credit for the sale. So that's why we have to continue to look at these as overall omnichannel transaction as opposed to one versus the other. But it does create a complication for us in making sure that we understand just how many stores we need, how far will the customer drive to, try on this product once they've discovered it on their mobile device or their tablet device. And so those are the kind of things that we're thinking through but we think over time that nets to more and more of the business to continue to come from digital. And as I've said, we're growing at a double digit rate and we're already the seventh largest Internet retailer in America today, so more of the mix will come from purely how we calculate, the way I've just described it, in the online category portion of the business. Paul L. Lejuez - Citi: Great. Thanks and good luck.

We'll go next to Michael Binetti with UBS. Michael Binetti - UBS Securities LLC: Hey, guys, good morning. Karen, I know you gave a little bit of detail on the SG&A plans, but since the $500 million is a pretty big number, it sounds like it's fairly early on. I'm just kind of curious if you could give us a little more help on how you guys thought about building up to that number since it is a pretty large number. Any areas – I think it's even larger than $500 million if we take your language that says it's net of growth initiatives, right? Karen M. Hoguet - Chief Financial Officer: Yes, the intent would be it would be larger than $500 million, so that it would be net of the investment in growth initiatives. Terry J. Lundgren - Chairman, President & Chief Executive Officer: Right. Michael Binetti - UBS Securities LLC: Right. Karen M. Hoguet - Chief Financial Officer: And I will repeat what you said, which is it's really too early to talk about how we will get there. As you know, though, we've been pretty good at getting expense cuts once we commit to them. Michael Binetti - UBS Securities LLC: Okay. Maybe you could talk – just ask a little bit more about Backstage in particular, the hybrid model. As we look across the sector and just think a little bit higher level here, we've seen lots of scenarios where retailers have gone maybe a bit too far in promotional intensity and had trouble backing up after training a consumer to expect that very heavy discount. And Terry said you guys have been a promotional retailer for a long time and policed this in your stores and with your business, but how do you think about potentially cannibalizing a full-price store – or full-price sale rather, from your stores with a Backstage inside that store and what are the guardrails you look at to keep that from being a drag on the AURs longer-term? Karen M. Hoguet - Chief Financial Officer: Well, I think the key thing, Michael, is that's why we're testing. In our model that led us to feel really good about the opportunity here, we did assume some cannibalization, A) because we're taking square feet away; and, B) because we do think there will be some categories where customers may choose Backstage over the main Macy's. But we think in the longer-term, it may enable us to do more things in the Macy's store so there would be less overlap. So we actually think this could be a really cool combination of concepts over time. But in the math, we have assumed cannibalization. And we don't know. We, by the way, had also assumed that the Backstage free-standing would hurt the main store, and in the end, that hasn't happened. So it again is why we keep testing things, because you can't – with all the analytics in the world, it's very hard to predict what the customer is going to do when she's given real choices. And so we're anxious to get these first, no more than 10 stores open next year, these hybrid stores, and really see what happens. Michael Binetti - UBS Securities LLC: Okay. And if I could just ask one final question, I apologize; I know in the past, we've talked about keeping the optionality open on the off-price strategy. Should we take the announcement today that go-it-alone is the plan for the foreseeable future, and that you've looked across the landscape and don't see anything that you'd rather just acquire at this time? Karen M. Hoguet - Chief Financial Officer: I think we're still evolving with our strategy. At this point, we think we're going to be opening up the 50 new stores over the next couple of years. Michael Binetti - UBS Securities LLC: Okay. Thanks a lot.

We'll go next to Todd Duvick with Wells Fargo Securities. Todd Duvick - Wells Fargo Securities LLC: Good morning. Thanks for the question. Karen, I had a question for you with respect to your comments about keeping an investment grade rating, and I understand that and appreciate it. In the past, you have had a 2.4 times to 2.7 times target leverage range, and I think that also contemplated the IG rating. So my question is, at this point, do you have any more details that you can give us in terms of either a target leverage range, a credit rating range, or if not, if we can anticipate maybe a finer point on some of your comments with respect to the investment grade rating in the future? Karen M. Hoguet - Chief Financial Officer: Well, I think, Todd, what I would say is we have made what I'd call a slight change in the calculation methodology rather than a change in our leverage target. We did update our adjusted leverage calculation to reflect the change in Moody's treatment of operating leases. So if we calculated on the new basis, our leverage target becomes 2.5 times to 2.8 times. But again, I'd characterize that as a change in calculation methodology, not a change in leverage. Todd Duvick - Wells Fargo Securities LLC: Okay. Karen M. Hoguet - Chief Financial Officer: And having said that, for the right strategic opportunity, as has always been the case, we would consider moving outside of the stated range assuming we were confident we would get back within the range before too long. Todd Duvick - Wells Fargo Securities LLC: Okay. That's helpful. And I guess just one follow-up question to that. Commercial paper I think in the past has been a factor that you like to have, but it may not be a requirement. Can you just talk about that with respect to, is that something that you continue to value? Karen M. Hoguet - Chief Financial Officer: Well, I think as you said, you said it correctly, we like to have it. Obviously, we're in the commercial paper market quite significantly right now, and we think it's the right way to finance a seasonal business like our own. Having said that, if we didn't have it, we do have the bank line. So I can't tell you we need it, but it certainly is an efficient way for us to finance the business, given the seasonality. Todd Duvick - Wells Fargo Securities LLC: Okay. That's helpful. Thank you very much.

We'll go next to Priya Ohri-Gupta with Barclays. Priya Joy Ohri-Gupta - Barclays Capital, Inc.: Hi. Good morning. Thank you for taking the question. Can you speak to how you're thinking about the investment grade rating in the context of some of the real estate alternatives being explored? Should we see any proceeds directed to that paydown? Or is there room to flex the current rating to accommodate share buybacks? Karen M. Hoguet - Chief Financial Officer: I think that's a version of the question that Todd just asked. So I think the best way of saying it is that our target leverage is the 2.5 times to 2.8 times that I just talked about. And could that vary a little? Sure. But we do believe that Macy's needs the financial flexibility that comes with an investment grade rating. Priya Joy Ohri-Gupta - Barclays Capital, Inc.: I see. Okay, great. Thank you.

We'll go next to Lorraine Hutchinson with Bank of America. Lorraine Maikis Hutchinson - Bank of America: Thank you. Good morning. Karen M. Hoguet - Chief Financial Officer: Good morning. Lorraine Maikis Hutchinson - Bank of America: Karen, you executed a pretty significant balance of the share repurchase in the first three quarters of the year. Should we expect you to back away from that a little bit until the sales variability stabilizes? Or would you think about continuing at the same pace? Karen M. Hoguet - Chief Financial Officer: We believe that we have adequate liquidity to continue to buy back the stock. Having said that, I'm not predicting at what pace we'll be buying it. Lorraine Maikis Hutchinson - Bank of America: Okay. Karen M. Hoguet - Chief Financial Officer: But we do have the liquidity to be able to do so. Lorraine Maikis Hutchinson - Bank of America: Right. And then given the variability that some of these large real estate transactions could cause over the coming years, how do you think about the payout ratio for your dividend? Karen M. Hoguet - Chief Financial Officer: Yes, it's one of those subjects that the board addresses every year. And they will continue to do so. For this year's decision, we all felt that having a competitive dividend in the range that we've been at, made sense. And again, the board will continue to revise the analysis behind that. Lorraine Maikis Hutchinson - Bank of America: Thank you.

We'll go next to Stephen Grambling with Goldman Sachs. Stephen White Grambling - Goldman Sachs & Co.: Good morning. Thanks for all the color and going over for questions. Given the tougher traffic trend, but solid growth online, as you look at specific delivery areas, are the strongest online markets the weakest in-store markets, and as a corollary, can you talk about how you're evaluating the right number of stores longer-term in this environment? Karen M. Hoguet - Chief Financial Officer: Yes, I haven't looked at that specifically, Stephen, but we tend to find that we do best in lines where our stores are strongest. So, I actually think they work together as we said, as opposed to one cannibalizing the other. And our store analysis will always be, we look at the cash flow from operating a store given what we think the trend in sales will be over time and compare that to the opportunity of selling the store, getting out of a lease, doing whatever. Stephen White Grambling - Goldman Sachs & Co.: Understood. That's helpful. Karen M. Hoguet - Chief Financial Officer: And then obviously, we do take into consideration the math around online; for example, we know that online returns will happen someplace else if you close a store. We also know when we close a store, macys.com does less well, or bloomingdales.com in their context, but that methodology won't change. Stephen White Grambling - Goldman Sachs & Co.: Okay. That's helpful. And then one other quick follow-up on – I think it was Backstage, can you just talk to any difference in the packing and distribution that you've found and whether there may be any required step-up in the supply chain or investment at some point? Karen M. Hoguet - Chief Financial Officer: It is a very different business, particularly on the subjects you're talking about. So should we continue to expand at this rate, at some point there will need to be capital invested to help on the back of the house operation. Stephen White Grambling - Goldman Sachs & Co.: But at this point you can support this with your existing distribution. Karen M. Hoguet - Chief Financial Officer: At this point, yes. Stephen White Grambling - Goldman Sachs & Co.: Okay, all very helpful. Thanks so much. Good luck this holiday. Karen M. Hoguet - Chief Financial Officer: Thank you very much.

We'll go next to Laurent Vasilescu with Macquarie Capital. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Good morning. In terms of tourism factor, it was called out that the one-year midpoint is December. Should we expect a 100-basis point drag to the fourth quarter comp? And do you have any sense if Chinese tourists are still traveling to the U.S. after the stock market turmoil they experienced in the summer? Karen M. Hoguet - Chief Financial Officer: I can't predict how much it's going to impact us. Our hope and expectation is that it will be better than the 1.5 points that we experienced in the third quarter. In some countries, the trend actually got worse in the third quarter, so I think it's a complicated subject, but our expectation is the impact will be less than the 1.5 points that we talked about. And to your second question, Chinese customers are still coming to the United States, not to the degree that they had been buying last year. I don't know specifically in terms of how many people are coming, but from the sales perspective it's not as great as it had been, but not one of the countries where we're seeing the biggest decline. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Okay, great. And then lastly, handbags was called out as one of the best performers last quarter; I don't think we've heard anything this quarter, can you provide some color around that category? Karen M. Hoguet - Chief Financial Officer: Yes, it was still fine, as we said the growth has slowed from what it had been historically. But Center Core in total and handbags was still a good category, it's just not as good as it had been. Laurent Vasilescu - Macquarie Capital (USA), Inc.: Okay. Thank you. Best of luck. Karen M. Hoguet - Chief Financial Officer: Thank you.

We'll go next to David Glick with Buckingham Research. David J. Glick - The Buckingham Research Group, Inc.: Thank you. Good morning. Just a follow-up question on real estate and understanding your decision to go down the joint venture route versus the REIT; could you conclude that the joint venture path would create more value than a REIT, or was it that was the next best alternative, given your objective of maintaining an investment grade rating and the REIT potentially wouldn't create enough value to allow you to do that? Karen M. Hoguet - Chief Financial Officer: Well, we're excited by the value we think can be created with these joint ventures or the partnerships, David, is I think the way I'd answer your question. David J. Glick - The Buckingham Research Group, Inc.: And then how would that value be delivered to shareholders? Should we assume buybacks or special dividends? I mean how do you see that playing out? Karen M. Hoguet - Chief Financial Officer: Can't tell you that. David J. Glick - The Buckingham Research Group, Inc.: Okay. Thank you very much.

We'll go next to Omar Saad with Evercore ISI. Omar Saad - Evercore ISI: Good morning. Thanks for taking my question. Wanted to follow up on a lot of the conversation around gross margin; you guys are thinking differently about a lot of aspects in your business. There's obviously a lot of change with the consumer, the new technologies, digital, a lot of shifts going on in your business (74:39). How do you think about the gross margin model that you work with your vendors? Have you thought differently about that? Is it potentially something you would put on the table as you kind of think about the new paradigm of the consumer and in discussions with vendors is it something you'd put on the table in terms of potentially rethinking how to do it and... Karen M. Hoguet - Chief Financial Officer: I'm not sure that that is needed. Working with our vendors to help improve the sales and profitability of the business is one of the things our merchants focus on all day long. So, yes, we're always looking to work with them to improve our mutual business both in terms of sales and profitability. Omar Saad - Evercore ISI: Understood. And then help us understand the dynamic around that same conversation 3Q to 4Q, into the next year? Where's the tipping point? Is it really just the comp level and inventory level, where there becomes a little bit of a tipping point in terms of how that burden is shared? Karen M. Hoguet - Chief Financial Officer: I'm not sure I understand the question. Omar Saad - Evercore ISI: Well, it sounds like there's a little bit more gross margin pressure expected? Karen M. Hoguet - Chief Financial Officer: Oh, oh, oh. Well, if you think about the third quarter, we had very weak sales. As I said we're coming into the fourth quarter with excess inventory, most of which or a lot of which relates to the cold weather businesses and we did not want to take the markdowns and start clearing those goods in October because it will get cold. So it felt like we'd be taking price cuts too early and we would rather liquidate that merchandise when the customer's going to come in and want it. So that's why the margin shift is happening between quarter three and quarter four. Omar Saad - Evercore ISI: Okay. I understand. But the conversation with vendors doesn't necessarily change around the promotionality and the markdown support? Karen M. Hoguet - Chief Financial Officer: No. No. Omar Saad - Evercore ISI: Got it. Thank you.

We'll go next to Michael Exstein with Credit Suisse. Michael Block Exstein - Credit Suisse Securities (USA) LLC (Broker): Thank you so much for taking my question and the detail that you've given us. A couple of quick questions for Karen and Terry; number one, of the $500 million that you're targeting for further reductions, how much is that going to come from store closings, just the natural SG&A that you save there? Number two, what are your expectations for credit income going forward? And number three, a sort of strategic question. Over the last 18 months, the reach and breadth of Macy's as an organization has dramatically expanded; Middle East, China, off-price, licenses in the stores. Is it possible the organization is sort of losing focus at this stage of the game and not spending enough time on its core business? Karen M. Hoguet - Chief Financial Officer: Michael, let me take the first couple of questions. At this point, we're really not ready to break out the $500 million or how it will happen, including the subject on credit. Obviously the credit profitability is a function of the sales that we're getting and therefore the credit sales and profitability. So I think we need to see the fourth quarter before I can comment on that specifically, and the $500 million we'll get back to. And remember, the savings is more than $500 million; the $500 million is the net number. Terry J. Lundgren - Chairman, President & Chief Executive Officer: And, Michael, on the focus on the core business, I can assure you that the organization is very, very focused on the core business. If the core business does not perform, then all these other initiatives cannot make up the difference. We have to perform in the core business. But I can assure you that there is a small group of people, under the leadership of Peter Sachse, that are totally dedicated to these other subjects and have nothing to do with the core business and vice versa. So we created a new organization under Peter Sachse of new business development, which supervises international; he now supervises Bluemercury, he supervises off-price. So his group is totally dedicated to those businesses and there's no overlap or mixing up from the leadership of the core business. Michael Block Exstein - Credit Suisse Securities (USA) LLC (Broker): Thank you so much for your comments.

We'll go next to Stacie Rabinowitz with Consumer Edge Research. Stacie Rabinowitz - Consumer Edge Research LLC: I had sort of a turnaround of the question you guys were talking about regarding vendors earlier. Because so many of your vendors have been reporting weaker results than in the past, are you seeing any – do you think it's an overall kind of industry at that level and for clothing issue or are you seeing some variability in performance from different brands you carry, your private brands, Macy's versus Bloomingdale's; anything out there? Karen M. Hoguet - Chief Financial Officer: Well, I think we talked about general weakness in the apparel categories. There are areas that are doing well, we talked about active, juniors, dresses, so it's not that there's uniform weakness in apparel, but there has been weakness. And we're constantly looking to help our big vendors get better and help find new vendors that have the most-wanted products, including by the way our own private brand. Terry J. Lundgren - Chairman, President & Chief Executive Officer: And I'd like to say that, you can just see it as clearly as we can just that some of these larger brands report their own results that either you believe or you don't believe that some of these big brands are going to get it right, they're going to make the necessary changes, they're going to get fashion components correct, they're going to get the basic inventory planned properly and that they're going to respond and they're going to improve their results. And so the business, as we've said, is cyclical, there's no question about it, but these guys that we're talking about, specifically the ones that have the largest relationships with us, they'll get it right, it's just a matter of whether it be the first quarter or the second quarter delivery or which one will it be. If you believe like I do, that we're going to work very closely together and identify trends, work with them on future deliveries, we're going to get these things right then you have some confidence that both the vendors and our company will benefit from that. Stacie Rabinowitz - Consumer Edge Research LLC: Are there any small vendors in the categories where you're seeing weakness that are doing well or newer trends that are kind of outperforming the category average? Terry J. Lundgren - Chairman, President & Chief Executive Officer: No, we can't talk, and that's why I'm trying to specifically stay away from names of vendors because I know that my comments, as we are so important to them, will influence their value of their company. So I can't specifically talk, but the answer is yes, but I can't specifically name them and tell you who they are. Stacie Rabinowitz - Consumer Edge Research LLC: No, that's all right. That's very helpful. Thank you.

We'll go next to Bob Drbul with Nomura. Bob S. Drbul - Nomura Securities International, Inc.: Hi. Good morning. Just one quick question; on the inventory levels, can you just talk to any cancellations or adjustments you've made both for your branded merchandise or your private brands, just around the numbers that you're reporting today, like end of October numbers and just how aggressive you've been to try to get that to a better place in terms of inventory? Karen M. Hoguet - Chief Financial Officer: Well, I think the key thing, Bob, is we are always aggressive at addressing our forward-looking receipt plans and expectations, category by category, vendor by vendor, there's not really one overall answer, but whenever a business is trending better, we're chasing goods, and when a vendor is not doing well, we're trying to figure out ways of not having too many receipts coming in, so I would say this year is no different. It's just obviously a little more extreme. Bob S. Drbul - Nomura Securities International, Inc.: And I think earlier I think Terry mentioned the consumer trading down from time to time, would you expect a bigger focus on some of your private brands as we look through the next several quarters? Karen M. Hoguet - Chief Financial Officer: Well, our private brands I wouldn't put in the category of trading down. If you think about INC it happens to be well priced, but the quality and the fashion sensibility of that product is spectacular. And I would not call that trading down at all. And fortunately, speaking of INC, it is doing quite well at this point, so we feel very good about brands like that going forward. So, don't always think private brand is being trading down. If you think about hotel in the home world, doing extremely well in textiles and again it's the most expensive textile product we have on the floor. Bob S. Drbul - Nomura Securities International, Inc.: Okay. Thank you very much. Goodbye.

We'll go next to Larry Haverty with GAMCO. Lawrence J. Haverty - GAMCO Investors, Inc: Yes, hi, Karen and Terry. I'm just curious, you guys get the best financial advice in the world and I'm worried about whether your financial advisors are briefing you on the idea that this company could essentially be bought by its dividend. And I'll walk you through it. The dividend right now is 3.5%. If you gross it up for taxes, it's 5.2%. It's not too terribly difficult to do an LBO, I suspect, at 10% and half the financing costs would be the dividend. So the math is just incredibly persuasive, especially given the free cash flow that this company generates. I'm wondering if within the company that's been discussed? If not, why not, and how in fact do you cope with it? Because the other side of it is that the economics of share repurchase, as you know, have just gotten absolutely compelling, especially with the level of the dividend being what it is. Karen M. Hoguet - Chief Financial Officer: I think, Larry, all I can tell you is as you've said, we have the best advisors in the world and we're looking at absolutely everything. Lawrence J. Haverty - GAMCO Investors, Inc: Okay. So this is not something that hasn't been considered. Karen M. Hoguet - Chief Financial Officer: Sorry, was that a question? Lawrence J. Haverty - GAMCO Investors, Inc: Yes, I mean that you think... Terry J. Lundgren - Chairman, President & Chief Executive Officer: Larry... Karen M. Hoguet - Chief Financial Officer: Larry, all I can tell you is we're looking at every possible opportunity, and you know that. Lawrence J. Haverty - GAMCO Investors, Inc: Thanks a lot, Karen.

We'll go next to Charles Grom with Sterne Agee CRT. Charles P. Grom - Sterne Agee CRT: Thanks a lot. Most of my questions have been asked, but just, Karen and Terry, bigger picture here; your comps are down a lot, transactions are down a lot, but you've got some company out there. I mean Whole Foods is comping negative; there's a lot of retailers that are seeing a big deceleration in trends. But given your breadth, the type of product you sell, are you seeing anything out there that tells you that we're really kind of on the impetus (85:46) of a real pullback in consumer spending, something of the like that we saw back in 2008 and 2009? And the weather, which obviously is an issue, tourism is an issue, but there's just a bigger picture problem out there? Terry J. Lundgren - Chairman, President & Chief Executive Officer: Well, look, it's a fair question. Someone asked me just earlier this morning, is this similar to 2008 and 2009, and my answer is absolutely no. It's not similar because then it was a crystal-clear massive pullback by consumers and we literally saw them stop shopping the day of the Lehman Brothers collapse. The next day business dropped dramatically, we just saw consumers stop spending for a strong period of time. So this is different. This is what we've seen, a slowdown, as you said, in transactions particularly in this last quarter. We also here can see that the fundamentals of the economy are in much better shape than they were in 2008 and 2009. We can point to the tourism purchasing issue. At some point, I can't tell you if the dollar's going to change in terms of its strength in the near-term; and in fact, I don't expect it will. But over time it will adjust and that subject will improve in terms of our ability to sell more products to tourists. At some point in time the weather will normalize. And so when I put all of that into the way that we look at the total business potential, I think you have to say we got to get through the fourth quarter, it's so important, it's such a big part of the overall business and when those subjects start to – the tourist subject begins to anniversary itself and the weather pattern begins to normalize and then you look at it and say there's really no improvement, then I think your point could be valid, but I'm not expecting that to be the case. I am expecting there'll some improvement when those two subjects year round and normalize. Charles P. Grom - Sterne Agee CRT: Okay. Great. And then just, Karen, just on the asset sales, the $4.20 to $4.30, can you just sort of break down what you perceive to be as one-time versus recurring, just so we can think about 2016 from a modeling perspective? Karen M. Hoguet - Chief Financial Officer: Yes, I think in terms of – I don't know that I'd call it one-time, but the one thing that, as you've heard me break out, has been Brooklyn. And the gain, the $250 million gain. But things like Seattle, we hope to be able to replicate. Maybe not with one transaction but as we're modeling 2016 and thinking about SG&A, the only transaction that we're viewing differently would be Brooklyn. Charles P. Grom - Sterne Agee CRT: Okay. Great. Hang in there. Good luck. Karen M. Hoguet - Chief Financial Officer: Thank you.

And we'll go next to Dana Telsey with Telsey Advisory Group. Dana L. Telsey - Telsey Advisory Group LLC: Good morning, everyone. Karen M. Hoguet - Chief Financial Officer: Good morning. Dana L. Telsey - Telsey Advisory Group LLC: Can you talk a little bit about Bloomingdale's and how Bloomingdale's did relative to Macy's? And lastly, the credit card penetration was up I think to 49.3%, up 60 basis points. So, it's obviously showing a difference in locals versus tourists, anywhere where you saw difference in locals' performance and how you think about that? Thank you. Karen M. Hoguet - Chief Financial Officer: On the credit subject, Dana, we are obviously very pleased with that result and I do think as you said, it's a function of having less international tourists and it tends in these kinds of periods, our loyal customers tend to come out more when business is weaker, so I think that's also part of the proprietary credit good news. In terms of Bloomingdale's, I would say the trends are actually – have the same issues that Macy's does, in fact in the international tourist business, that's an even bigger impact on Bloomingdale's given where their locations are. Terry J. Lundgren - Chairman, President & Chief Executive Officer: Yes, I would say, Dana, they're similar trends, but to Karen's point, Bloomingdale's is even more highly penetrated in the Northeast, weather issues and more highly penetrated international, New York, particularly as a percent of their 37 stores as opposed to Harold Square being a percent to our 750-plus Macy's stores. But I think overall when you look at it, I would say, it's quite similar, so there was no major difference in the more upscale consumer of Bloomingdale's than there is for the more mid-household income consumer of Macy's. It was really the swing was more along the lines that I've just described with that international tourism and the concentration of our business in the Northeast. Dana L. Telsey - Telsey Advisory Group LLC: Thank you.

And with no further questions in the queue, I'd like to turn the call back to Karen Hoguet for any additional or closing remarks. Karen M. Hoguet - Chief Financial Officer: Great. Well, thank you, and thank you for your patience today, it was a longer than usual call. I know there's a lot of material in the release and obviously call me, call Matt, Sarah, Ryan (90:56), et cetera, we'll try to get back to you as quickly as we can and help you with any of the details that you need help with. Terry J. Lundgren - Chairman, President & Chief Executive Officer: And just to know that I think we've said it loud and clear, but we are going to be so, and continue to be so aggressive in terms of our work to right this shift, to get our business on track. We've got a strong, strong talented team here with a proven track record of success and bet on our company for the long-term and you'll be glad you did. Thank you. Karen M. Hoguet - Chief Financial Officer: Thank you.

Again, that does conclude today's presentation. We thank you for your participation.