Karen M. Hoguet - Macy's, Inc. Jeffrey Gennette - Macy's, Inc.

Matthew Robert Boss - JPMorgan Securities LLC Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC Lorraine Maikis Hutchinson - Bank of America Merrill Lynch Kara Szafraniec - Northcoast Research Partners LLC Paul Trussell - Deutsche Bank Securities, Inc. Paul Lejuez - Citigroup Global Markets, Inc. Chuck Grom - Gordon Haskett Research Advisors Oliver Chen - Cowen and Company, LLC Todd Duvick - Wells Fargo Securities LLC Brett Levy - Loop Capital Markets LLC Omar Saad - Evercore ISI Michael Binetti - UBS Securities LLC Lindsay Drucker Mann - Goldman Sachs & Co. Brian Callen - Bank of America Merrill Lynch Priya Ohri-Gupta - Barclays Capital, Inc.

Good morning and welcome to Macy's Inc. First Quarter 2017 Earnings 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, ma'am. Karen M. Hoguet - Macy's, Inc.: Good morning. Joining me on the call today is Jeff Gennette, our new 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 the company's most recent Form 10-K and other SEC filings. So, on this morning's call, I'm going to first take you through our results for the first quarter, and then I'm going to turn the call over to Jeff to make a few comments. We will then both take your questions. Our sales and earnings in the first quarter were consistent with our expectations and keep us on track to achieve our annual guidance of a comp owned plus licensed sales decline of 2% to 3% and earnings per share of $3.37 to $3.62, excluding retirement plan settlement charges and premiums on debt repurchases. This includes the approximately $0.47 per share gain expected on the sale of the Union Square Men's building that will be booked in the fourth quarter. Remember that we sold this building in January and received the cash at that time. Sales in the first quarter were $5.338 billion, down 7.5% from last year. On a comp owned plus licensed basis, sales were down 4.6% and down 5.2% on an owned basis. The back half of the quarter performed better than the first. Sales in the quarter continued to grow double-digits in the digital channel. While the sales performance in our stores were consistent with our expectations, the sales declined versus last year. The Southwest region based out of Los Angeles was strongest, and the Northeast region was weakest. International tourist sales declined at about the same rate as our comp sales, meaning it didn't have an impact. We had hoped, however, that the uptick we saw in the fourth quarter would help us in 2017. By family of business, our sales were strongest in women's apparel, most notably active and dresses, in fine jewelry, fragrances, women's shoes, furniture and mattresses. Weaker businesses in the quarter included handbags, fashion jewelry and watches, housewares, and top-of-table. Trends at Bloomingdale's were similar to those at Macy's in the quarter. Bluemercury had a strong quarter with continued successful store openings, as well as double-digit comp growth. In the quarter, the number of transactions declined 7.5%, while average unit retail increased 0.7% and units per transaction increased 2.2%. We now have 26 Backstage stores open within our Macy's stores and are adding 19 more this year. We are encouraged by the performance of these combined stores where the total store sales are being lifted versus control group. This performance, as well as, the results of our Last Act clearance strategy, are both encouraging. We see customers liking the everyday deep value opportunity being offered within our mall locations. We are testing a few variations of our strategy this year, but we believe from our tests so far that this will both add incremental spend from existing customers and also lead to the addition of new customers, and whichever model performs best this year, will be rolled out aggressively next year. The gross margin rate in the quarter was 38.1%, 100 basis points below last year. The decline was due in part to ending 2016 with inventory higher than we had anticipated, compounded by weak sales trends in February and margin pressures in a few families of business. We are experiencing gross margin declines in the beauty business due to increased promotional activity; in housewares, due to price competition; and in fashion watches, due to the strong customer demand and, therefore, growth in lower margin tech watches. While we do not expect to have as much margin pressure going forward due to the inventory level, the pressure in these three categories is expected to continue. We are working to offset this margin pressure through speeding up our inventory turnover, accelerated growth in our private brands, as well as from our Last Act clearance strategy. Comp inventory at the end of the quarter was up approximately 1%. SG&A in the quarter was $1.812 billion, or $154 million below last year. We benefited in the quarter from $54 million more in asset sale gains compared to last year, reduced expense from closed stores, and the impact of our restructuring. We offset some of the reduced expense with our investment in growing our digital and mobile business and expanding Bluemercury. Depreciation and amortization was $243 million in the quarter, or $17 million below last year. We are pleased with our expense performance and note that it helped to mitigate the gross margin rate decline. Credit income in the quarter was $180 million, approximately flat to last year. Credit penetration was 45.4%, which is 50 basis points below last year in the quarter, but 50 basis points above 2015. Operating income in the quarter was $220 million, down $56 million from last year, or down $69 million excluding the settlement charges from last year's operating income. Net interest expense in the quarter was $84 million and tax expense was $63 million. The effective tax rate of 47.4% is higher than our annual estimate due to the adoption of the new accounting rule for the income tax effects of stock-based compensation. We still expect the annual effective rate to be approximately 37%. During the quarter, we repurchased $146 million of debt in the open market, paying a premium of $3 million. Approximately $135 million of this was in our 6.375% senior notes due 2037. Net income in the quarter attributable to Macy's shareholders was $71 million. The average share count on a diluted basis was 306.9 million shares in the first quarter. Earnings per share on a diluted basis was $0.23 as compared to $0.37 per share last year. Excluding the premiums on debt repurchases, the earnings per share was $0.24. This compares to last year's $0.40 per share when excluding settlement charges. The cash provided by operating activities was $234 million in the first quarter as compared to $8 million last year. While there are other variances, this can be explained almost entirely by $249 million lower current income taxes. This results from the timing of our first quarter estimated payment, which was made in early May this year. The net cash used by investing activities was $60 million as compared to a $211 million use last year. CapEx, including capitalized software, was $51 million lower in the quarter, while asset sale proceeds were $80 million higher. We are still expecting our CapEx to be approximately $900 million this year. So this resulted in cash flow generated before financing activities of $174 million as compared to a use of $203 million last year, or a $377 million increase. $149 million of the cash was used, as I mentioned earlier, to repurchase debt, and no stock was repurchased in the quarter. On a rolling four-quarter basis, our leverage ratio was 3.2 and our coverage ratio, 6.7. This compares to our target range of 2.5 to 2.8 for the leverage and 6.4 to 6.6 for coverage. Let me now update you on the progress in executing our real estate strategy. During the quarter, we received $96 million of cash associated with real estate transactions and booked $68 million of gains. $47 million of the gain was related to Downtown Minneapolis, and $9 million associated with the Brooklyn transaction. In addition, we sold numerous other properties with lower proceeds as well as gains. We are making good progress in selling off properties that were previously closed. We are also continuing in our efforts to create additional value from our real estate holdings where we expect to continue to operate. As you saw in the release, we are now under contract to sell an additional two floors of our downtown Seattle store, having sold floors five through eight in 2015. After this sale, we will operate what we expect to be an even more exciting store on the lower three levels of the building. This transaction is expected to close this fall. We are very excited by how this project is unfolding, and the opportunity that this provides to greatly improve our store there. We have also launched a marketing effort for the upper floors of our State Street flagship store in downtown Chicago. This will enable us to operate a more productive store while creating additional traffic from the utilization of the upper floors. We're excited by the opportunity to make our State Street store an even more vibrant shopping destination. On our Brookfield partnership, there is a dedicated team at Brookfield who is fully engaged and working in conjunction with our team on feasibility analyses and pre-development activities related to the approximately 50-asset strategic alliance portfolio. We anticipate that we will make significant progress on formulating specific approaches for properties in this portfolio later this year. Execution would then obviously take us into 2018 and beyond. And finally, we are in the very early stages of our work to analyze the potential to enhance and energize Herald Square here in New York. So that's an overview of the first quarter. As I said earlier, it was consistent with our expectations, and our outlook for the year remains unchanged. We're still expecting the annual comp owned plus licensed sales to decline 2% to 3%, and total sales to decline 3.2% to 4.3%. Remember, our total sales guidance incorporates a 53rd week in 2017, while our comp guidance is on a 52-week basis. Earnings per share, excluding settlement charges and premiums on debt repurchases, is still expected to be $3.37 to $3.62, or $2.90 to $3.15 excluding the gain on our Union Square Men's Store. I am sure many of you are going to ask about our annual sales guidance, given the 4.6% decline in the first quarter, so I thought I would address that question now. We had expected the first quarter to be our weakest quarter of the year, primarily because of the rollouts of our strategic initiatives, which weren't starting until this month, and will continue through the second and third quarters. Also, the benefit from closed stores was not expected to help until the going-out-of-business sales were completed in late March. And while the first half of the quarter was disappointing, our trend improved, giving us comfort that we are on track. We expect the improvement in trend to start in the second quarter, and then continue to build in the third and fourth quarters for four key reasons. First, as I mentioned, the benefit from the retained sales from closed stores just started to be experienced now, given that the stores are now actually closed. We expect this impact to help our comp sales starting in the second quarter. Second factor is the rollout of our pilots. So the rollout of our very successful shoe pilot began May 1. Between now and August, we will complete the rollout of the shoe strategy to all stores. Shoes in the pilot stores produced a nearly double-digit shoe sales increase in the first quarter, well above the shoe sales trend for the rest of the stores. And in jewelry, we expect to roll out the pilot initiative to the roughly 200 remaining stores this quarter, which will then complete the rollout of that initiative. There too, we've had very good results that we expect to continue. And we're also adding or expanding furniture and mattresses in approximately 60 stores. These are all categories of business where we took a new approach to how to operate them, and that we saw success in our pilots and are now rolling them out. The third factor is our new marketing strategy, which will be rolled out in the third quarter, which we also expect to help drive our sales. As our new Chief Marketing Officer has learned more about Macy's, we've concluded that our current model is too heavily weighted to promotional marketing. Starting this fall, we are evolving to a model that heightens the engagement of our key customers with our brand. Part of this will include adding communications that will better build our product authority in fashion and in beauty, highlighting trends, exclusive products, and newness. We are also evolving our media mix to improve efficiency and effectiveness of our spend. And then the fourth factor is on the digital front. We continue to improve our mobile app and the digital experience, and we're also strategizing to improve our Buy Online Pickup in Store experience to help us grow this business. Also remember that in the fall season, the digital business, which is growing rapidly, penetrates higher as a percent of our total sales, which then helps the total sales performance due to the mix. So with that, let me now turn the call over to Jeff, and then we'll both take your questions. Jeffrey Gennette - Macy's, Inc.: So, thank you, Karen, and good morning, everybody. I'm pleased to be here on this call. And I'm going to make a few brief remarks this morning, and then we'll open up the line for Q&A. So, firstly, these are unusual and challenging times for retail, especially for mall-based department stores. And we certainly know that these changes that we're seeing are secular and not cyclical. On the consumer side, we see continuing shifts in shopping trends, driven by the rapid adoption of technology, and for some of our customer segments, a greater emphasis on value and on experience. As for the retail industry overall, we've known for some time that the United States is over-retailed compared to other markets, so it's not surprising to see the contraction in retail square footage. And it will take some time to tell how the consolidation and the closure of stores, and in some cases, entire brands will impact us. On one hand, we have opportunity to acquire new customers. On the other hand, this contraction puts more pressure on some of our mall-based stores, where we already have seen a slowdown in traffic. At Macy's, we have a responsibility to bring additional traffic into these stores, and we're also going to be working on this in close partnership with our mall developers. But we don't have our head in the sand as to the significant challenges that we face in getting the business growing again. And we're looking outward as well as inward for the solutions, and I'm confident that we will carve out a successful path forward. So, I want to give you a sense of how I've spent my first few weeks as CEO. I'm really listening to our customers, to our brand partners, to our associates, and to our investors, and I'd like to give you just kind of a highlight and sense of what I've been hearing. So, let me start with the front line associates. So, from the front line associates in our stores – so I do unannounced visits to our stores each week, and I've been in a lot of our great stores that are performing well, and in other stores that are not. And when I ask them, what help they need and what's working. What's working is where we have clear value. What's working is where we have exclusivity. Our customers love that. And simple is working. When we simplify and build and edit and promote great products that customers can only get at Macy's that our customers can easily see on the floor, we get the sell-through. So, a big need and take-away from this is that we need to continue to make bigger meals out of fewer things for our stores, make them easier to shop. I've also done a tour of our various cities and town halls with our corporate and support associates, and I will just say that they're very engaged and they're eager to win again. And when I ask them what they need to do to succeed, it's really loud and clear. They're telling us, prioritize, give us clear direction, and then get out of the way so we can move more quickly. They know we need to move at the speed of our customer. I've also spent time with our brand partners, and they've told me, be Macy's. Macy's should be the place where customers go for fashion and new ideas, and we need to own that lane again. They also tell us to go faster. Our brand partners want us to come with them with great ideas and insights. They're ready to lock arms with us. We need to push them to be more creative and them with us, and to share combined opportunities through data and innovation. And then our investors, you've been very clear. It's how and when will you grow again is what's on your mind. And what I want to tell you is that we certainly don't have all the answers yet, but we are working on them with a sense of urgency. And overall, the transition for me has gone smoothly, and I'm grateful to have had the ten months before this to build my core team and get a plan in place that we're beginning to address our current challenges, but there's certainly more to be done. So let me just tell you about 2017. We're focused on delivering the plan to support the earnings guidance that we provided for the year. And doing that will require us to stabilize our brick-and-mortar business, as well as keep our digital and our mobile business humming. On the core business and stores business, I'm pleased with the progress we've made in scaling, as Karen just mentioned, the fine jewelry and women's shoe pilots. Both will be rolled out nationally. They'll both be across the fleet by August and we expect to have a modest but measurable lift on performance in the back half of the year, based on them. And when we're looking at future improvements to stores, expect us to apply the same approach of testing in a few number of stores, iterating as we expand, and then be ready to scale with our learnings nationally in 2018 and beyond. We've done a nice job of really this mantra that we have of testing, iterating, and scale. When we get that rhythm right, we know we can accelerate our pace of improving the customer experience and driving improved store performance. And, as Karen noted, our mobile and our digital business continues to grow at a very strong pace, driven in part by a consumer experience that just keeps getting better. In particular, our mobile app has been recognized as a top retail app. And if you haven't tried it lately, you should. We expect to get continued interest and growth through the mobile platform. Internally, we constantly challenge ourselves to deliver on an experience that integrates mobile, digital, and stores, and allows our customers to shop the way that they live (24:07). So, stabilizing the brick-and-mortar business and continuing the rapid growth of mobile and digital are key to delivering in 2017, but we certainly know that we will need to go beyond that to find new places for our brand to play and find new sources for growth. And that exploratory work is currently underway. So, as you saw in the release this morning, we're having an investor meeting on June 6 where we will take you into more detail of how we were looking at the business. As Karen just mentioned, we'll provide at that meeting an update on the work we're doing to re-engineer the Macy's marketing machine, and then we're going to spend some time discussing key initiatives that we are in test mode right now, that we're iterating in 2017, like what Karen mentioned with Backstage, with the intent of scaling those initiatives in 2018 and beyond. And at that meeting, we'll also have Karen, myself, and the rest of our senior team will be on hand and available to answer your questions. So with that, let's open up the line for Q&A.

Thank you. We'll pause for just a moment. We'll take your first caller from Matthew Boss with JPMorgan. Matthew Robert Boss - JPMorgan Securities LLC: Thanks. Jeff, question on the brick-and-mortar front, and as we think about this over-stored retail backdrop domestically, I guess, what gives you comfort that your 100th store closure announcement was enough? And if sales declines were to continue, what's the best way to think about a potential plan B over time? Jeffrey Gennette - Macy's, Inc.: Yeah, what I'd say, Matt, is that we looked at the store closures in a couple of ways. The first place we looked was the cash flow that each of those stores were giving us. And that was more of a gentle pruning that we had done historically. The second way that we looked at it would be that if we were building the Macy's brand from the ground up, what DMAs, what major cities would we be in? What key malls would we be in? And with the strength of the internet business, what stores, frankly, will we not have built? So, we felt like we got to that when we made the decision to go aggressively and close and we made the announcement on the 100 stores, we did it thinking that the landscape was such that, and the portfolio that remained was the appropriate level of stores across the country. But, as things go, we're watching all of this and we're watching how the store trends evolve. We're also looking at are there going to be advantageous opportunities for us where the value of that real estate is greater than the value of the retail that we do there. So, I'm not going to say that we're not going to close more stores beyond those 100, but we do feel like we got to the right level when we made the decision that we did in 2016 that we're executing now in 2017. Matthew Robert Boss - JPMorgan Securities LLC: Great, and then just a follow-up. I guess, as you size up the decelerating top line performance that we've seen, do you think it's more company-specific execution, or is it the combination of off-price, online, some of the category killers? I guess the question being now that you've had some time to assess and step back, what's the best way that you think to lay out the step-stones to stabilize the business from here? Jeffrey Gennette - Macy's, Inc.: Yeah, let me take you through that. I think that our opportunity is really three-fold and then we have a strategy to address it. I think the first thing we have to do is we do have to stabilize the core brick-and-mortar business, because still the bulk of our business is being done in our stores. While we do that, we need to continue the high growth that we're experiencing in mobile and digital. That's really critical, and we've got good wind in our sails on that, and we will continue to do all the initiatives to keep that going. And the third thing we have to do is we have to explore new territory where we believe our brand can play. So let me take you briefly through the strategy to address those top-line opportunities. Three of our five-point strategy really focuses on our best customer. And really the first piece of that is how we make our brand stronger with a re-engineered marketing machine. And so you're going to hear about our efforts on that in more detail in June. The second of the customer-facing pieces of the strategy are really amplifying the products that she loves and can only get at Macy's. And what we're doing with exclusivity and really working through the needs of our customer through the brands that we create or the brands we work with, with our partners that are exclusive at Macy's. And the third thing we're focused on that are facing customers is the experience and gets to the belly of your questions about reasons why she comes to a store. And this is kind of a nexus of technology and the human touch and the experiences that we create in our best stores and those that we create in stores that are of lower tier. The fourth point of the strategy is then how we fund all that. And we're pretty good at that. We're pretty good at the expense piece. We have a real intense focus on cost management and efficiency. We've gotten $1 billion of SG&A out over the past couple of years. And then we're clearly showing that we can improve cash flow through our real estate monetization. So, some of those proceeds are basically helping us invest in those pieces that are customer-facing that will improve our overall business. Then the fifth point of the strategy is recognizing that those first four points might have gotten it done in a different time, but in the time that we're in, we really haven't – we have a fifth point on how we're reimagining Macy's for the future, and where does our brand and our consumers give us permission to play? How can we transact outside of our store and digital boundaries today? What are the new kind of markets and experiences and models that we need to create? So, we're looking outward as much as inward on that. We believe that we have the right strategy to achieve what we set out to do for 2017, and though it was a disappointing quarter, we are on track to achieve that. Matthew Robert Boss - JPMorgan Securities LLC: Great. Good luck, guys.

We'll hear next from Kimberly Greenberger from Morgan Stanley. Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC: Great. Thank you. Karen, I wanted to ask about two things. I think, you said e-commerce or digital commerce is growing rapidly. I'm wondering if you can provide any additional color around that here in the first quarter. And then secondarily, given your leverage targets in the 2.5 to 2.8 times range, can you talk about some of the strategies and the things that you think Macy's needs to do to deliver on that? And what kind of timeframe we could think about? Thanks so much. Karen M. Hoguet - Macy's, Inc.: Sure. On the digital growth, we said that it was double-digits in the first quarter increase. As I've said repeatedly, it is almost impossible to truly break out digital from store, given all of the cross-channel activity. If somebody is using a mobile phone in store, having just worked with a sales associate, is that store or digital? Or the returns, et cetera, et cetera. But the growth continues to be quite strong, both mobile in store or digital at home or wherever. And as I had said, double-digit growth. In terms of the leverage ratio, as we've talked about, we do expect to continue to reduce our debt levels this year, so that's a piece of it. But we also expect to grow the EBITDA over time. So, it's a combination of working on the numerator and the denominator at the same point and hope to get back in that target range before too long. Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC: Great. Thanks, Karen. Could I just add one on the e-commerce? Is there any change over time in the categories that you find consumers are particularly buying online? Because I think Macy's has delivered solid double-digit growth in e-commerce for a number of years now. But are the categories that are growing there the same? Are you seeing it across the category spectrum, or does that change over time? Karen M. Hoguet - Macy's, Inc.: No, I think, Kimberly, we're seeing growth in all categories, and it really has not changed over time. Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC: Okay. Thank you.

Next we'll move to Lorraine Hutchinson from Bank of America. Lorraine Maikis Hutchinson - Bank of America Merrill Lynch: Thanks. Good morning. Karen, on the fourth quarter call, you had guided merch margins about flat for the year. It sounds like there are some challenging categories in the first quarter. Do you still expect to be able to get that flat merchandise margin, or do you think that that will decline for 2017? Karen M. Hoguet - Macy's, Inc.: Well, in the first quarter, the merch margin was down by about the same as the total margin. So, that was worse than expected, although we did offset it on the expense side. So, all in all, the quarter was okay from that perspective. I think, there will be continued pressure on the merchandise margin. As I had said earlier, we're hoping to offset it and still lead to that flat merchandise margin as we go through the year. But, we're also looking at the expense side too, to make sure that if that isn't feasible, we've got the opportunity to still do okay on the bottom line. Jeffrey Gennette - Macy's, Inc.: What I would add, Lorraine, is that we had some unexpected fourth quarter overhang in our inventories coming into the first quarter. And obviously, we're dealing with that through the quarter. And to what Karen talked about in terms of a few categories where we are more challenged with margin that we see to continue, we're hoping that we have upside in how we're building some of our exclusive assortments that are more margin-rich. And we're really focused on making sure that that product is – it's got a customer in mind and that the value is there and consistent with what a customer expects. And if the benefit of it is that it's also enhanced margins, then we will take that. But we're really focused on creating products in our exclusivity portfolio that is really designed for particular customers. So far, she's responding to those. We expect that to help us offset some of the FOBs that we don't see improving in overall margin. Lorraine Maikis Hutchinson - Bank of America Merrill Lynch: And could you give us an update on cosmetics and maybe talk through what you're doing to stabilize sales? Jeffrey Gennette - Macy's, Inc.: Let me talk about that. So, I think that – let's talk about color and treatment versus fragrances. So fragrances, our business is quite strong. And you've heard us on these calls talk about fragrances being a positive piece of our business. That continues. So, we saw that in the first quarter. And when you look at the color and treatment line, that is what's under more duress. Then we have pieces of our business within color and treatment like Bluemercury that is quite strong. And we're getting double-digit growth out of that. We did add Bluemercury in two Macy's stores, and like the Impulse strategy that Macy's started about 10 years ago, it's taken awhile to get some traction. But we're starting to see some real firming up of that. And that give us confidence that that can be a much bigger play in Macy's in the future. The Impulse strategy that's part of color and treatment has been quite strong for us. What we will be – we're rolling out more of those locations, more in the second quarter for the back half of the year. And then we're working with our branded partners that – on how we're going to change the experience or product mix to get better performance out of some of our lines that have not been doing as well in the balance of the Beauty strategy. So, we have many task forces that have been formed on this. We've got very smart people that are working on it, both on our brand partners side as well as our side. And we're working towards this. We also believe there's an opportunity with loyalty, and so we're focused on that. And we hope to share those learnings with you in that direction when we meet in June at the investor meeting. Lorraine Maikis Hutchinson - Bank of America Merrill Lynch: Thank you.

Kara Szafraniec from Northcoast Research, your line is open. Kara Szafraniec - Northcoast Research Partners LLC: Good morning. Had a couple of questions on Backstage for you guys. We are wondering if maybe you could give us just a little more color on how the Backstage productivity is in comparison to maybe the rest of the store? What categories are working best in that deep value section? And any cross-shopping commentary you could give us would be great. Thanks. Jeffrey Gennette - Macy's, Inc.: So, I'll take that. So, there is a – let me kind of back up a bit on really what the off-price strategy is at Macy's. It really starts with our customers. And we – when you look at our best customers, those customers that shop with us up to 20 times a year, two-thirds of those shop in off-price on a monthly basis, and 70% of Millennials are shopping off-price on a monthly basis. So, Macy's needed to solve for that. So when we started the Backstage concept off-mall, we got some good returns on that. But we also – at the same time we were doing that, we also tested Backstage in some of our underproductive stores by kind of carving out a big cavity of real estate and putting Backstage in there. And that – we got some interesting results from that. So, to get at the heart of your question, we really had this real estate, that we had excess space where we could add the Backstage concept, and so then we started to play with what the offering would be. And we were very careful about cannibalization, making sure that what we put in the Backstage section of that store wasn't just cannibalizing what was on the full price side. And so that brought for us categories that we weren't in in the balance of the store, that we could really exploit within Backstage. So we have a big chunk of the inventory that is not represented in the balance of the store. Things like home décor, a lot of things like toys and things in Baby. Opening price point in certain categories like cosmetics that isn't cannibalizing anything in the balance of the building. And what we're finding with this is that, as Karen mentioned, that Backstage where we have it in a freestanding store – or, excuse me, when it's in a Macy's full-price store – that the entire building is lifting by a very nice level. And so we're looking really now at the customer behavior. Does that core customer, who is coming into those buildings, is she going over to the Backstage side? And is she building up her ticket or her basket on that particular visit? That – we checked that box. She's in fact doing that. The opportunity for that same customer to visit more often as a result of Backstage , we're looking at that one right now. And then the home run will be if you get a new customer that comes into that building because of Backstage. So we've got a lot of tests out there right now. We have four, to be precise, of the 50 doors that are going to be fully engaged with Backstage in store. And we're hoping that by the end of this year, we're going to have a scalable model to aggressively roll out in the future.

Kara, do you have anything further? Kara Szafraniec - Northcoast Research Partners LLC: No. Thank you.

We'll hear next from Paul Trussell with Deutsche Bank. Paul Trussell - Deutsche Bank Securities, Inc.: Jeff, welcome. And, Karen, good morning. Thanks for the color you've provided on this call. Wanted to just circle back on some of your comments regarding initiatives to improve the comp trend over the balance of the year. Maybe if you can provide a little bit more color around your assumptions for retention from the door closings going on, and the potential expected lift to the digital or the remaining stores. Also, if you can maybe just be a little bit more granular on how we should think about the impact of the shoe pilot and the jewelry business more specifically? And then, lastly, Jeff, you spoke about exclusivity as a real differentiator that the customers are responding to. If you can maybe give us some insight into the extent that you may be able to accelerate your offering from an exclusivity standpoint. Thank you. Karen M. Hoguet - Macy's, Inc.: Yeah, Paul, on the granularity, I'm not sure I'm going to be able to help you there. It's clearly these initiatives, though, that are going to help us go from our trend in the first quarter to the annual guidance we've given you. On the specific subject of retention, as we've discussed, it varies based on how many other stores are in the market, how similar the demographics of the customer is versus the store that closed in the nearby stores, as well as other factors that impact that. And it can range on a store anywhere from about 15% all the way up to 40% or 45%. So, again, there's not one answer to that. But between the retained sales and the pilots, as well as the marketing strategy, digital, et cetera, that's why we're confident in the annual guidance at this point. Jeffrey Gennette - Macy's, Inc.: And then, Paul, on your other three questions, let me take them in order. So the first one was on women's shoes. And this is one that has been surprisingly good for us. Shoes have been a real passion category for our customer. It's one of the two FOBs that she comes to us for, that really generates – it's the first place that she shops, and then she stays to shop in the balance of the store. So, not only if you get shoes right, but you also get a customer that is ready and willing to spend in other parts of the building, so it's a great place for us to focus on. And we do believe that women's shoes – that a department store is still the best place for a woman to buy shoes in America. So, this was a category that we had to get right, and it was a category that we were losing share through 2015 and in 2016. So, as we do here, we have developed a pilot that we tested. We learned from that pilot, and now we're rolling it out to the balance of the country. And when we take a pilot, we take a pilot that would be a flagship store all the way to a low volume store and test different things, so that when we take it into a district or a region of the country, we have a scalable model for all types of stores. And that's what we did, really, in women's shoes. So we focused on three things within it. We really focused on product selection and making sure we had the right brand curation, that we really stood for the trends. Once we took care of the brands, we then took an approach of saying, okay, how do we want to curate it? So, we then looked at it from a classification lens. And instead of having everything by brand, we segmented the brands that mattered and everything else, basically, was then merchandised by classification. That got at a lot of editing that we could do. That gave us the opportunity, with the brands – or the items that remained, to really pump up the amount of quantity of size and color that we had. So we were ready for any customer in size and color, or that we could fulfill from that store. Then we focused on – so we got the assortment right. Then the next thing we did is, we really focused on experience, and we really looked at the amount of management we needed, what the back of house had to be. What the – amount of sales associates, what their commission rates would look like, to give them the incentive to work with our customers. And then we really looked at that overall model that would say, how much of this could be self-serve, how much of this could be – needs to be high touch? So we played with all that, and that's what – we got some nice lifts that Karen mentioned. And that's what we'll be rolling out, and every store will have some version of this pilot by August of this year. So women's shoes, we feel very good about. A year before that, we were really testing everything with fine jewelry, and we talked on these calls in the past, or Karen has, about our success with that. But what we've seen on that is basically about a double digit increase over control on these fine jewelry stores. Same thing from flagship all the way to opening price. And this is, again, where we've looked at it from edited assortments, we raised the amount and the caliber of the goods, some of those branded. We made – we said to you that we really wanted to go after the bridal business. And, as a result of that, you needed better salesmanship. So, we almost doubled the amount of sales associates in a number of our doors. We added training. We added management, we improved the environment, we improved the venting, and it's worked very well. So, that's what we are now rolling out to the balance of the country, and we will have this concept fully involved in every single store by August of this year. So that's – it's going to be a modest but measurable improvement in the back half of the year's trend. As it relates to your third question about exclusivity, this is one that we can totally control. And we've really strengthened the caliber of our teams in private brands. And they've worked deeply over the past year and a half with their suppliers and really worked on the DNA of each of the brands that they create. And one of the reasons that we've been talking about some more consistent success in the apparel areas is based on the efforts of these private brand teams. So they have focused on that. We've been able to really work with our supply chain, take out weeks of supply. We've worked with embedded teams on our side to really work on that. And we're just getting much faster and the value of the products we're now – we're able to put more make into these goods. We're getting higher AURs from these products. It helps us stem some of the traffic losses that we're seeing in stores, because we can get more in AUR, we can get more in that basket strength because of the strength of these private brands that our customer wanted. In addition to that, we're working with our market vendors. So obviously, things like Tommy Hilfiger, they have been quite strong. We've talked about that. The teams that are touching that of our wholesale partners are doing a great job. They're marketing the brands really well, and we're getting good lifts in Tommy Hilfiger. We made the decision on DKNY. So, DKNY now is being made exclusively for us in the deliveries that are coming up in the next number of months. And that filled what we believed was white space that we believe is going to give us exclusive product. But first and foremost, customer-wanted product that we weren't serving with other brands. All of this leads to that we're going to be growing exclusivity. So, if it's X percent today, expect us to have aggressive growth there. We can control it. Our customers expect it of us. It gives us the opportunity to get into a third bucket of growth in exclusivity, which is capsule collections. So, we've had good success with that, with Y Yigal. We've got Cynthia Rowley coming up. We've got Anna Sui at the end of this year. All of those, we believe, cement Macy's as a place to get fashion, to get great – where we can kind of flex our fashion chops. So expect us to do that. So, it's going to be a higher percentage in the future with all those things in play, and we think that will give us growth in the future at rates accelerating from where they are today. Paul Trussell - Deutsche Bank Securities, Inc.: Thank you. And good look.

We'll move next to Paul Lejuez from Citi. Paul Lejuez - Citigroup Global Markets, Inc.: Hey, thanks. Karen, were there any sales in the quarter from the stores that are now closed? And if so, was there a gross margin impact as well? And I'm also curious about your performance in A, B and C malls? Thanks. Karen M. Hoguet - Macy's, Inc.: No. There was – the closed – the stores that we closed are not in operations in the first quarter. Paul Lejuez - Citigroup Global Markets, Inc.: Okay. Karen M. Hoguet - Macy's, Inc.: And the question is, as I said earlier, our stores achieved the plan for the year – for the quarter. Sorry. And that I think I haven't looked at it quite that way. But we feel good about the performance of all of our stores at this point, relative to what we had expected. Paul Lejuez - Citigroup Global Markets, Inc.: Okay, and then, Jeff, you said something about needing to find new places for growth and that exploratory work was underway. What does that mean? Can you expand on that a little bit? Jeffrey Gennette - Macy's, Inc.: We'll share that color with you in June. We'll give you some – the beginning – our beginning thoughts on that. Paul Lejuez - Citigroup Global Markets, Inc.: Okay, and then last one. Karen, on credit cards, can you talk about underlying metrics? What you saw on credit during the quarter? Karen M. Hoguet - Macy's, Inc.: It was a quarter that was pretty much as expected. No surprises. I – we were not surprised that the penetration came down a little bit because it had gone up so much last year. But really, not much change in terms of the portfolio. Paul Lejuez - Citigroup Global Markets, Inc.: And what was the offset in SG&A? Did you share that? Sorry if I missed it. Karen M. Hoguet - Macy's, Inc.: I did. And if you give me a minute, I'll tell you. $180 million, which was about flat with last year. Paul Lejuez - Citigroup Global Markets, Inc.: Great. Thanks, guys. Good luck. Karen M. Hoguet - Macy's, Inc.: Thank you.

Charles Grom from Gordon Haskett. Your line is open. Chuck Grom - Gordon Haskett Research Advisors: Hi, thanks. Good morning. On the digital front, there's a little bit of a growing trend of some of the traditional brick and mortar guys buying some customer-facing e-commerce players. I was wondering, Jeff, if that's something you're contemplating to not only acquire customers but also some intellectual capital on the digital front? Karen M. Hoguet - Macy's, Inc.: I think, Chuck – It's Karen, obviously, not Jeff, but it's something that we've looked at for many years. And we've explored this over time. Obviously, haven't done anything. And we continue to look at all opportunities for helping that business. Chuck Grom - Gordon Haskett Research Advisors: Okay, fair enough. And then, one for you, Karen. Back in February, you provided, I think, close to 10 factors that were embedded in the full EPS guidance. Wondering if there's any significant updates to any of those, particularly on the assets on the sales fronts? Karen M. Hoguet - Macy's, Inc.: We're not updating the details today. I think, we're really focused on the total number in terms of sales and earnings. Chuck Grom - Gordon Haskett Research Advisors: Okay. And then just you spoke a little bit about the sequential improvement. Kohl's this morning said that they saw about 800 basis point to 900 basis point comp improvement from February to the March/April period. Just wondering if that was fairly consistent with the improvement that you guys saw. Karen M. Hoguet - Macy's, Inc.: Let me answer it a different way, which is that our March/April trend was about a point – a little over a point better than the quarter as a whole. Chuck Grom - Gordon Haskett Research Advisors: Okay. Okay, great. Thanks, and good luck. Karen M. Hoguet - Macy's, Inc.: Thank you.

[Operator Instruction] We'll hear next from Oliver Chen from Cowen & Company. Oliver Chen - Cowen and Company, LLC: Hi, thank you. Jeff, regarding the vendor relationships in the context of Amazon, how do you make sure that you really foster and have the specialness that is required in the marketplace, especially as Amazon does a good job upgrading their brands or making extremely aggressive efforts? Along the lines of Amazon, I know, Karen, you've mentioned you've really ramped up your hiring in terms of big data and using artificial intelligence. And Amazon has made some strides in voice recognition and is really looking to push fashion. So how would you articulate your competitive advantages in that context, since a lot of our research shows the majority of Americans shop at Amazon? The other major question I had is speed. You speak about speed a lot quite insightfully, and you have, over a number of quarters just – what needs to happen in the organization, and how would you dissect speed in terms of where you think you should go versus now and the capabilities or the changes that the organization needs to undertake to really aggressively tackle speed, whether that be fulfillment or procurement? Thank you. Jeffrey Gennette - Macy's, Inc.: So, Oliver, that was a mouthful. So, let me take on a couple of what you said. Let me just say that I think that with respect to the competition, let's talk about, I think, what – there's aspects of the department store that is as relevant today as ever. And I think it's not a question of what we deliver. It's really how we deliver. So this idea about great products at affordable prices, I think that we have – there's many brands that we can control our own destiny. And, certainly, when you get into the exclusivity, that isn't going to be in the competition. And if that's customer-wanted and we can make those a bigger piece of our business, we can win. So, there is – that's how we are focused. And I gave some detail about that, about the way we were approaching our partners with either capsule or exclusive brands or what we were taking on for ourselves. I think that where we intersect as an omni-channel retailer versus where a pure play would be is really the nexus of store, and the kind of the social experience of being in a store. What we're playing with right now is what does a model store have to be for the future that is in a pop mall, and what does it have to be in another door? So, we're playing with that. We hope that we will have, by the end of 2018, a scalable model that really addresses the experience needs of our stores that we can scale to more in the future. And then the other piece that we are going to be really amplifying is the role of the store in the community. And there's opportunity for us to be a bigger part of the community. The community basically is reaching out to us and we to them. They want us to be there. This opportunity of volunteerism and all of our engagement and our events and our opportunity to bring the community into our stores for richer experiences is how we believe that we can win. So it's really products, experience, it's community and store, while staying very aggressive with digital. We use digital right now. A lot of customers are using digital to browse, and then the opportunity to take some of that demand and move it into the store through BOPS or Buy Online Pickup in Store is another way that we are going to be taking the advantages that we have of the digital customer and moving them into the store by making it advantageous for them to do so. So, that's how we're focused on that. Another part of your question was about speed. I think, we're – that's one of the biggest mandates of the company right now. The thing about speed for us is making sure that everybody is crystal clear about the five priorities of the company, and what is their role to lift the strategy. So, we have spent a lot of time in making sure that everybody is clear on the Macy's strategy and what's their role, and then what are the impediments or roadblocks that's getting in the way of those individuals to lift the strategy in their particular role? So, we've spent time on reducing process. We've obviously in the beginning of the year, we reduced a couple of management layers. That is helping us. But, we know we need to move faster. We know we need to move at the speed of the customer. And we know we've been slow in the past on this. So I think that, culturally, us getting faster and fleeter and pushing the decisions closer to the customer is going to be how we're going to succeed. So that is a huge priority for me. Oliver Chen - Cowen and Company, LLC: Okay, Jeff, and just a follow-up, regarding Backstage. The market research clearly indicates it's a nice opportunity, but a question we receive is regarding vendors, and it's a different kind of process in terms of how you talk to vendors within an off-price concept versus full price. Can you brief us on the dynamics there and why this will be a good long-term path, and if there's differences we should be aware of, and how you're competitively positioned, given that uniqueness, and also given the uniqueness of the planning and supply chain in the off-price model versus full price? Jeffrey Gennette - Macy's, Inc.: So, Oliver, as you know, that if we were approaching the off-price opportunity with the department store headset, I don't think we would be as excited about it and I don't think we would ultimately win. So, we have a separate team that is focused on off-price, that is working with our vendors. The bulk of that team basically came from the off-price world, and we really have segmented them as a piece of the company, giving them the resources that they need to really develop that on their own for the needs of that customer. As it's intersected with Backstage being in store, we're now looking at all of those where a customer traverses between a full price and an off-price business. We're making sure that we're comprehending those influences and what it might mean in cannibalization. What it might mean in value. What it might mean in terms of classification penetration. And what it might mean in terms of new businesses that we need to put into the building. And so far all of that is going well. So, I would tell you that we're getting encouraging signs with this. The teams are finding the vendors that are very different from the vendor matrix that Macy's is dealing with. And we're going to continue to support them. So, it's way too early for us to declare victory on this. But at the end of the day, we do hope that we will be – we will have a viable off-price concept that is on-mall. It takes advantage of a, still, a destination that millions of American consumers come to each and every day. They come to a Macy's. Now they can come and there's a viable off-price concept, we think that could be a competitive advantage for us in that most of our ferocious off-price competitors are off-mall right now. So, we have a lot to learn. We don't have hubris on this. We are really looking at who the talent is that can help us with this. We think we've got a lot of that on our team right now, but we're still in the learning stages. Oliver Chen - Cowen and Company, LLC: Thank you. Looking forward to the investor day and appreciate the comments.

Moving next to Todd Duvick from Wells Fargo. Todd Duvick - Wells Fargo Securities LLC: Good morning. Karen M. Hoguet - Macy's, Inc.: Hi, Todd. Todd Duvick - Wells Fargo Securities LLC: Karen, I'm trying to get a sense for what we should expect on the debt reduction front. You paid down some debt in the first quarter, and I believe you previously outlined a plan to pay off the $300 million note that matures in July using cash on hand? Karen M. Hoguet - Macy's, Inc.: That's correct. Todd Duvick - Wells Fargo Securities LLC: Okay, great. So, for debt reduction beyond this, should we primarily expect debt reduction after the holidays, when you generate the majority of your cash? Or are there some larger real estate deals that could result in further debt pay down opportunities? Karen M. Hoguet - Macy's, Inc.: Yes and yes. Honestly, we're not commenting on specific timing. But, as we've said, debt reduction is an important priority for this year. Todd Duvick - Wells Fargo Securities LLC: Okay. Fair enough. Thank you.

Brett Levy from Loop Capital, your line is open. Brett Levy - Loop Capital Markets LLC: Hey, guys, most of the questions have been answered. Just, I mean, in terms of speed, I mean, have you ever just thought of taking the top three floors of every single store and either selling it or sale lease backing it or something like that? And I'm just kind of getting ahead of a trend. Karen M. Hoguet - Macy's, Inc.: Well, let me answer it this way. First off, most of our stores are less than three stories, so I'm not sure the question is exactly right. But, I think what you're saying is, should we be shrinking all of our stores? In some cases that may be the opportunity, and as Jeff said, we've put Backstage into many of these less productive doors. So it is, in essence, using the real estate differently. So, part of our real estate strategy is, in fact, looking for opportunities where perhaps a real estate value is greater than the retail and it may involve shrinking other stores, for example, like we've done with Seattle, with downtown Chicago, in terms of the marketing of where we're heading. In other situations we closed the stores, like Downtown Minneapolis or Pittsburgh. So, there's not one answer. But I think we are trying to be realistic in terms of looking at the retail square footage and how to maximize the real estate value. Jeffrey Gennette - Macy's, Inc.: The other piece of it is... Brett Levy - Loop Capital Markets LLC: What are the usual alternative uses; is it residential, is it other commercial, I mean, I think that this sort of a picture of an uber environment of retail space kind of having a lot of residential and a whole bunch of small retail space and that sort of thing, is there.... Karen M. Hoguet - Macy's, Inc.: Again, you have to split it between the very few but big urban stores that we have like Seattle where we're putting office space above our stores. But in terms of our malls, the usage is completely different. I mean, square footage is more limited. Similarly with State Street, we're hoping to do the office space as well, but most of our stores that are mall-based, the square footage that would be freed up is a lot smaller in most cases, and the uses would be different. Brett Levy - Loop Capital Markets LLC: The last question is, in terms of the Internet or website-based business you're doing, are you feeling like your price points are truly the lowest price points when people actually go to the Internet to search? Jeffrey Gennette - Macy's, Inc.: I think it depends on what category you're in. I think that we're under what we communicated in terms of the housewares category is one that is really being footballed around right now on the net and we are obviously dropping our prices to be competitive. We don't want to have like products that are more expensive online or in our stores than our competitors. So that is why we have really pushed to make sure that we're getting customers' value and we're really focused on exclusivity because we think we can give them exclusivity and give them great value, but not have the same demands of pricing transparency that we do in those things that are more broadly distributed. Karen M. Hoguet - Macy's, Inc.: Also, as a promotional business, there are days where our prices are perhaps not competitive, if competitor X is on sale and we're not, but when we're on sale, we try hard to be as competitive as we can be. Brett Levy - Loop Capital Markets LLC: All right. Thanks very much, guys.

Omar Saad from Evercore ISI, your line is open. Omar Saad - Evercore ISI: Hey, thanks. Good morning. Karen M. Hoguet - Macy's, Inc.: Good morning. Omar Saad - Evercore ISI: Thanks for taking my question. I wanted to ask maybe a little bit more color around the idea of what you're doing in the Seattle location, keeping some of the store for yourself and monetizing part of the store. How do we think about how that space is going to change? Are you getting out of certain categories in a location like that? Are you going to kind of basically shrink the footprint of each of the categories? That will be really interesting to hear more details around that, how you are thinking about it at least? Thanks. Jeffrey Gennette - Macy's, Inc.: So, I think Seattle is a great case, because we can actually not only shrink, but also add categories into that store. So it's still a very big overall square footage on the three floors that will remain, which will be the lower level, 1, and 2. And it gives us the opportunity to take where we had low dollars per square feet and where we frankly had excess inventory in categories that we didn't need, to be able to size that appropriately, and also open up spaces to be able to add new ideas, new brands, new categories. So I think Seattle is a great example of where we can be much more efficient and get more productive. Obviously, when you are more productive in your square footage, your sales associates show up, your management is able to manage that better, your customers are navigating it with more ease, so any time we're downsizing a store, unless the customer is telling us on that trade area that they don't want a category, we're looking to retain it. And in most cases, we're looking to add ideas, and we're doing that either through owned categories or through what we negotiate with our leased partners, that give us new ideas that, as an economic model, that is very attractive to us. Omar Saad - Evercore ISI: Got it. That's helpful. And then if I could ask one follow-up. As we think about the store closures and picking up some of that customer traffic and spend in the remaining locations, are you seeing signs in your credit card and loyalty program data that you can migrate those customers to some of the existing locations or online, or how do you use that data, and that customer relationship that you already have there, to make sure you kind of capture as much of that lost revenue as possible? Karen M. Hoguet - Macy's, Inc.: Yeah, one of the things we've done over the last couple of years as we've seen a higher number of store closings coming is that we, in fact, did take that data to help us both market to the customer, but also plan and assort the stores so that if the customer is in a store that was being closed, liked a particular vendor that may or may not have been in a nearby store, our planning organization was able to bring that vendor into the nearby store. So, if you had gone back four or five years ago, we were not retaining customers or sales to the degree that we are today, but by utilizing the data, both from a marketing perspective but also, frankly as importantly from an assortment perspective, has made a huge difference. Omar Saad - Evercore ISI: Got it. And then if I could sneak one last one in, on the new marketing strategy with the new personnel, you have their leadership to move away from more of a promotional marketing strategy to more around your product and fashion offering and capabilities. Do you expect to change the promotional cadence in the business as a result of it, or just the way you message it to consumers through marketing and advertising? Karen M. Hoguet - Macy's, Inc.: We will forever be a promotional department store. So I don't want anybody to say that we're going to reduce the amount of promotiality (1:07:13) of this business. I don't think we'll ever see that in any of our lifetimes, but it is going to change the messaging and in some cases, we over communicate in a certain promotion. So we don't expect to reduce the promotional nature of the business. This is really going to be reallocating how we spend and how we talk to the customer, so that each communication is actually read and can be more effective, so don't read this as being less promotional. Omar Saad - Evercore ISI: Got it. Thank you. Thanks for all the information.

We'll move next to Michael Binetti from UBS. Michael Binetti - UBS Securities LLC: Hey guys, good morning. Thanks so much for taking our question. Just a couple of quick ones on – I'm thinking about the year here, on the inventory plan, can you just comment on how you're thinking about inventories in the fall, maybe in terms of units. And then, I just want to clarify something you said (1:08:08), Karen. So the stores that were closed in the quarter were not in the operations reported for the first quarter, so I believe those would be a net negative to the continuing operations, since they probably drew some attention away from the ongoing stores with an inventory liquidation sale. Karen M. Hoguet - Macy's, Inc.: Well, let me answer the first one while I think about the second. So in terms of inventory, as we get through the year, I think you're going to see the inventory relative to last year come down a bit as we go through the year. I can't comment on units, but in terms of dollars, that would be the case. Michael Binetti - UBS Securities LLC: Okay. Karen M. Hoguet - Macy's, Inc.: I think that our hope is that, as we get through the first quarter, not having these stores in the going-out-of-business mode will help our business. I think that's what you said, but I'm not completely sure. But it should help our business as we go forward. Michael Binetti - UBS Securities LLC: Okay. So maybe a bit of a distraction first quarter (1:08:56). Then, I guess, if we could just kind of think about the, I'm kind of focused on the transactions number here. I know we talked about this in the quarter at one point, but when we look at the stacks on the transactions, that seems to be the area that needs the most urgent attention. In very simple terms, as you look at the basket of initiatives that you laid out that sound like – many of them sound like it would be very compelling to your customer in particular. Do you think, as those roll out through the year, the combination of those are enough to push traffic significantly – or transaction growth significantly better than what we've seen on a one-year, two-year basis in the first quarter? And then, I guess just more broadly, if we look at some of your strategies, again, they sound like they'll resonate with your consumer, but there is only probably so much you can do with the foot fall at the malls where it's at. Can you maybe discuss your conversations with the REITs and what they sound like today, what they think about the urgency of the traffic situation, and any good ideas you hear that could help maybe from the broader mall? Karen M. Hoguet - Macy's, Inc.: Yeah. I mean look, we expect the number of transactions to improve. I don't want to get into a debate as to what significantly means, but we do expect improvement as we go through the year, and we're also hoping for help on the AUR, as Jeff has been talking about. But again, all of that is in the mix of our guidance for the year. And I think we and the developers are trying to partner more and more in making our stores and our malls better, and so, not only attract more people, but to have them buy more when they're there. So it's really a combined effort there. And that's part of why Jeff talked about some of the things we're doing to make our stores more interesting, more exciting. And some of it is with services. One of the reasons we like Bluemercury so much are the spa services that they provide. So we are working very hard to think about how to drive customers into our store, but also how to convert them. One of the things, for example, we're focused on is making checkout easier, so that customers can get in and get out. One of the things – I think I have talked about this on an earlier call – that we tested last year that was a huge and somewhat surprising success, which is that, when we originally started the Buy Online Pickup in Store, we put it, as you might imagine retailers would, in the second floor in a corner so that you'd have to walk through the store to get there and hopefully buy along the way. We experimented with moving the Buy Online Pickup in Store right at a parking lot door to make it easier for the customer to buy. Obviously, great for customer service, but what was interesting is, our radiated sales went up significantly. And again, because we made it easier for her to run her errands, and then she felt better about us and bought more. So other things like that we're doing, which will help us convert business more while they're in the store. So, long way of saying, yes, we are doing everything we can with our partners to make our stores in malls better. Michael Binetti - UBS Securities LLC: Can I sneak one more in on the model? I know you guys have been very generous with your time. But on the gross margins in the quarter, I think historically, we've been very surprised how stable your gross margins have been, even in some of the toughest quarters you've had. The 100 basis points of transaction, in your mind (1:12:13), are those just the specific categories you called out that came under pressure in the quarter versus historic levels? Is there something more structural in the composition of mix of the inventory today that changes how we should think about gross margin into the future? Karen M. Hoguet - Macy's, Inc.: No, I think the bigger part of it related to what I said about the inventory level and not only level but content going into the year combined with the weak February. Had February been stronger, we would have been able to clear a lot more of those goods at a better margin. So the combination of the content and the quantity of the inventory at yearend combined with the weak February is a big reason for that 100 basis point decline. Michael Binetti - UBS Securities LLC: Thank you very much.

Lindsay Drucker Mann from Goldman Sachs, your line is open. Lindsay Drucker Mann - Goldman Sachs & Co.: Thank you, good morning everyone. Karen M. Hoguet - Macy's, Inc.: Good morning. Lindsay Drucker Mann - Goldman Sachs & Co.: I wanted to ask on the handbag category which you called out as underperforming, overall revenue, it's been a category that's been under some pressure. But is there any color you can give us on sort of sequentially whether you're seeing any signs of life there, and if you expect to see some improvement there across the year against easier comparisons? Jeffrey Gennette - Macy's, Inc.: I'd say Lindsay, it's meeting expectations, so I think we saw the run rate of what it looked like all through 2016, and that's how we planned it. So what you see on this is, is that our supply is in line with demand. And it's less promotional than it was in the past, that is really the goals of our manufacturing partners as well as what makes sense for our customer. And so that's what we're seeing. So that's how I'd comment on it. Whether or not that continues, I think we've got it planned right for the balance of the year. Lindsay Drucker Mann - Goldman Sachs & Co.: Sorry, Jeff, just to clarify, you had planned it down consistent with 2016, and that's what you're seeing? Jeffrey Gennette - Macy's, Inc.: What I'm saying is that based on 2016 we planned it as we saw it for 2017, and that's how it is playing out. I'm not commenting that the rate of what we planned it out in 2017 was the same as what we had in 2016. Lindsay Drucker Mann - Goldman Sachs & Co.: Got it, okay. I think it was the last caller, maybe one before, you had talked about addressing your coupon strategy and maybe making some changes there. I was curious if you had an update for us? Jeffrey Gennette - Macy's, Inc.: We'll have an update for you at the investor meeting in June. Lindsay Drucker Mann - Goldman Sachs & Co.: Okay. And then just one last one for me. The credit penetration rate in the stores that you closed, we had assumed that the credit penetration rate in those stores because less productive stores was lower. Is that the right way to think about it, was the percentage of sales done on credit in the closed stores lower than the fleet that remains? Karen M. Hoguet - Macy's, Inc.: I would not think about it that way, no. Lindsay Drucker Mann - Goldman Sachs & Co.: Okay. Got it. Thank you very much.

Brian Callen from Bank of America. Please go ahead. Brian Callen - Bank of America Merrill Lynch: Hi, Karen. Just a follow up on the debt reduction. Is the open market strategy what we should expect for the balance of the year and then I guess knowing that you repurchased the 2037s was helpful color. Can you talk about that decision in terms of looking at high coupon versus low dollar bonds going forward? Karen M. Hoguet - Macy's, Inc.: I'm not going to comment on our strategy for repurchasing debt in terms of timing or how we're going to do that going forward. I will say that we're focused on NPV as we analyze these transactions, though, as our primary driver. Brian Callen - Bank of America Merrill Lynch: Okay. And then maybe a quick follow-up on the mechanics of leverage given that's such a focus. I may have missed this. The D&A dropped in the quarter, so the guidance is unchanged on D&A. And then just given the store closures, is there a point in 2017 where we start to see rent expense begin to fall or is that really an 2018, 2019 type event in terms of the impact on leverage? Karen M. Hoguet - Macy's, Inc.: Honestly, I don't know the answer to the question. I have not looked at rent expense lately, but we can talk later. Brian Callen - Bank of America Merrill Lynch: Okay. Thank you.

Your last caller in the queue for questions will be Priya Ohri-Gupta from Barclays. Please go ahead. Priya Ohri-Gupta - Barclays Capital, Inc.: Great. Thank you so much for the question. I'll try to make them quick. Karen, one for you, just a follow-up on again the leverage question. As we think about your debt reduction beyond this year, to the extent that you do realize proceeds from real estate transactions, should we expect that to continue to go to debt reduction, particularly if EBITDA isn't as strong as you expect? And then just a second question is around some of the time that you've been able to take out of your supply chain with regards to private brands? Can you just provide a little bit more detail on sort of which specific brands you're seeing that in, and how broadly that initiative can be rolled out and the total amount of time that can be taken out? Thank you. Karen M. Hoguet - Macy's, Inc.: Yeah, on the leverage question, we're aiming for our target range, so that's really the only way I can answer that. We expect that the EBITDA to do what we expect it to do or hopefully better over time and should that not happen, we'll revisit that. But I think I would focus on leverage ratio getting back to the target range. Jeffrey Gennette - Macy's, Inc.: And then with respect to the supply chain, we really focused on – we started with the I.N.C, which is probably our biggest and our best female brand as well as the Alfani brand for women. I'm not going to answer the specific about how many weeks we took out, but it's measurable. In both of those brands we're now seeing the fruits of the sell-through by being much closer in and being able to react to consumer trends by getting those products, and we've done that through really working at the supplier chain as well as looking at embedded themes. So the rest of your question is how much of that do we see? We believe that what we're learning right now in I.N.C and Alfani we can take to all of our private brands and we've already started that work as well as take some of those learnings and work with our vendors who are creating exclusive products for us through their third-party wholesale model. Priya Ohri-Gupta - Barclays Capital, Inc.: Great. Thank you very much.

There are no additional callers in the queue. At this time I would like to thank everyone for their participation in today's conference. You may now disconnect. Jeffrey Gennette - Macy's, Inc.: Thanks, everybody. Karen M. Hoguet - Macy's, Inc.: Thanks.