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Macy's Inc. (NYSE:M)

Q4 2013 Earnings Conference Call

February 25, 2014, 10:30 AM ET

Executives

Karen M. Hoguet - Chief Financial Officer

Analysts

Matthew Boss - JP Morgan Chase & Co.

Charles Grom - Sterne Agee & Leach Inc.

Heather Balsky - Bank of America Merrill Lynch

Oliver Chen - Citigroup Inc.

Kimberly Greenberger - Morgan Stanley

Paul Swinand - Morningstar Investment Research

Paul Lejuez - Wells Fargo Securities

Jeffrey Stein - Northcoast Research

Robert Drbul - Nomura Securities

Paul Trussell - Deutsche Bank AG

Lauren Thompson - Crédit Suisse

Stephen Grambling - Goldman Sachs

Richard Jaffe - Stifel, Nicolaus & Co.

Michael Binetti - UBS Investment Bank

Lizabeth Dunn - Macquarie Research

Dana Lauren Telsey - Telsey Advisory Group

Stacie Rabinowitz - Consumer Edge Research

Valerie Brown - Alliance Bernstein

David Glick - Buckingham Research Group

Rob Wilson - Tiburon Research Group, Inc.

Richard Church - DISCERN Investment Analytics

Laura Starr - Nuveen Asset Management

Operator

Good morning and welcome to Macy’s, Incorporated Fourth Quarter Earnings Release Conference Call. Today's call is being recorded. And I'd now like to turn the call over to your host Karen Hoguet. Please go ahead.

Karen M. Hoguet

Thanks, Becky. Good morning and welcome to the Macy’s call. I am Karen Hoguet, CFO of the Company. Any transcription or other reproduction of the statements made in this call without our consent is prohibited. A replay of the call will be available on our website, www.macysinc.com, beginning approximately 2 hours after the call concludes. Please refer to the Investor Relations section of our website for discussion and reconciliations of any non-GAAP financial measures discussed this morning.

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

As you saw in our press release, our sales in January were very disappointing. But in spite of that, we ended the quarter and the year very strong in terms of our operating income, earnings per share, and cash flow. Our adjusted earnings per share grew by 16% in 2013, which is our fifth year of double-digit EPS growth. Starting in 2009 when the restructured the Company and began implementing our M.O.M. strategy, My Macy’s, Omnichannel and Magic Selling.

This morning I will talk first about the quarter and then the full-year. After that, I'll discuss our key assumptions in planning 2014. Sales in the fourth quarter were $9,202,000,000, up 1.4% on a comp basis and up 2.3% on a comp basis together with sales and license department. The 2.3% is really the best metrics for gauging customer demand.

Given the conversion of some of our businesses from owned to leased such as the Athletic Shoes during the year. This is really the only way to attract customer purchases on a comparable basis to last year. And on an ongoing basis, even after a conversion, customers make shoes a licensed item versus owned in a similar category. So we'll continue to focus on this metrics.

Also you will note that total sales were down 1.6% in the quarter, because we are comparing this year’s 13 week quarter to last year's 14 week. We were pleased with our November-December sales, but in January our sales fell well short of what we had planned. As a result, we miss the sales guidance that we had provided at the start of the month.

Clearly, much of this weakness resulted from the bitter cold temperatures and the frequent snow events in January, but we’d not attribute all of the weakness to the weather. Back in August, we were assuming 2.5% to 4% comp sales increase for the second half of the year, which we then updated to 2.8% to 2.9% after December.

However, the weak January brought our comp sales for the second half of the year down to 2.3% or 3.2% including sales in license department and well below what we had hoped 3% is feeling like a good performance compared to our competitors. The strongest businesses in the quarter were handbags, cold weather apparel and accessories, our older Millennial apparel or Impulse area, Men's dress apparel and shoes, luggage and furniture and mattresses.

I should also add that we continue to see strengthening in the women's apparel categories overall, which is a very good sign. Private brands were part of the reason for the strengthening in the women's apparel category. The weaker businesses in the quarter relative to their prior trend included watches, fragrances, housewares and tabletop. Juniors continue to be weak, but we did see some improvement in trend, especially the dressier parts of the business.

Geographically as you may suspect, our strongest sales performances were across the South, where weather was not as much of a factor. We also continue to see strength in all of our Omnichannel transactions, whether it would be online purchasing, including transactions on mobile devices, shipping from stores to satisfy online demand and shipping from warehouses to satisfy store demand.

We also tested "buy online, pickup in store," this fall and based on the positive results we’re not -- now rolling this out to all of our stores during the spring season. We continue to find our stores to be important even into our online only buyers whether it would be to check out a color, try something on, browse to get ideas, or make a return.

Bloomingdale's had a better fourth-quarter than Macy's, in part because we experienced less weakness in January in these stores. As with Macy's the Omnichannel transactions helped fuel Bloomingdale's growth.

Average unit retail in the fourth quarter was up approximately 1% with transactions down just under 1% and units per transactions up a little more than 1%. The gross margin rate in the fourth quarter was 40.6% flat with last year. We are very pleased with that result, which was better than expected.

Inventory at the end of the quarter was up 4.7% or 4% on a comp basis. This is higher than we had planned as a result of the weak January sales. But this inventory is in the right category, so it doesn't pose a significant markdown risk. We will move this inventory out during the first quarter and hopefully without a noticeable margin impact.

SG&A in the quarter was $2.3 billion, down $99 million or 4.1% versus last year. This reduction is in part due to last year’s extra week in the quarter. But as a percent of sales, SG&A was 25%, 70 basis points below last year. We did benefit in the quarter from $58 million in asset sale gains, a little more than half of which had been planned and included in our prior guidance.

We did not include the other transactions in our guidance even in early January because we were not sure that they were going to close in 2013. This was one of the reasons we were able to beat the upper end of our previous guidance in spite of the weaker sales.

We were also pleased with our credit results in the quarter. Credit income was $6 million above last year consistent with expectations. The usage of our card as measured by penetration was 47.2%, up 20 basis points over last year. This is a positive trend that we hope will continue into 2014.

Operating income excluding impairments, store closings and other costs in the fourth quarter was $1.437 billion, or 2.9% above last year's $1.396 billion. And as a percent of sales, operating income in the quarter on this basis was 15.6%, 70 basis points over last year.

We booked in the quarter $88 million of impairment store closings and other costs of which approximately $45 million are non-cash charges. This is significantly less than the original estimate of $120 million to $135 million. This is largely because we were able to place many more associates than we had expected into open jobs after their positions were eliminated. In the end, we laid off approximately 1,800 employees instead of the original estimate of 2,500, and this will not impact the expectation of the $100 million in annual cost savings.

Interest expense in the quarter was $99 million; $7 million lower than last year. Tax expense was $439 million, $17 million higher than last year. As a rate though it was 35.1% compared to last year's 36.6%. Our tax expense in the quarter included a $13 million adjustment to evaluation allowance because we now anticipate being able to utilize more state loss carryforwards than previously expected. This added $0.03 to our earnings per share and had not been anticipated in our guidance.

Diluted EPS excluding the impairment store closing costs and other costs was $2.31 in the fourth quarter, 12.7% above last year's $2.05 on the same basis. For the full year 2013, our sales were $27.931 billion, up 1.9% on a comp basis or 2.8% together with sales from licensed businesses. This fell below our expected 3.5% comp guidance at this time a year ago, but our earnings per share excluding the impairment store closing and other costs was $4 for 2013, which beat the guidance that we had provided at this time last year of $3.90 to $3.95.

As you'll remember we had lowered the guidance to $3.80 to $3.90 in August after our weak second quarter. We are very happy that we were able to make up that quarter's shortfall during the fall season even without above expectation sales and were able to beat our original guidance. And while our sales were below our own expectations, we hoped that our performance relative to competitors looks strong when we see what everyone reports as it did through the first nine months of the year.

Our gross margin rate for the full year fell 20 basis points below last year due largely to the impact of shipping charges associated with our Omnichannel transactions. Merchandize margins were just slightly down as a result of increased promotional activities needed to fuel the business, especially in the third quarter. SG&A ended up below last year in dollars and 50 basis points below last year as a percent to sales. This was due to a good expense management throughout the company together with asset sales gains, $68 million of higher credit income and $29 million lower depreciation and amortization. In part, these benefits were offset by our continued investments related to our Omnichannel strategy.

Operating income excluding impairments, store closing and other costs for the full year was $2.766 billion, up 3.8% over last year and as a percent of sales up 30 basis points. Adjusted EBITDA as a percent of sales was 13.6% for 2013, up 20 basis points over 2012. We continue to march towards our 14% target for EBITDA as a percent of sales. Average share count for the year was 385 million shares which is 7% below last year as a result of our buyback during the year of 33.6 million shares for approximately $1.6 billion. And EPS on a diluted basis excluding the charges previously mentioned was $4 or 15.6% above last year on this basis.

Return on invested capital was 21.4%, 20 basis points over last year. We are very pleased with our performance over the past four years on this metric. Cash provided by operating activities net of investments was $1.761 billion or $363 million higher than last year. This was due to higher EBITDA, lower capital spending as well as higher asset sales. The capital spending did fall below our expectations by $62 million due to timing and much of this will carry over to 2014 as I will discuss in a few minutes.

The cash flow generated by the company is very strong, enabling us to invest in profitable growth while still returning significant cash to our shareholders. In spring of 2013 we increased our dividend by 25% to $1 a year and we also bought back $1.6 billion of stock during the year which is approximately $200 million more than the prior year. We are proud of our performance this year and our confident in our strategies.

We are focused on identifying growth opportunities whether it be in a specific store or an entire market, with the third party vendor or a private brand and owned business or a licensed business, in-store, online or a combination of both and I can go on and on.

Our M.O.M. strategies, My Macy's localization, Omnichannel and Magic Selling, continue to gain traction. The retail environment is evolving rapidly and I believe that our 2013 performance demonstrates that we are making the necessary changes to our business model so that we can continue to compete effectively and profitability.

But let's now look to 2014 so you can hear some of what we're doing to accelerate our progress. Let's start with My Macy's. We continue to find ways to leverage technology to help us better localize assortments. We also continue to refine our ethnicity strategies for localized growth. There are so many opportunities to accelerate our growth by applying a My Macy's lens to all of our merchandized strategies. Importantly, we remain committed to stores which we believe are important for us to connect with customers and local communities.

We are also very focused on developing Omnichannel strategies that will enable us to better serve our customers and attract new customers as well. Increase collaboration between our stores and dot-com teams is enabling us to identify new growth opportunities and ways to be more productive. The key to Omnichannel's success will be the combination of the digital world with our stores to make both better shopping experiences for our customers.

Magic Selling also continues to be important to us and we have expanded the mindset beyond stores to include all customers facing environment such as phone, live chat and big ticket delivery. We need to make Magic in all of our customer interactions not just on the selling floor.

We're confident that our MOM strategies and our focus on our major power house brands many of which are exclusive to us will continue to help us perform well. There is lot of feel good about for 2014, and fortunately starting around Valentines Day our sales trend began to recover. Our guidance for 2014 sales and EPS is unchanged. For comp sales growth, we are assuming 2.5% to 3% and we are guiding for earnings per share on a diluted basis of $4.40 to $4.50.

Let me now list off, I think it's 11 other key planning assumptions. First, for the year we're expecting comp sales including sales from licensed departments to grow only slightly faster than comp sales as we year round on the finish line conversion midway through the first quarter. Two, we expect total sales growth to be approximately the same as comp sales through this year. Three, our sales plan for the first half of the year assumes a higher comp gain in the second quarter than in the first quarter.

This is due to the fact that we are year rounding a stronger first quarter and a weaker second quarter as well as a promotional shift at the end of the first quarter. The same is likely to be true between the third and fourth quarters. Four, for gross margin rate we are assuming a flattish to down slightly gross margin rate for the year. Five, credit is expected to produce more EBIT than last year, but with significantly less of an increase than we’ve experienced in prior years.

Six, depreciation and amortization is assumed to be approximately $1,040,000,000 which is slightly above 2013. Seven, interest expense is assumed to be approximately $390 million for the year. As the tax rate for 2014 we are assuming a lower effective tax rate of 36.4%, this is lower than our normal assumption due to tax credits we are now receiving relating to a remodel of our Herald Square store.

Nine, with the pension plan now frozen our retirement expense will change dramatically. Pension expense is assumed to turn into income in 2014 and the 401k match will go up significantly as we’re shifting our retirement benefits more to our defined contribution plan. Net-net, we are assuming approximately $150 million of lower expense in retirement expense in total much of which is being used to offset higher healthcare costs.

Ten, we have $453 million of debt maturing in July which we expect to refinance during the year. Our target leverage ratio remains 2.4 to 2.7 times. And the eleventh assumption is that CapEx is assumed to be $1,050,000,000 with that $50 million being pushed out from 2013. So that’s a quick overview of our key planning assumptions for 2014.

I always find the year end to be a good time to just stop and reflect. To fully appreciate where our company stand’s going into 2014 consider the contrast to where we were just five years ago when we started our journey as a restructured company with our MOM strategy. Concurrently we were continuing to invest aggressively in online infrastructure, talent and fulfillment.

Since that time we have become a fundamentally different company that is able to serve customer needs no matter how that customer prefers to shop. We can strategically access and manage inventories across channels. We have balanced our ability to offer localized fashion, differentiation and newness while also delivering the value and service that our customers expect and demand. We have built a strong and talented organization at all levels.

We have returned value to our shareholders through stock buybacks and dividends while also achieving investment grade ratings. We are today a strong and stable company with a consistent track record in growing sales, earnings and cash flow. We have been able to reliably increase our ROIC and EBITDA as a percent of sales. It goes without saying that we are very proud of our people and our accomplishments, and we appreciate your strong interest in and support for Macy's and Bloomingdale's as we embark and what we expect will be another successful year in 2014.

I’ll stop here and take your questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And we’ll take our first question today from Matthew Boss with JP Morgan. Please go ahead.

Matthew Boss - JP Morgan Chase & Co.

Hi, Karen good morning.

Karen M. Hoguet

Good morning, Matt.

Matthew Boss - JP Morgan Chase & Co.

Something that seems like it's definitely that Macy’s apart is the brands and the partnerships that you’ve established; can you talk about some of the notable collaborations in the fourth quarter as well as some of the learning’s from the marketing changes that you made out of 2Q so far.

Karen M. Hoguet

Well, we have got spectacular vendor partnerships with all of the major brands and again if I start listing I’m afraid I’ll drop somebody accidentally, also by the way our private brands. But one of the major changes that happened in ’09 when we centralized all of the merchandise functions was the ability to collaborate much more closely and we believe passionately in what we call these power brands and we’re working very hard with them so that they can grow our business aggressively within our stores and online.

Matthew Boss - JP Morgan Chase & Co.

Great. And then, look I think we all understand weather and the impact that it's had on retail. Can you talk a little about what you saw in less weather impacted areas during the quarter and obviously you commented on some of the business post Valentine's Day, but was this broad based and clearly a better sign it sounds like?

Karen M. Hoguet

Yes, I mean in January -- in November and December our business was strong really across the country, whilst that continue to strengthen this out. In January there was much more of a difference between sort of the north and the south. There was some weaker business in the non-weather impacted areas, that’s why I said during the call that I don’t think its all weather in January but the good news is starting in Valentines Day our boats are rising and so we’re feeling very good about the trend.

Matthew Boss - JP Morgan Chase & Co.

Great. Best of luck and hopefully those boats continue to rise.

Karen M. Hoguet

I agree with you. Thanks, Matt.

Operator

And we’ll now take a question from Charles Grom with Sterne Agee. Please go ahead.

Charles Grom - Sterne Agee & Leach Inc.

Hi, good morning guys.

Karen M. Hoguet

Good morning, Charles.

Charles Grom - Sterne Agee & Leach Inc.

Fantastic performance obviously on the gross margin, I don’t think that’s the big surprise this morning. So just when you look at over the next couple of years what do you think the puts and takes are for the company?

Karen M. Hoguet

Well I think the key thing is, the hope is that we will accelerate sales growth and continue to increase the EBITDA rate up to the 14%. And I think it will be terrific performance continuing to earn profits as well as the cash flow that we generate.

Charles Grom - Sterne Agee & Leach Inc.

Okay. And anything like longer term structural changes with ecommerce as it continues to grow and what the implications could be for gross margins?

Karen M. Hoguet

I’m not sure about the gross margin piece. One of the things we continue to work on is how to make our inventory more productive across channels. That may in fact lead to helping us get that EBITDA rata. Not sure that it would be gross margin or expense, but that is going to be an important strategy.

Charles Grom - Sterne Agee & Leach Inc.

Okay. And just a couple of clarifications, I appreciate the 11 points on guidance but the buyback, how much we assume or what do you guys assuming in that 4.40 to 4.50?

Karen M. Hoguet

We don't disclose that though it is included in the 4.40 to 4.50.

Charles Grom - Sterne Agee & Leach Inc.

Okay, that's what I thought. And then just on the fourth quarter, that 58 million, geographically that goes as a contra SG&A, is that where it placed?

Karen M. Hoguet

Yes.

Charles Grom - Sterne Agee & Leach Inc.

Okay.

Karen M. Hoguet

It was multiple asset sales and as I said, a little bit more than half of that had been planned and we were happy that future transactions did close right at the end of the year.

Charles Grom - Sterne Agee & Leach Inc.

Okay, great. Good luck. Thanks.

Karen M. Hoguet

Thank you.

Operator

We'll now take a question from Heather Balsky with Bank of America Merrill Lynch.

Heather Balsky - Bank of America Merrill Lynch

Hi. Good morning, Karen.

Karen M. Hoguet

Good morning.

Heather Balsky - Bank of America Merrill Lynch

So I guess first on the gross margin, you guys had gotten a little bit more promotional in the third quarter and you had expected that to continue into the fourth. And then also given the growth of ecommerce, how were you able to keep gross margins steady in 4Q?

Karen M. Hoguet

Well, I think we have a spectacular merchant organization that works very closely with our vendors as well as our marketing team to plan out profitable promotions and I think they just did a spectacular job in the fourth quarter.

Heather Balsky - Bank of America Merrill Lynch

Okay. And then just as a follow-up, you had spoken also that you're getting smarter about using data to plan your promotions. Any learning during 4Q using that strategy and how do you think about it in the first half of next year or this year I guess?

Karen M. Hoguet

Well, I think every major event is benefiting from that because we learnt from the prior ones what items are generating what we call radiated sales and things like that, what kinds of promotions are impacting which customers. So that's just constantly helping us and to do a better job at growing the business profitably.

Heather Balsky - Bank of America Merrill Lynch

Great, thank you.

Operator

We'll now go to Oliver Chen with Citigroup.

Oliver Chen - Citigroup Inc.

Karen, congratulations on a great year.

Karen M. Hoguet

Thank you.

Oliver Chen - Citigroup Inc.

Regarding your comments and your details as you think about your inventory positions, could you just elaborate on some of your strategies to move the inventory out? And also on your comments on a look forward to a more normalized pattern of shopping and your competence there, what are the things that we should fixate in terms of that happening in the marketplace given relatively kind of confusing consumer spending environment we're undergoing right now?

Karen M. Hoguet

To that one, don't know that I would use the word confusing. I think the key thing is we'll just see what sales look like at the end of the first quarter, we'll take note and keep moving from there.

Oliver Chen - Citigroup Inc.

Okay. And then as you move inventory out, what's the main kind of tactical levers that you're pulling in order to…?

Karen M. Hoguet

We have major events planned throughout the first quarter and so we'll obviously use those events to clear inventory.

Oliver Chen - Citigroup Inc.

Okay, thank you. And regarding the later Easter, could you give us any comments there and things we should think about as we look at our models regarding expectations?

Karen M. Hoguet

Well, I do think the later Easter is good for retail, so that could be helpful. And I had said earlier, we do expect the second quarter comp to be higher than the first quarter. Beyond that I think that really is all I can say.

Oliver Chen - Citigroup Inc.

Thank you. Best regards.

Karen M. Hoguet

Thank you.

Operator

Next is Kimberly Greenberger with Morgan Stanley.

Kimberly Greenberger - Morgan Stanley

Great, thanks. Nice cap to a really terrific year, Karen.

Karen M. Hoguet

Thanks, Kimberly.

Kimberly Greenberger - Morgan Stanley

I'm wondering if you can talk a little bit more about your Omnichannel initiatives. I know you're testing any number of different ideas or strategies at any time. Are there any of those tests that are going on here in the first half of 2014 that you can share with us? And then reflecting back on 2013, ecommerce continued to be a really nice contributor to your sales growth. Is there evidence that you have that you're able to capture a new customer through some of these Omnichannel initiatives? And what were the sort of strategies that you think helped drive growth in that channel last year?

Karen M. Hoguet

Wow, that's a lot of questions. Let me try to summarize some of it. I think the key thing is we are testing lots of things as we go through the first quarter, whether it be relating to our assortments or how to be more efficient in terms of the store fulfillment. We talked about the buy online pick up in-store. We're also testing strategies for intensifying our service levels with in-stores, so sometimes it's not all Omnichannel but related to that. And again, we're trying to scientifically measure all of these results as we go, so that's going to be very important. If I think about things that are making us successful online, frankly it's very similar to what's making us successful in-store, which is merchandizing strategies and without the right assortments and the right service levels, it almost doesn't matter if you have sexy technology and I think that's what's driving our Omnichannel business today.

Kimberly Greenberger - Morgan Stanley

You mentioned that your ecommerce, your dot-com merchants and organization are working very, very closely with the store teams. I think that's a little bit of a change over the last three to five years. Is there still more opportunity in that partnership to either yield better in-store benefits, better online benefits or just broadly speaking say other sales or margin benefits?

Karen M. Hoguet

Absolutely. We're really at the beginning stages there. We've tested it in some areas. We've got a major test going on right now in the dress area where we actually have one combined inventory between channels. We think that's going to be very important as we go forward. The other thing that we're doing which I think is important is that we're moving people around so that they get different experiences, whether it be store merchandizing or dot-com and that's helping also to enhance really this collaboration. So I would say we are at the very early stages of that and that's why I'm so excited about the growth going forward because I think the combination of these teams working together is going to be very powerful.

Kimberly Greenberger - Morgan Stanley

Terrific. Thanks, Karen.

Operator

We'll go to Paul Swinand with Morningstar Investment Research.

Paul Swinand - Morningstar Investment Research

Good morning. Thanks for taking all the questions.

Karen M. Hoguet

Sure.

Paul Swinand - Morningstar Investment Research

I want to ask about some of the – in your prepared remarks you have – I think you said watches, fragrances, home and juniors were tough. Do you think that had something to do with the weather or do you think those are delayed purchases, because maybe people will need to browse the stores for them and have they picked up with the Valentine's Day list that you were talking about?

Karen M. Hoguet

Well, that could be the case. Fragrances has certainly picked up, so that's one example where there has been a change in trend. Watches, as we know, we've gotten spoiled with. It's been unbelievably strong and I would say it's still good relative to much of the store but not nearly as good as it had been. So, again, there are different juniors I talked about, we are making improvements there, so it's still weaker relative to last year but making a lot of progress. And house wares and table top we hope will get better this year.

Paul Swinand - Morningstar Investment Research

Any comments or any color about the price points or the geographies on watches or home?

Karen M. Hoguet

No. I don't think either of those are really the issue. By the way it's not all of home. We had great business in furniture and mattresses. We had very good business in home textile, sheets and towels, so it's not all of home that's weak. Much of home is in the very strong category.

Paul Swinand - Morningstar Investment Research

Okay, interesting. Thank you. And quickly about the online business, when you've got through your extreme weather events, does online actually pick up a little? In other words, did your strength online actually offset what was maybe even a weaker actual traffic environment than we realize?

Karen M. Hoguet

I wish, no. I mean it did pick up but I think people were watching the weather and not focusing on shopping. Yes, it did pick up but not anywhere close to – I mean if you think about how much of our business is done in-stores, that just isn't going to happen, at least not yet.

Paul Swinand - Morningstar Investment Research

Right, okay, great. Thank you and best of luck.

Karen M. Hoguet

Thanks so much.

Operator

We'll go to Paul Lejuez with Wells Fargo.

Paul Lejuez - Wells Fargo Securities

Hi, Karen. It's Paul Lejuez. Let me think about your 2014 guidance. What are your assumptions as far as the competitive landscape, just overall promotional environment, particularly as you think about how next holiday will look relative to this past year since it was such a promotional one? I know you had said specifically on the comp drivers, how do you think about transactions versus average ticket size in terms of what would drive your comp assumption? Thanks.

Karen M. Hoguet

Honestly, I think every year is promotional in this business, so I don't expect it to get better or worst in terms of our guidance. And in terms of AUR for 2014 we've got lots of different assumptions that could get us there. We are not expecting a huge increase in AUR for the year but hopefully not a decline.

Paul Lejuez - Wells Fargo Securities

Got you. And maybe just a last one, inventory; how should we think about your plans throughout the year, inventory versus sales?

Karen M. Hoguet

Well, you tend to want your inventory increase to be comparable to your comp growth expectations and obviously we’re high right now at 4%. So that’s why, the expectation is that, that will come down by the end of the first quarter.

Paul Lejuez - Wells Fargo Securities

Okay, great. Thanks and good luck.

Karen M. Hoguet

Thank you very much.

Operator

Next is Jeff Stein with Northcoast Research.

Jeffrey Stein - Northcoast Research

Hi, good morning Karen. Just a follow-up on the last question. If you look at weakness in mall traffic and you’re kind of thinking perhaps about a flattish maybe up slightly AUR. It would seem that, that creates quite a gap to get into that 2.5% to 3% comp increase even with the benefit of stronger online growth. So, I am wondering kind of how you’re thinking about that, how you get to the 2.5% to 3%?

Karen M. Hoguet

Well, I mean I think it's a combination of things. I do think that transaction should go up this year and units per transaction we’re always trying to increase. So again there’s lots of different formulas that can get us there mathematically, also mix is a big part of that also.

Jeffrey Stein - Northcoast Research

Right.

Karen M. Hoguet

So we’re feeling pretty confident, Jeff.

Jeffrey Stein - Northcoast Research

Okay. And as far as the Millennial collections that you launched last year, can you talk about which ones did well, which ones did not and plans to roll the successful ones out to additional doors that’s here?

Karen M. Hoguet

No, this year was very good about many of them, and I probably won't hit all the ones that we’re feeling good about, but certainly Bar III and Maison Jules are private brands. We do feel great about and we’ll continue to roll them out. As I said a few minutes ago, the impulse part of our business was very strong in 2013 including active which was also very strong which again we consider is part of that business. So we're feeling good about that and the younger millennial as I said we're making some progress, albeit fourth quarter wasn’t quite where we’d like it to be yet but we think that a year from now we will be feeling much better about that.

Jeffrey Stein - Northcoast Research

Great. And one final question Karen, can you just bring sub to date on how many Finish Line lease departments you have now and what the plan is for the rollout for the remainder of the year?

Karen M. Hoguet

Yes, I don’t know the specific number. I’ll have Matt call you with it, Jeff sorry.

Jeffrey Stein - Northcoast Research

Great. Thank you very much.

Operator

And we’ll go to Robert Drbul with Nomura Securities.

Robert Drbul - Nomura Securities

Hi, good morning Karen.

Karen M. Hoguet

Hi, Bob.

Robert Drbul - Nomura Securities

Just got a couple of questions. On the overall business, can you talk a little bit about how the collection businesses are performing in some of the Denim businesses? And then Bloomingdale’s and the Bloomingdale’s outlet, Karen you said Bloomingdale’s actually did well, I think in specifically January when things got a little choppy. Just maybe a little bit more insight into that business for us.

Karen M. Hoguet

Yes the outlet business had a good fourth quarter but hurt by weather in January, but November, December was feeling stronger which was very encouraging. And then on collections in Denim not as strongest we have liked in the fourth quarter but I wouldn’t put it in the weakness category.

Robert Drbul - Nomura Securities

Okay. Thank you very much.

Karen M. Hoguet

Thanks.

Operator

We’ll go to Paul Trussell with Deutsche Bank.

Paul Trussell - Deutsche Bank AG

Thanks, good morning Karen.

Karen M. Hoguet

Good morning, Paul.

Paul Trussell - Deutsche Bank AG

In the guidance you provided, I believe you mentioned that interest expense would be roughly in line with the 2013 totals. And so I just wanted to enquire about your thoughts on adding back to the balance sheet given such a strong operating performance this past year, it does seem like you're on track to be at the very low end of your targeted leverage ratio if not below as we look forward over the next 12 months?

Karen M. Hoguet

I think what you say is correct, we're at the low end of the range and our plans are that we haven't decided exactly yet. Obviously a lot of that will depend on market conditions and we’ll see as we go through the year.

Paul Trussell - Deutsche Bank AG

Got it. But not included in the guidance at this point in time?

Karen M. Hoguet

Refinancing the $453 million is, and should we do more if that could go up a little bit.

Paul Trussell - Deutsche Bank AG

Understood. And then just for clarification with SG&A, the $58 million was assets sell gains, that was about $0.10 or so in my quick math, you said that was they were included when you gave.

Karen M. Hoguet

A little more than half of it had been included in our original guidance.

Paul Trussell - Deutsche Bank AG

Okay.

Karen M. Hoguet

And a little bit less than half had not been.

Paul Trussell - Deutsche Bank AG

Okay, that’s helpful. And then just going forward though, obviously you have the reorganization providing some expense savings throughout ’14. If you can just kind of walk through some of the headwinds and tailwinds on some of the other line items that’s going to impact expenses whether it's, healthcare or just overall.

Karen M. Hoguet

But I think as we said credit should be helpful, the savings and retirement expense. The savings from the cost savings program all are helpful. On the other side we’ve got healthcare going up, and also we have got the continued investment in the Omnichannel world, those are probably the big factors.

Paul Trussell - Deutsche Bank

Got it. All right. Thanks a lot Karen.

Operator

Next is Michael Exstein with Crédit Suisse.

Lauren Thompson - Crédit Suisse

Good morning, Karen. This is Lauren Thompson on Michael’s behalf. We just have one question, you said your license department commissions are included in net sales. Is there any other line items in your P&L we should be thinking about that are impacted by the licensed category?

Karen M. Hoguet

Well, it goes into gross margin as well.

Lauren Thompson - Crédit Suisse

Okay. Thank you very much.

Operator

And now we’ll go to Stephen Grambling with Goldman Sachs.

Stephen Grambling - Goldman Sachs

Good morning, Karen thanks for taking my question. Just a follow up on that, to take Paul’s comments about SG&A, are there any additional opportunities to streamline the organization longer term. I think you also discussed how we should be thinking about flow through next year, should the environment maybe a key plan?

Karen M. Hoguet

I am not sure. Well, in terms of the first question we’re always looking for opportunities to more cost deceptively operate our business. I don’t see any major changes. Obviously we just announced a major restructuring. But we’re constantly looking to improve incrementally as we go. And again as we march to that 14% EBITDA rate, that’s always a piece of it, but I don’t see any major changes happening in the near future.

Stephen Grambling - Goldman Sachs

And then on the second question, which was just how we should be thinking about flow through depending on the top line?

Karen M. Hoguet

Well, hopefully if the sales are higher that will help achieve a higher EBITDA rate, because it should be at a higher rate and obviously help accelerate earnings growth beyond what we said.

Stephen Grambling - Goldman Sachs

Okay. And then one other clarification, just on the Omnichannel, how is the assortment changed online, is there anyway you can quantify that in terms of the skews and additional opportunities other than ones you’ve already outlined with private label?

Karen M. Hoguet

Well, I don’t know how to quantify the -- I am not sure exactly what your question is, but what we're trying to do is have our assortments online, be representative of what we’ve got in store and have them -- have more available online and what's available in store, but to be congruent.

Stephen Grambling - Goldman Sachs

Okay, that’s helpful. Good luck.

Karen M. Hoguet

Thanks.

Operator

We’ll go to Richard Jaffe with Stifel.

Richard Jaffe - Stifel, Nicolaus & Co.

Thanks very much Karen and just a follow-on question to Omnichannel, a lot of initiates in place and a lot of success. I am wondering how far along perhaps on a percentage basis you're in terms of including Omnichannel where you think it should be, and also how much it might cost to get there?

Karen M. Hoguet

Well, I think I mean the cost we’re absorbing as we go, and fortunately I’ve been able to do that and still generate profitable growth. I would say we’re just really in the early stages of accomplishing all that we think we can do. As I said during the call, the key will be picking the best of the digital world and putting it into our stores and at the same time picking the best of our stores and putting that into the digital world. And it's complicated and will take time but we’re very much committed to making that happen.

Richard Jaffe - Stifel, Nicolaus & Co.

And have you been able to broaden any assortments online compared to what's in stores and how much broader are they now?

Karen M. Hoguet

Well somewhat so, but within the categories primarily that we offer. So often we can use online for extended sizes, often we use online to test and if the test is successful we’ll put it into the stores. Or if we find that the online sales of lets say extended sizes does very well we’ll bring that assortment into stores. So it's really very interesting to see how the two can interrelate.

Richard Jaffe - Stifel, Nicolaus & Co.

And we should interpret early stages as not even half way there, is that fair to say.

Karen M. Hoguet

Yes, I don’t even know what there will be, because I think the world is going to continue to evolve. But I think the key thing to remember is, the keys to success in Omnichannel are going to be the keys to success in retailing in general, and again the strong merchant store organization technology groups that we have is really going to what will pay us here for us as we go forward.

Richard Jaffe - Stifel, Nicolaus & Co.

Right. Thank you very much.

Operator

We'll go to Michael Binetti with UBS.

Michael Binetti - UBS Investment Bank

Good morning, Karen. Congrats on a great quarter and great year.

Karen M. Hoguet

Thank you.

Michael Binetti - UBS Investment Bank

I hate to bore you with a quick accounting question, but could you explain to me how pension becomes an income line and is that just related to funding levels last year versus change in interest…?

Karen M. Hoguet

It has to do with the benefits going forward being frozen, but if you want we can talk to you later and take you through the detail.

Michael Binetti - UBS Investment Bank

Okay. Well, is it an income line beyond 2014 is the quick question, I suppose?

Karen M. Hoguet

You know what, I don't have that in front of me but I suspect it is.

Michael Binetti - UBS Investment Bank

Okay. And then maybe more interestingly on the women's business, it's obviously an area…?

Karen M. Hoguet

That's much more…

Michael Binetti - UBS Investment Bank

I think you waited a long time to tell us…

Karen M. Hoguet

You bet.

Michael Binetti - UBS Investment Bank

Can you tell us what you think is helping drive that – I mean it's just the old fashion wardrobe refresh or has there been an adjustment on brand, on promotional strategy or perhaps…?

Karen M. Hoguet

Yes, yes and yes. I don't think it's just – it happened accidently. I think our team put together a great strategy. A lot of it was relating to items and also I would say more focused on opening price points. But we've done very well at the better price points too. Our I&C brand had a spectacular year last year, but so did Style & Co and Jennifer Moore. So again, I think the team just is working very well on the assortment strategy as well as the marketing.

Michael Binetti - UBS Investment Bank

Okay. And if I can have one last question, since you mentioned how reflective you are at your end, if you look back on the year, could you talk about any of the categories that you could have seen better results in 2013 that could be an opportunity as we look ahead to '14 we say this is where we could improve?

Karen M. Hoguet

That's a good question. My hope always is that the categories we did well and we'll continue and we'll fix everything else, but I've spent 30 years in the business I think that maybe too optimistic. So I think again wherever you see weakness, for example juniors I do think we're going to see improved business this year. I like what the merchants are thinking about. That should be helpful. I think we're going to continue to see great results in impulse particularly on some of the new brands and also active. The coat, cold weather business will be interesting next year now that we finally had a great year after two horrible years and I think women's apparel was just poised to take off, so I feel really good about that. Based on our core, we'll continue strong, so I guess I'm fairly optimistic throughout the store.

Michael Binetti - UBS Investment Bank

All right, thanks a lot. Congrats.

Operator

We'll go to Liz Dunn with Macquarie.

Lizabeth Dunn - Macquarie Research

Hi. Thanks. Let me add my congratulations on a great finish to the year.

Karen M. Hoguet

Thanks, Liz.

Lizabeth Dunn - Macquarie Research

I guess I'm interested in your comment that you see multiple opportunities for an acceleration of sales growth. Obviously the millennial strategy is a big piece of this. Am I right that this ethnicity strategy that you sort of referenced is something you haven't talked a lot about in the past and are there others that you're comfortable – other strategies that you're comfortable naming at this point?

Karen M. Hoguet

Well, I think we had started with My Macy's beginning to think about that. We started with the tourist strategy which is very different in different parts of the country and obviously as you look at the population base, there are stores in local areas where you need to think through the Latina strategy or an African-American strategy or Asian. But interestingly there isn't one Latina strategy because in different parts of the country and different countries of origin, it can be very different, same for the Asian. This is where My Macy's is just helping us so much with that local input coming from the field is terrific. So we have been working on this but it just gets better and better and better and we incorporate not only the merchandizing but the marketing which is a big part of the store events and also visual in the stores. So we just get better and better at it every year.

Lizabeth Dunn - Macquarie Research

Okay, great. And then relative to the restructuring and cost savings that you've outlined, in the past when you've done any sort of restructuring or merging of divisions, the cost savings have actually turned out to be better than expected because there is sort of best practices and that sort of thing that you don't necessarily model in. Is it fair to assume that you've taken the same sort of conservative approach to how you've planned out the cost savings this time?

Karen M. Hoguet

I hope so but I don't think so, because this is different than a division consolidation but hopefully I'm wrong. But at this point I would not count on that.

Lizabeth Dunn - Macquarie Research

Okay. And then finally we haven't talked about Bloomingdale's Outlet for a while. Could you just update us on where that stands?

Karen M. Hoguet

Yes, sorry, we had just talked about it. I think the Outlets had a good fourth quarter. January was tough with the weather but we're feeling better and better about the business there.

Lizabeth Dunn - Macquarie Research

I'm sorry, I meant in terms of like gross expectations or – I apologize if I missed it, I got pulled off the line for a second.

Karen M. Hoguet

No, that's fine. I think that we're beginning to think about where else to put the Bloomingdale's Outlet stores, where have they done the best, where would that work do [ph]. My guess is it's probably not '14 but in '15 we'll start to see acceleration of that growth.

Lizabeth Dunn - Macquarie Research

Great, thanks.

Operator

Next is Dana Telsey with Telsey Advisory Group.

Dana Lauren Telsey - Telsey Advisory Group

Good morning, Karen and congratulations.

Karen M. Hoguet

Thanks, Dana.

Dana Lauren Telsey - Telsey Advisory Group

As you think about Omnichannel and learning from it, what's the marketing impact from it? Is there any qualitative implications that makes sense for marketing and expanding the customer base whether it's from your credit cardholders or from non-credit cardholders?

Karen M. Hoguet

Yes, absolutely. And in the way the marketing team is thinking about how the best markets for our customers is changing dramatically with Omnichannel and all the digital technologies available to them. So we're thinking about how can we market better across channels and really trying to get – the word we're using now is Omnichannel engagement because very often we'll find people, as I said earlier, who only purchase online and yet we know they're spending a lot of time in our stores. And so as the marketers are thinking about that and driving Omnichannel behavior, it's becoming very interesting changes in the strategy.

Dana Lauren Telsey - Telsey Advisory Group

Does the change in marketing spend at all?

Karen M. Hoguet

Has not yet.

Dana Lauren Telsey - Telsey Advisory Group

Got it. Perfect. Thank you.

Operator

We'll go to Stacie Rabinowitz with Consumer Edge Research.

Stacie Rabinowitz - Consumer Edge Research

Hi. I was just wondering as you add licensed departments very slowly but – I was in the store the other day and it felt like almost the whole first floor was starting to become licensed. Do you see additional opportunities there?

Karen M. Hoguet

Of Macy's?

Stacie Rabinowitz - Consumer Edge Research

Of Macy's, yes. I was trying to return something and especially with the – there was the cosmetics, there was the sunglasses.

Karen M. Hoguet

Well, cosmetics is all-in owned business, so – anyway keep going with your question.

Stacie Rabinowitz - Consumer Edge Research

Just as you're talked about sort of other business models I guess and more different structures in terms of how the vendors operate your space and how leeway you give the vendors in their – I know Michael Kors has been talking about how they've been sort of in the retail department space having some successes with being more involved in the operations there.

Karen M. Hoguet

Well, as part of our vendor collaborations we're always trying to work more closely with vendors to help obviously make our stores more successful. And obviously Michael Kors would be an example of that. But we're still operating with the owned model. So actually if you think about the first floor of Herald Square, we do have the luxury shops sort of around the floor that are leased but most of the first floor is not a licensed business model, it's still owned.

Stacie Rabinowitz - Consumer Edge Research

Okay.

Karen M. Hoguet

And again, from our perspective with licensed businesses what we do is identify what we call white space and where there is a business that we think we can find our need to add to this store or we believe someone outside could do better. So if you think about Sunglass Hut, when we decided to license that business, part of it was because they had access to brands that Macy's could get without the licensed model and we think they've done a fabulous job; similarly with Finish Line. So again, we start with what does the customer want and where is there an opportunity and if we don't think we're the best at delivering that to the customer, we're more than willing to partner with somebody as we've done in athletic shoes, sunglasses, et cetera.

Stacie Rabinowitz - Consumer Edge Research

Okay. And did you see those opportunities up ahead or so far nothing?

Karen M. Hoguet

Well, we're always looking for at new ideas, so I certainly don't want to say nothing. We have the whole team of people that is focused on where are the white spaces and what businesses could we add to our stores to either satisfy customer demand, make them more interesting, bring in the new customer, so that's an important focus of what we're working on.

Stacie Rabinowitz - Consumer Edge Research

Great. Thank you.

Operator

Next is Valerie Brown with Alliance Bernstein.

Valerie Brown - Alliance Bernstein

Hi, Karen. It's Valerie.

Karen M. Hoguet

Hi, Valerie.

Valerie Brown - Alliance Bernstein

Hi. Just a question on the working capital efficiency. You've talked a bit about your inventory levels and obviously they're elevated now relative to your increase in sales. Do you have any specific initiatives that we should look out for that would really drive those inventory turns particularly given the Omnichannel strategy, there just seems to be some room for improvement there, that would also help drive your cash flow?

Karen M. Hoguet

I believe that there is Valerie. I don’t think it's going to be 2014. With that said, earlier we’re testing having one inventory across channels which I think will be an important part of bringing the inventory levels down over time, but we’re just beginning to test, so it will not happen in ’14.

Valerie Brown - Alliance Bernstein

Okay. Thank you.

Operator

And we will now go to David Glick with Buckingham Research Group.

David Glick - Buckingham Research Group

Thank you, Karen. Just a quick follow-up on the licensed model. I'm curious and -- footwear obviously is a big important business and you had to make some tough decisions in terms of space allocations to put their shops in. Have you looked at the performance of the -- of your footwear business in locations that have put the shops in versus not, and how you evaluate sort of the trade-offs in terms of sales productivity and whether you look at profit dollars per square foot and how do you think this investment is paid off?

Karen M. Hoguet

We are very happy with the investment and I will also say it’s brought new customers into the store, which is also helpful. So we feel very good about that decision.

David Glick - Buckingham Research Group

And we’re also starting to see some new shops, we really haven't seen in addition to Finish Line some vendor shops, show up in footwear, I’m just wondering if that’s helping drive productivity as well and maybe that could be one of the leading categories for you guys that could replace one or two of the other center core categories that are still good, but maybe not quite as productive?

Karen M. Hoguet

Well, I hope shoes does well and so do those other categories.

David Glick - Buckingham Research Group

Right. Okay and then just finally, just a quick clarification I believe I just wanted to double check you said similar to -- you said Q2 comps would be greater than Q1 and I think you said Q4 greater than Q3 that -- is that what you’re …?

Karen M. Hoguet

That is what I’ve said.

David Glick - Buckingham Research Group

And first half roughly equal to second half?

Karen M. Hoguet

I didn't say that. I didn't answer that one.

David Glick - Buckingham Research Group

Is the first half comparable to the second?

Karen M. Hoguet

We're not commenting.

David Glick - Buckingham Research Group

Okay. Thank you, Karen. Good luck.

Karen M. Hoguet

Yep. Thanks.

Operator

We will now go to Rob Wilson with Tiburon Research.

Rob Wilson - Tiburon Research Group, Inc.

Yes, thanks for taking my call, Karen. Can we go back to the gross profit margin in Q4 and drill to that a little bit deeper? Was there any impact from the licensed business on gross profit margin in Q4?

Karen M. Hoguet

There was and it was also impact of the increase in delivery fees, so both of those factors are offsetting.

Rob Wilson - Tiburon Research Group, Inc.

Was the core merchandise margin higher or lower?

Karen M. Hoguet

Oh, it’s about flat.

Rob Wilson - Tiburon Research Group, Inc.

Okay. And then did you have any asset gain sales last year?

Karen M. Hoguet

In the fourth quarter, that's a good question. I don’t know the answer, but if so, it was small.

Rob Wilson - Tiburon Research Group, Inc.

Okay.

Karen M. Hoguet

We will check that and get back to you.

Rob Wilson - Tiburon Research Group, Inc.

And one final question, the pension expense $150 million, was that flow through evenly throughout the year or is it lumpy?

Karen M. Hoguet

I don't know the answer to that. We can check that.

Rob Wilson - Tiburon Research Group, Inc.

Okay. I will follow-up.

Karen M. Hoguet

Yes.

Rob Wilson - Tiburon Research Group, Inc.

Thanks for taking my questions.

Karen M. Qoguet

You bet.

Operator

We will now go to Richard Church with DISCERN Investment Analytics.

Richard Church - DISCERN Investment Analytics

Good morning, Karen.

Karen M. Hoguet

Hi, Rich.

Richard Church - DISCERN Investment Analytics

How are you?

Karen M. Hoguet

Fine.

Richard Church - DISCERN Investment Analytics

I just wanted to -- I’m good. With respect to Omnichannel, I was wondering if you could comment a little bit about the sort of the last mile challenges that I think you and everybody faces with getting that product into the consumer’s hands. How are you thinking about that? How that's reflected in your guidance of course and then were there any unusual expense pressures associated with that in December?

Karen M. Hoguet

One of the things that has us excited about the buy online, pickup in store test and that's going to help us really lay this foundation for same-day delivery, because we have the capability now of knowing exactly if that inventory that a customer is ordering is in a specific store. And if that inventory is in a market, obviously it’s easier to get to the customer on the same day. So that is laying the foundation. We'll probably test same-day delivery in a few other places this year. And I don't know where that will lead.

Richard Church - DISCERN Investment Analytics

Are you working with any smaller transportation or shipping companies that are even going to step further and trying to deliver in certain categories within an hour?

Karen M. Hoguet

Yes, we had -- I don’t know if that was in an hour, but we're working with a few in different markets trying to test different ways of doing this.

Richard Church - DISCERN Investment Analytics

Okay. Thank you very much.

Operator

(Operator Instructions) And we will now go to Paul Trussell with Deutsche Bank.

Paul Trussell - Deutsche Bank AG

Oh, hi, Karen. Just sorry, just one quick follow-up. You mentioned at this time a year-ago that the promotional shift between 1Q and 2Q was material and that should lead to 200 to 300 basis points type of gap between the performance of those two quarters last year. Should we think about the gap between 1Q and 2Q this year to be similar?

Karen M. Hoguet

We're not commenting on this specific difference.

Paul Trussell - Deutsche Bank AG

Okay. I just wanted to ask.

Karen M. Hoguet

Yes, thanks Paul.

Operator

And we will now go to Laura Starr with Nuveen Asset Management.

Laura Starr - Nuveen Asset Management

Good morning, Karen.

Karen M. Hoguet

Hi, Laura.

Laura Starr - Nuveen Asset Management

Yes, several people have asked this question on the online versus in-store. I noticed when I go online to Macy’s and I look at the SKUs available there is so much more than what’s in store which is obviously the -- what you want to do but how are you conveying that to customers, how do they know that there is so much more there to pick from? Is that something that you feel that that you’re at the right place at or is there more to do there? And then my second question is on your credit card. I got a mailing from you, it's a new card with a reward program where I can get points back or money back or something, buying groceries and all these other things. Is that something new that you’re starting?

Karen M. Hoguet

Well, let me answer that question first and then I'll go back. We have reissued the Macy's Star Rewards program and I would say we have, I guess the right word is tweaked the program that we had before and frankly communicating with customers better about what benefits she is already getting. We do think it's an enhanced program, but I wouldn't call it a major launch of a new loyalty program there.

Laura Starr - Nuveen Asset Management

Okay.

Karen M. Hoguet

The cards are red, which I think is pretty cool with the Macy's red. But it is an improvement over what we had before, but I would not call it a major launch of a significantly different program.

Laura Starr - Nuveen Asset Management

Okay. And the number …?

Karen M. Hoguet

On the online, it’s interesting in some categories, what you're saying is right, another categories that’s actually not the case. It just feels that way when you’re shopping. But we're trying to do is help customers whether it would be frankly in-store or online, find what they want easier and more quickly. And that's always a challenge. So I would say, we continue to try to showcase our inventory in a way that the customer finds what she wants, but isn't so overwhelmed, that it's hard to do so.

Laura Starr - Nuveen Asset Management

Okay. Thank you.

Operator

And Karen, there are no other questions. So I'll turn the call back to you for any additional or closing remarks.

Karen M. Hoguet

Okay. Well, thank you all for your interest, your support. If you have follow-up questions, you can call me, Matt, Sarah, and we'll do our best to try to answer them. And again thank you very much.

Operator

Thank you. That does conclude our conference for today. I would like to thank everyone for your participation, and have a great day.

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