Karen M. Hoguet - Chief Financial Officer.

Charles Grom - Sterne, Agee & Leach, Inc. Oliver Chen - Cowen & Co. LLC Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC Paul E. Trussell - Deutsche Bank Securities, Inc. Matthew Robert Boss - JPMorgan Securities LLC Matt McGinley - Evercore ISI Paul Swinand - Morningstar Research Todd Duvick - Wells Fargo Securities LLC Jeff S.

Stein - Northcoast Research Partners LLC Bob S. Drbul - Nomura Securities International, Inc. Stephen W. Grambling - Goldman Sachs & Co. Dana L. Telsey - Telsey Advisory Group LLC Lorraine Maikis Hutchinson - Bank of America Merrill Lynch Michael Block Exstein - Credit Suisse Securities (USA) LLC (Broker) David J.

Glick - The Buckingham Research Group, Inc. Priya Joy Ohri-Gupta - Barclays Capital, Inc. Joan Payson - Barclays Capital, Inc..

Good morning, and welcome to Macy's, Inc. First Quarter 2015 Earnings Release Conference Call. Today's conference is being recorded. I would now like to turn the call over to your host, Karen Hoguet. Please go ahead..

My Macy's, Omnichannel and Magic Selling. And we will continue to make progress on all three of these key strategies. In addition, there's some new initiatives about which we're very excited. The following are seven of these initiatives. First, the acquisition of Bluemercury and its impact on our overall Beauty business.

We believe it will contribute both to our growth and earnings going forward. We're excited by the prospects for increasing the number of free-standing stores as well as comp growth in the Bluemercury stores, e-commerce and the addition of shops within the Macy's stores. At the start of this year, there were 59 Bluemercury locations.

Today, there are 63 stores open, and we expect to open 14 more by year-end. We are also developing plans to maximize their e-commerce business utilizing our omnichannel capabilities, and we expect to open approximately five shops within Macy's stores over the next nine months, with a few opening this fall so we can start testing various concepts.

The Bluemercury approach to the Beauty category is opening our eyes to new strategies and tactics, which could actually help us grow our overall beauty business beyond their own operation. The second key initiative is Plenti. Our new loyalty program Plenti was launched on May 4. It is the first U.S. loyalty coalition involving major U.S. brands.

It offers consumers everyday opportunity to earn and redeem points with much choice. Plenti offers opportunities to both incent our current customers to buy more and also to bring new customers into Macy's who enter the Plenti program through the other participating brands.

In the first week, we have already enrolled more than 2 million customers at Macy's, which is well ahead of expectations. We are very pleased with early customer response and interest as well as our store team's terrific execution.

The third initiative I'd highlight is that we are developing strategies to focus on our top 150 doors, and especially what we call our 30 platinum doors – our very best.

These 150 doors and the 30 were selected based on numerous factors including the recent sales growth, external economic factors in their markets, customer service scores in these stores, as well as their profitability.

We believe there is opportunity to elevate these stores further and accelerate their growth and hopefully we will begin to see the benefit this fall particularly in the fourth quarter. The fourth key initiative is what we call All Things Wedding.

Macy's and Bloomingdale's have always been known for our gift registries, but the truth is we have an enormous opportunity to not only improve our wedding gift registry business, but also to strengthen, pull together, and market our complete offerings throughout our stores ranging from engagement rings to bridesmaid dresses to tuxedos, to cosmetics, et cetera, et cetera.

Frankly, this initiative impacts almost every category in the store. And we believe it offers a great way to build ongoing loyalty with millennial customers. The fifth initiative is that we are focusing on some key categories where we see outside growth opportunities. A few of these would include active, dresses and jewelry.

Our efforts for these categories vary, but they all include not only having the right product but also having the right selling models as well as marketing strategies. The sixth key initiative, which you heard a lot about last week, is Macy's Backstage.

We don't have anything new to report since the press release, but as you might imagine, we're all very excited about the potential for this new initiative. We believe that these stores will help us increase our share of wallet with existing Macy's customers as well as bring new faces into Macy's stores. And the last initiative is international.

There are numerous third parties approaching us about potential partnerships overseas, but we aren't far enough along in our work to discuss these yet. We are excited, as you might imagine, to further build on the strength of our Macy's and Bloomingdale's brands in other key countries and markets.

There is a lot going on, and our talented, dedicated and, I might add, competitive organization is working very hard to accelerate our sales growth while maintaining our profitability. As I said earlier, we still believe the right expectation for 2015 is approximately 2% owned plus licensed comp sales growth and approximately 1% total sales growth.

But it will be more back-end loaded than we initially expected. And while we expect the second quarter comp owned plus licensed sales growth to be positive, we do not expect it to reach the 2% annual guidance. In terms of earnings, we are still expecting $4.70 to $4.80 per share in annual earnings on a diluted basis.

But in the second quarter, we are expecting our earnings per share to be below last year. One of the hallmarks of Macy's, Inc. in recent years has been our ability to overcome obstacles and succeed despite a variety of challenges and macroeconomic factors. In a lot of ways we did have the deck stacked against us in the first quarter.

These included the external factors I mentioned, such as weather, port bottlenecks, the value of the dollar, and a sawtooth economy. There were also internal factors, such as the impact of our omnichannel reorganization, which we believe caused some inadvertent but short-term disruption.

While we are disappointed in our first quarter results, we are not discouraged. We see some of the first quarter obstacles disappearing and some of our new initiatives beginning to gain traction. Our style is not to make excuses but to take action.

With today's consumer having so many choices for shopping and buying, both Macy's and Bloomingdale's continue to put in place new growth strategies on every front, both organically and in pursuit of bold, new ideas.

Not everything we are doing will pan out, nor should it, but we know the value of testing, learning, and taking successful ideas to scale very quickly. We remain fully committed to the new stage of growth we introduced to you in February.

We expect to continue to grow comp sales and earnings per share in the full year 2015 consistent with our guidance, and we are more excited than ever about the new ideas that will unfold in the years ahead. Let's now open the floor for your questions..

Thank you. . We'll go first to Charles Grom from Sterne Agee..

Hi. Good morning, Karen.

Just on the guidance of $4.70 to $4.80, any meaningful changes to the six or seven factors that you outlined in your February call both on the gross line or SG&A line, buybacks, et cetera?.

No, I don't think so. I just think, again, the timing by quarter will vary..

Okay, great. And then in order to get to that 2% comp hurdle for the year, trends need to get, as you mentioned, a lot better, particularly against tougher compares in the second and fourth quarter.

Could you just walk us through a couple of the drivers that make you comfortable hitting that number, particularly if the second quarter is expected to be sub 2%, but a little bit above zero?.

Yeah. I mean, I think if you think about the first quarter, the weather is, obviously, better and the port slowdown will be behind us. The hope is that the disruption from the new omnichannel restructure is lessening as we get into the second quarter. What will continue with us is likely the impact of the strong dollar on the international tourists.

Hopefully, as we get through fall that will begin to improve. But, I think what makes me most excited about the fall is when we look back at the areas that we tested last year with the single view of inventory and viewing omnichannel across the organization.

By the fall of last year we began to see big improvement, and I think the same thing should happen this year. And so, I'm actually quite optimistic about that as we get into the fall season..

Okay. And then just last question. Obviously, gross margin is much better than you would expect on that type of comp.

Any thoughts on the promotional backdrop today? Are you seeing any unusual activity from your peers?.

Well, I mean, yeah, obviously, we are, particularly in the upscale world. But remember also, I said that the second quarter gross margin is going to have the impact of some of the delay of the markdowns on the goods that were received late in the first quarter.

So while we're very pleased with the first quarter, the second quarter may not be as good and the two will equalize together..

And that's a major factor on why you expect earnings to be down a little bit relative to last year?.

Yes..

Okay. Great. All right, thanks, Karen. Good luck..

Thanks, Chuck..

We'll go next to Oliver Chen from Cowen & Company..

Hi, thanks. Thanks, Karen. The Plenti loyalty program sounds pretty awesome in terms of the potential here.

Do you expect this to have a back-half impact in terms of the timing at which this may occur? And given that you are mildly more inventoried than you'd like, what gave you the confidence to kind of maintain your full-year outlook as you look towards the back half?.

Well, remember the second quarter gross margin I said will be pressured, and part of that is a result of the inventory being high at the end of the first quarter. But that will be behind us as we go to the fall season. In terms of Plenti, people here are betting on when we're going to see the impact.

I think most of the knowledgeable people think it's likely to be spring 2016, because it will take customers time to start building points and really understanding the strength of the program. Frankly, that would be consistent with what we saw with Bloomingdale's when we rolled out the Loyallist program.

It does take customers a while to understand these new programs, but hopefully it will help the back half. But we're not counting on that..

Okay, Karen, and our final question is on the top 150 doors. It sounds like a shrewd prioritization. What's the nature of the lower hanging fruit in terms of the changes that you envision, whether it be different allocation of floor space or selling techniques? Just more color there would be appreciated..

Yeah, I mean, it's really, we're looking at the story holistically. So it will be some shift of space. There will be some new brands brought in. It will be places where we can elevate the assortment consistent with the customers in those stores.

But if you think about it, the top malls in the country are doing extraordinarily well, as are we, but we think we can actually push that growth farther..

Okay. And we do believe your learning curve program makes sense in terms of how you characterize that.

As we do look forward, which aspects of that are the most near term, in terms of the improvement opportunity as your organization gets more integrated?.

I think the key issue will be understanding inventory allocation and how to think about putting inventory in stores versus warehouses. And we're trying hard to make sure that our best-selling styles are everywhere and an increasing the congruency.

And I'm trying not to get into technical retail speak, but it will help, we think, enormously to have inventory in the right places. And I think it will take a few months for that new organization to figure out how to do this. But I think the sales opportunity is tremendous..

Thank you. Best regards..

Thanks, Oliver..

We'll go next to Kimberly Greenberger of Morgan Stanley..

Great. Thank you so much, Karen. Karen, the question we're getting most often from investors here over the first three months of the year is around your real estate strategy. And I'm wondering if you can just articulate how you're thinking about Macy's real estate as an asset.

Are you, at this point, contemplating any sort of strategy around the value of your real estate and, if not, is there something that may happen over time that could cause you to change your mind?.

Well, when it comes to real estate, the first thing I would say is this is far more complicated than what most people think. And some of the estimates of value in our real estate, I think, have been done overly simplistically.

Having said that, as you might imagine, we are studying closely with our key banking partners all the various transactions that have happened lately and all the possible strategies, the pros, the cons of how you would do it, et cetera, et cetera, to see what's right for us. Our objective is always to maximize value.

And up until now, we haven't seen an opportunity that made sense in terms of a global strategy. Now keep in mind, over the last couple of years you have seen us monetize some of our real estate, frankly not with our worst-performing stores.

So examples would be last year Sunnyvale and Cupertino in Northern California, where we did take advantage of a disconnect between the value of real estate and the value of the retail entity. And we are continuing to study many opportunities like that within the portfolio.

So I would say obviously we're studying everything, and if something would make sense, we obviously would do it. So that's the only way to answer it, Kimberly. But we are staying close to the subject, because like you, we're getting the question also..

Great. Thank you so much, Karen..

We'll go next to Paul Trussell of Deutsche Bank..

Good morning, Karen. The breakdown of the comp, you mentioned that AUR was up a bit, UPT down.

Just wondering how do you expect that to trend as we move forward, particularly in the second quarter? And then how you kind of make up the composition of the 2% full-year comp?.

As I have said repeatedly, that is an impossible number to forecast. There are so many factors that go into it, so I don't know how to begin to answer that question..

Got it.

And then when we think about the smaller store concepts, both the Macy's Backstage, as well as Bluemercury, can you help us out with any thoughts around store count opportunity longer term or productivity and profitability metrics?.

Well, if you look at Bluemercury, obviously if you look at Sephora or ULTA, we're currently sitting at 63 stores. You can see the enormous opportunity in free-standing stores. So I can't give you a specific number, but it's enormous. Also, obviously, the opportunity to go in the best Macy's stores is huge as well.

And you add on e-commerce growth; we're very encouraged by that, but I can't give you any specific numbers. As to Backstage, again, we're just testing this fall. If it works well, again, the opportunity is huge, but that one we have to pilot it before I could begin to give you any insight as to what that strategy may mean..

Got it. Thank you..

We'll go next to Matthew Boss with JPMorgan..

Hey, Karen.

So from a top-line standpoint, if you parsed out tourism and some of the weather impact, what categories do you think account for the trajectory change that we've seen from the 3 to 5 comps we were running from 2010 to 2012 versus today's reduced level?.

I don't think it's a category change. I think it's sort of the overall level. I mean, there's ups and downs within categories, but there really hasn't been any dramatic shift broadly based..

Okay.

And then even to break that down a little further, I mean, what do you think of the health of Center Core? Any changes? I know you mentioned watches and some shifts maybe in jewelry, but any slowing or shifting of drivers worth noting?.

It's hard to know right now. Obviously, I called out the fashion jewelry and watch business being slow, and that's a part of Center Core. We were up against some major handbag promotions in the first quarter, so it's kind of hard to read until we get through that, what's happening there.

But that growth continues to be very strong, absent the impact of that promotion. Shoes has done well, Beauty is doing quite well, fragrances, in particular, is very strong. So hopefully there's no major change in Center Core as the total. And, again, we're looking for ways of offsetting that jewelry/watch slowdown. That would be the only call out.

But then usually other opportunities pop..

Okay, great. Best of luck..

We'll go next to Matt McGinley from Evercore ISI..

Good morning. My first question is on the free cash flow generation. The first quarter is always a little bit choppy in terms of how you generate cash, but this quarter had a bigger investment in inventory as it related to the port issues.

So my question is does that working capital investment normalize over the year or should we expect that overall it would be an inventory investment over the course of the year?.

Yeah. So it will normalize. I mean, as I said, the inventory was a little high at the end of the first quarter but that will normalize..

Great. My second question is a follow-up on the tourism spending. I'm thinking about this from a historical standpoint.

How does that tourism spending typically snap back after a weak period in the past? Is that driver mostly FX or do the stores that are more tourist-dependent tend to recover as you get into a more tourist heavy season like the summer?.

I'll be honest I have not looked at that. I can't remember a time where it feels as bad in those stores, but I may be wrong, and it's a good suggestion. We'll do that..

Okay, thank you..

So, I'll let you know after we've done it. Yeah, I can't remember it, and maybe I should – I'm not sure. Let me look at it and we'll let you know..

Sounds good. Thank you..

We'll go next to Paul Swinand of Morningstar, Inc..

Good morning. Just wanted to maybe follow up on Paul's question about the units per transaction.

Is it that people are being more careful? Is there any read-through into the environment or maybe is it just the tourism effect or the port squeeze effect having fewer goods available or people that aren't sort of stocking up? Is there any way you can comment on that color?.

Well, as I said, when you look at the AUR, part of it was mix, and the regular price was doing better. And we typically sell fewer units per transaction with regular price. So, I have a feeling the first quarter may be distorted because of the port situation and we ought to wait and see the second quarter before we make too much of it..

Got it.

So regular price up, but maybe just the takeout of the markdowns lowered the units per transaction?.

That's correct..

Okay..

If we know – If we know it positively impacted the AUR, so it would have made sense that it would do the opposite on the UPT..

Got it. Thanks. And then just wanted to drill down a little bit also in the – again, a follow up on the other question, but with watches and Center Core.

Is it tough comparisons from individual brands and promotions from brands, or is it pretty widespread across the different brands being down in any color on why you think that might be besides the promotions?.

I have not looked at it brand by brand, so I'm not sure how to answer that. Sorry..

Okay. Thanks..

We'll go next to Todd Duvick of Wells Fargo..

Hi, Karen..

Hi..

My question pertains to share repurchase expectations. The past couple of years, you've managed your balance sheet to a lease adjusted leverage range of 2.4 times to 2.7 times. And I calculate you are slightly below that range right now.

So as you consider the pace of share buybacks going forward, should we expect that pace to be governed by the upper end of your leverage range?.

Yeah, I mean, we – yes, I think is the easy answer. We aim for the 2.4 times to 2.7 times, so yes..

Okay. Okay. That's it for me. Thank you..

We'll go next to Jeff Stein of Northcoast Research..

Good morning, Karen. A couple of questions.

Besides the top-line acceleration that you are hoping for in the back half of the year, are you assuming any incremental expense cuts to stay in that $4.70 to $4.80 guidance range you've provided?.

No. I mean, we always are doing what I would call expense management cuts, but nothing significant..

Okay. And with respect to the port delays, would you say that the vast majority of that is now behind us? And then taking a look at the delayed deliveries, I think you mentioned in your fourth-quarter call that something on the order of 12% of your receipts were running late.

Was it primarily private-label brands or nationally branded goods? Because I presume that national brands coming in late, you might be able to return some of that merchandise.

So how should we think about the mix of the merchandise that was delayed?.

I don't know the specific percentage breakdown, but, yes, a lot of it was private brands, but certainly not all..

Okay.

And then final question, on the new loyalty program, have you done any research to understand how many of those sign-ups are already existing Macy's credit cardholders or customers?.

We are doing that, and I don't know the answer. And after one week it would be too early to tell you anyway. But, obviously, we're tracking that quite closely..

Okay. Thank you very much..

We'll go next to Bob Drbul of Nomura..

Hi, Karen. Good morning..

Hi, Bob. Good morning..

Just had a couple questions.

The first one is, on the inventory situation, are there areas in the store and throughout the business that are higher than others? And sort of how aggressive will you be in terms of getting it? And when you think about it on a monthly basis, do you think it will be throughout the whole quarter? Do you think you'll get it cleared up in June into July? Just give us an idea of how aggressive you...?.

Yeah, I mean, obviously, there are pockets where inventory is higher than others based on the port situation and also based on weakness in sales. And so, we have plans to make sure that we enter the third quarter fresh and we don't take forward any of this inventory. And again, remember, the comp expectations is 2 times.

So while the inventory is higher than we expected, it's not that high..

Okay. And then did you quantify any impacts on the tourism piece? I guess just a couple questions.

Can you give us just updated thoughts on how much of your business is susceptible to the tourism trends and comp trends in tourism-affected markets versus ones that are less affected by the tourism?.

Overall, it's about 5% of our sales, we think, comes from the international tourist. And so, as I said, we think it hurt our comps in the first quarter by a full percent..

And is that the expectation that you are holding in the full-year comp plan that you reiterated this morning?.

No. I mean, second quarter, yes, but as we go through the fall, we're hoping to begin to mitigate that somewhat. And as we get to the fourth quarter, it begins to year-round also..

Okay.

And then, just a last question is, could you give us any updated thoughts on acquisitions, whether – do you think that the off-price piece is a potential area for acquisition? Or do you fully expect to do it sort of on a one-by-one store basis?.

We always look at buy versus build alternatives, and we'll continue to do so. In that case, we've got to test it and see what we think and decide, assuming the success is successful, what's the right way of scaling it quickly? And we'll look at anything..

Great. Thank you very much, Karen..

Thanks Bob..

We'll go next to Stephen Grambling of Goldman Sachs..

Hi, Karen. Good morning. A couple of follow-ups actually on both those questions.

But I guess the first would be, how does the tourist spend maybe vary by category? Did that drive any changes in the quarter among the strong and weak categories? And on a related note, how did the impact from tourism change relative to the fourth quarter?.

The second question is quite a bit. It almost doubled. So that was a big step-up in terms of the impact. By category, it's relatively spread through the store. I haven't really gone through and looked at it category by category. The merchants are doing that, but I don't know the answer to that..

Okay. And then I guess going back to the Backstage and off-price, and I realize that it is still early, but you did mention that scaling is a key competency.

So can you talk about how maybe the off-price supply chain differs from your existing and is there any kind of investment that is already embedded in your plan as it relates to the supply chain for off-price?.

All that's in our plan right now is the test, and if it works, we'll obviously go from there. We've estimated what we think it would cost to build it out to scale, which is why we got so excited about testing it. But, until we test it and know, I think it's premature to talk about that..

Okay. And the last one, if I can squeeze it in, would just be on the non-top 150 stores, I mean, I guess what is the plan there? How has that changed as you're now reemphasizing the top 150? Thank you..

We continue to focus on each and every store with a strategy that works in its local market and that's appropriate for it. Obviously, the elevation of assortments doesn't work in all markets. So we are focusing on those stores that have the greatest opportunity, as you might imagine. But, through My Macy's we've got strategies for each and every door..

Thanks so much..

We'll go next to Dana Telsey of Telsey Advisory Group..

Hi, Karen, how are you?.

Fine, how are you, Dana?.

Good.

Can you talk a little bit about marketing plans and how you see them for the remainder of the year? Is it skewed to the second half and what percentage of sales done on proprietary cards? Any change there? And just two last things, in Backstage, are there any brands that are in Macy's stores that you won't sale in Backstage and how is single view of inventory progressing? Thank you..

Okay, that was too many for me to remember. Let me try one by one. If I miss one, tell me. Credit penetration was 44.9% in the quarter, up 20 basis points. So that is, obviously, good news. In terms of our marketing spend, obviously, with the omnichannel organization, we're thinking differently about how we spend digitally versus the traditional media.

But, overall, I don't see any major change as we go through the remainder of the year.

In terms of Backstage, the question was are there vendors we wouldn't sell there?.

Yes, that are in full line that won't be in Backstage..

Oh, I'm sure there will be. And I suspect there'll be vendors that aren't in full line that will be in Backstage; so I think it will go both ways..

Okay.

And then, single view of inventory, how is that doing?.

Well, that's what I'm most excited about as we go to the fall season. And I do think it has caused some disruption in the beginning of the year as the new organization figured this out and figured out where to put inventory. I think it absolutely is going to give us a huge sales opportunity as we go forward..

Thank you..

We'll go next to Lorraine Hutchinson from Bank of America..

Thank you. Good morning, Karen..

Good morning..

I just wanted to follow up on Backstage.

As you're testing it, how are you thinking about how much clearance you'll ship to the off-price channel versus maintaining the traffic flow that you get from clearance in your flagship stores?.

Yeah, I mean, it's a very good question. And, obviously, we're going to test different approaches. Interestingly, if you think about certainly the 30 platinum doors, it's very possible that clearance is taking up too much space, and it would be better cleared so that we could bring in fresh, more newness into the stores.

So that may be where we take more of the clearance out than other stores that we think are more dependent on that traffic. So Peter and Vanessa and the team are going to test lots of things, and we'll learn more. But my suspicion is, to your point, we will take varying amounts of clearance out of different stores.

And also, remember, we're not taking goods out until they are well down the markdown cycle. So it's not the early markdowns that will be taken out for off-price..

Right. And what are you hearing from your vendors about AURs in the second half? Cotton prices are obviously down. There are some offsets.

Is there any change in strategy that you hear coming through the pipeline?.

I have not heard of any..

Thank you..

Thanks..

We'll go next to Michael Exstein of Credit Suisse..

Thank you very much, Karen. Just a couple of quick questions. Number one, what sort of costs associated by the Bluemercury rollout and the off-price rollout are incorporated in the estimates that you talked about today? Number one. Number two, in spite of the port issues, you actually were able to lever your payables pretty nicely.

I am just wondering was there some sort of change going on there because one would've thought that the payables may have backed up a little bit from that..

Let me answer that one before I forget. That one's just timing, Michael..

Okay..

So I don't think there's anything different there..

Okay.

And then, how about the cost associated with the rollout of off-price and stuff like that?.

Yeah, I mean, that's all in the numbers. And as we've discussed, we're offsetting that as we aim to maintain the 14% EBITDA rate. For this year, we would expect Bluemercury to sort of be breakeven on the EPS line..

Okay..

But, obviously, next year we hope that it will be additive. And, obviously, there are costs included in the SG&A, particularly as we go through the year associated with Backstage and also Bluemercury..

And then, finally, in terms of the Plenti loyalty program or rewards program, is that on top of the normal Macy's loyalty program so that you'll be layering loyalty programs on top of each other?.

No. The Star Rewards program will be merged into Plenti. So, we will still offer a lot of the coupons that we do for our credit card customers, but the actual rewards that we gave, roughly 1% is now being replaced by Plenti..

Okay, great. Thanks for the clarification. Good luck..

Thanks, Michael..

We'll go next to David Glick of Buckingham Research..

Yes, good morning. Thank you, Karen. Just two quick questions. Most of my questions have been answered. Just wondered in the first quarter whether there were any asset sales that impacted SG&A? I do see in other net line in the cash flows from investing activities.

And then, secondly, I was just curious what that handbag promotion was last year that you did not repeat that would've impacted the business. Thanks..

That I'm not going to comment on. But your first question is, there were asset sales but nothing material..

Okay.

Was that $70 million the release of reserves that you referred to earlier in the call?.

Yes. Yeah, it was less than that, but, yes..

Okay. Thank you very much. Good luck..

Thanks, David..

We'll go next to Priya Ohri-Gupta of Barclays..

Good morning and thank you, Karen, for taking the question. I was just hoping you could provide a little bit of color around how you would think about your current credit rating as you're evaluating some of these real estate options. You've seen some cushion build with a couple of the rating agencies.

Would you look to maintain current ratings at least a mid-BBB, or is it sort of just looking at staying investment grade overall? Thank you..

We tend to focus on ratios rather than ratings, because I've learned over the years I can't control ratings, but ratios I have more control over. So, to the question asked earlier, the 2.4 times to 2.7 times feels like the right leverage ratio to be in. And we remain committed to that range..

Great. Thank you so much..

We'll go next to Joan Payson of Barclays..

Hi. Good morning.

Could you talk a little bit about how much of the $140 million of restructuring savings for this year fell into the first quarter, if that remains relatively consistent through the rest of the year and then also could we expect a similar level of asset sales for the full year this year that we saw last year?.

The first question is it would be a little less than the first quarter, and then relatively evenly Q2, Q3, and Q4 on the $140 million. In terms of asset sales, we're still working on some deals, but that would be our hope and expectation..

Great. Thank you, Karen..

At this time we have no further questions. I would like to turn the call back over to you..

Great. Well, thanks everybody for your interest and your support. And obviously if you have further questions, you can call me, Matt, Sarah, Ryan, (51:20) whomever, and we'll do our best to try to get you the answers. Again, thanks..

That does conclude today's conference. We thank you for your participation..