[Operator instructions] As a reminder, today's call is scheduled for 90 minutes.
Comparable owned plus licensed sales for the fourth quarter increased 6.1% versus 2019.
Total company AUR was up 11.5% for the fourth quarter and for the full year, was up over 11%.
For the year, comparable owned plus licensed sales increased 3% compared to 2019.
For the year, we generated $984 million more in adjusted EBITDA than 2019, growth of 42%.
Our full year adjusted EBITDA margin was 13.6%, and a rate we have not achieved since 2014.
As a result, we achieved adjusted diluted earnings per share of $5.31 for the full year, up 82% versus 2019.
We completed our current $500 million share repurchase program during the past quarter.
And I am pleased to announce that our board has authorized a new $2 billion program.
Additionally, we have announced a 5% increase in our dividend after reinstating it during 2021.
2 website in our categories in the nation with 39% digital penetration, an increase of nine percentage points versus fourth quarter of 2019.
2, in 2019, our store strategy was largely focused on the highest quality A and B malls, while accelerating the closure of stores in C and D malls.
3, in 2019, we were over-indexed on occasion-based apparel, had less disciplined buying behavior and our approach to promotions was overly complicated for customers, all of which was driving high levels of markdowns and low inventory productivity.
4, in 2019, the spread between customer acquisition levels and customer attrition levels was narrow.
5, in 2019, we had just created a new integrated team to reimagine our supply chain that previously segregated store and digital inventories and relied on a distribution network that lacked efficiency.
44 million customers shopped with our Macy's brand in 2021, up 1% from two years ago.
We are adding new customers with 7.2 million new customers in the fourth quarter, an 11% increase compared to Q4 2019, with 58% coming in through digital.
Nearly 30% of these new customers were dormant over the past 12 months who are now reengaged.
For the full year, new customers increased 26% over 2019 to 19.4 million.
In addition to enhancing the shopping experience of our core customers, we also focused on new offerings to further attract the under-40 shopper.
In the fall season, we added a curated selection of brands, products and categories to 160 Macy's stores that appeal specifically to this younger, more diverse customer.
This in-store strategy aligned well with the digital strategy to attract the under-40 customers that we rolled out in the spring through our contemporary sitelet.
At Bloomingdale's, brands geared toward the under-40 customer had a record year.
Sales remained strong, and we saw healthy levels of conversion for Macys.com at 4.2%, a 13% increase compared to 2019.
During the fourth quarter, Macy's app had the largest quarterly gain in downloads across our peer set with an 81% increase in downloads over the third quarter of 2021.
Compared to 2019, Bloomingdale's digital sales grew 51% during 2021 with traffic increasing 28%.
During the quarter, 58% of our omnichannel markets, representing 80% of our sales, had growth above 2019 levels, and half of these grew by at least 10%.
For the year, we grew sales in 52% of our omnichannel markets versus 2019.
This past year, international tourism was down 50% from 2019 levels, with the fourth quarter strengthening before Omicron weighed on consumer sentiment.
We generated $8.7 billion in net sales during the quarter, up $328 million or 3.9% from the fourth quarter of 2019.
Comparable sales on an owned plus licensed basis increased by 6.1% despite the approximately 125 basis point headwind from the Friends and Family shift we mentioned on our last call.
Gross margin for the quarter was 36.5%, down 30 basis points from the fourth quarter of 2019.
Notably, holiday delivery surcharges, which were essentially nonexistent in 2019, reduced margin by approximately 85 basis points.
Merchandise margin increased 160 basis points from the fourth quarter of 2019.
Versus 2019, full-price sell-throughs improved 660 basis points and full-price AURs increased 10% for the Macy's brand.
Including holiday surcharges, delivery expense accounted for 5.9% of net sales, 190 basis points higher than the fourth quarter of 2019, but down from the fourth quarter of 2020.
Based on these results, we plan to roll this initiative out to an additional 35 locations before holiday 2022.
Inventory was down 16% versus 2019, while full year sales were almost flat.
And versus 2020, inventory was up only 16% on sales growth of more than 40%.
As a result, inventory turn improved by 22% compared to 2019.
SG&A expenses were $2.4 billion in the quarter, down $80 million or 3.2% versus 2019.
SG&A expenses improved as a percent of net sales to 28%, down 210 basis points from the fourth quarter of 2019.
Macy's media network exceeded our full year expectations, generating more than $105 million in net revenues that offset SG&A expenses.
During the quarter, we also made significant headway in filling open positions, provided premium weekend pay to our colleagues and accelerated the adoption of $15 per hour minimum wage in another 200-or-so stores.
Credit card revenues were $264 million, up $25 million from the fourth quarter of 2019.
As a percent of net sales, credit card revenues were up 10 basis points versus 2019 to 3%.
Adjusted EBITDA margin was 14.4% or 50 basis points higher than the margin achieved in the fourth quarter of 2019 despite asset sale gains that were $65 million less in 2021.
After accounting for interest and taxes, these results generated adjusted diluted earnings per share of $2.45, up from $2.12 in 2019.
Our full year capital expenditures of $597 million were focused largely on technology-based initiatives, including those that support our digital business, our data science initiatives and the simplification of our technology architecture.
We generated $2.3 billion of free cash in 2021, which includes the receipt of the majority of the CARES Act tax refund in January of $582 million.
Our strong free cash flow allowed us to pay off $1.6 billion of debt early.
This, coupled with our solid performance, resulted in a year-end leverage ratio of 1.8 times, well below our initial target of 2.5 times, and materially better than prepandemic levels.
As Jeff referenced, during the quarter, we exhausted the remaining $200 million of share repurchase authorization, repurchasing 7.5 million shares.
In total, under the full $500 million authorization, we repurchased 20.5 million shares or more than 6.5% of shares outstanding.
First, the marketplace we announced last quarter is expected to deliver incremental value above our $10 billion digital sales target.
The fine jewelry business in those stores saw an incremental 23 percentage point increase in sales growth over 2019 from the new assortment.
Pandora attracts younger customers, and we will now expand to 28 additional locations in 2022.
Of the customers that shop Toys "R" Us, 25% were new customers to the Macy's brand, and 93% of these toy customers cross-shopped other categories.
Today, 66% of our total spend is on digital versus 35%, five years ago.
Over this time, Macy's has experienced a 25% improvement in our return on advertising spend.
This new format is also bringing in new customers who are engaging with our curated under-40 brands and products.
Nevertheless, we remain committed to achieving low double-digit adjusted EBITDA margin annually, and in 2024, expect to be within a range of 11.5% to 12%.
The $900 million in permanent cost savings we realized over the last two years will remain a significant benefit to our SG&A leverage.
In the near term, we're targeting credit card revenues as a percent of net sales to be slightly below our historic average of 3%.
However, in the medium term, we expect proprietary credit card sales penetration to rise, which will offset the increased pressure from bad debt and help facilitate the rebound of credit card revenues to about 3% of net sales by 2024.
We're targeting capital expenditures of approximately $3 billion over the next three years.
In 2022, we're targeting approximately $1 billion of capital expenditures.
We have a robust monetization program that has reduced more than $2 billion in asset sale proceeds over the last six years.
After accounting for capital expenditures and asset sale proceeds, we're targeting to generate between $3.2 billion and $3.6 billion of free cash flow over the next three years with up to an additional $900 million of incremental debt capacity with strong financial flexibility given our leverage and EBITDA targets.
Those priorities include: first, maintaining a healthy capital structure that is focused on best positioning Macy's, Inc. for access to bank and capital market funding under all economic scenarios; and second, maintaining investment-grade credit metrics with well-laddered debt maturities, which includes targeting an adjusted debt to adjusted EBITDAR leverage ratio of 2.0 times or below.
As just mentioned, we announced the first dividend increase today and the authorization of a new open-ended $2 billion share repurchase program.
For Macy's, Inc., we expect net sales to be flat to up 1% with continued strong AUR performance at more modest levels than we saw during most of 2021.
For our owned plus licensed comp sales, we expect a three-year compound annual growth rate of between 1.1% and 1.4%.
Digital sales are expected to be approximately 37% of net sales.
We expect a gross margin rate between 38.1% and 38.3%, slightly down from last year, largely due to increased digital penetration and expected inflationary cost pressures.
Credit card revenue of approximately 2.9% of sales is expected.
From a rate perspective, SG&A is expected to be in the range of 33.7% to 33.9%.
Asset sale gains are expected to be between $60 million and $90 million.
Adjusted EBITDA margin is expected to be between 11% and 11.5%.
Net interest expense is expected to be approximately $190 million for the year.
Adjusted diluted earnings per share is estimated between $4.13 and $4.52 and does not include the impact of any share buyback that might occur throughout the year.
We also expect between 55% and 60% of our annual adjusted EBITDA, excluding asset sale gains, to be generated in the fall season.
Of this, nearly 70% is expected in the fourth quarter.
With those factors in mind, we expect net sales in the first quarter to be between $5.3 billion and $5.4 billion.
For adjusted earnings per share, we expect the first quarter will be between $0.77 and $0.85 compared to $0.39 in 2021.
This includes an anticipated benefit of approximately $25 million from asset sale gains and again, does not include any impact from share buybacks.

Summary:
Merchandise margin increased 160 basis points from the fourth quarter of 2019.