Earnings call transcript: Macy’s Q2 2025 EPS beats expectations, stock surges

Macy’s Inc. reported its fiscal second-quarter earnings, surpassing both revenue and earnings per share (EPS) expectations. The retailer reported an adjusted EPS of $0.41, significantly above the forecasted $0.19, marking a surprise of 115.79%. Revenue came in at $4.8 billion, slightly above expectations of $4.69 billion, despite a 2.5% year-over-year decline. Following the earnings announcement, Macy’s stock surged by 16.57% in pre-market trading, reflecting investor optimism. According to InvestingPro analysis, Macy’s maintains a "GOOD" overall financial health score of 2.62, though current trading levels suggest the stock is slightly overvalued based on InvestingPro’s Fair Value calculations.

Key Takeaways

• Macy’s reported an adjusted EPS of $0.41, exceeding the forecast by 115.79%.
• Revenue reached $4.8 billion, slightly surpassing expectations despite a year-over-year decline.
• The stock price jumped 16.57% in pre-market trading.
• The company closed 64 stores but showed strong sales in reimagined locations.
• Macy’s continues to focus on its "Bold New Chapter" strategy.

Company Performance

Macy’s demonstrated resilience in a challenging retail environment, with comparable sales growth of 1.9%, the strongest in 12 quarters. The company’s multi-brand and multi-channel strategy appears to be paying off, with Bloomingdale’s gaining market share in the luxury segment and Blue Mercury achieving its 18th consecutive quarter of comparable sales gains. Despite closing 64 non-go-forward stores, Macy’s maintained a positive outlook, driven by strong performance in reimagined stores and strategic brand partnerships.

Financial Highlights

• Revenue: $4.8 billion, down 2.5% year-over-year
• Earnings per share: $0.41, above the forecast of $0.19
• Gross margin: 39.7% of net sales
• Inventory: $4.3 billion, down 0.8%
• Adjusted EBITDA: $393 million, representing 7.9% of total revenue

Earnings vs. Forecast

Macy’s Q2 earnings significantly exceeded analyst expectations, with an EPS surprise of 115.79%. This marks a notable improvement compared to previous quarters, highlighting effective cost management and strategic initiatives. Revenue also slightly outperformed forecasts, despite a year-over-year decline, emphasizing the company’s ability to navigate a competitive retail landscape.

Market Reaction

Following the earnings release, Macy’s stock surged 16.57% in pre-market trading, reaching $15.51. This positive market reaction reflects investor confidence in the company’s strategic direction and financial performance. The stock’s movement contrasts with its 52-week range, showing a recovery from recent lows. InvestingPro data reveals a beta of 1.81, indicating higher volatility compared to the broader market. The stock has demonstrated strong momentum, with the current price representing a 65% premium to its 52-week low of $9.76.

Outlook & Guidance

Macy’s provided full-year net sales guidance of $21.15 to $21.45 billion, with comparable sales expected to decline between 1.5% and 0.5%. The adjusted EPS guidance is set between $1.70 and $2.05. The company remains focused on its "Bold New Chapter" strategy, emphasizing operational efficiencies and brand partnerships.

Executive Commentary

CEO Tony Spring expressed optimism, stating, "We are encouraged by our second quarter results." COO/CFO Tom Edwards highlighted the strategic initiatives, noting, "Our Bold New Chapter initiatives are really positioned to support performance." Spring also emphasized competitive positioning: "We have room in what we have guided to be able to be competitive, to be able to hold on to market share without buying the business."

Risks and Challenges

• Tariff impacts could affect gross margins by 40-60 basis points.
• Consumer spending patterns remain unpredictable amid economic uncertainties.
• Continued store closures may impact overall sales volume.
• Maintaining competitive pricing while protecting margins poses a challenge.
• Supply chain disruptions could affect inventory management.

Q&A

During the Q&A session, analysts focused on tariff impacts and mitigation strategies, consumer spending patterns, and inventory management. Executives addressed these concerns by emphasizing ongoing investments in customer experience and digital platforms, aimed at sustaining growth and adapting to market dynamics.

Full transcript - Macy’s (M) Q2 2026:

Conference Operator: Greetings, and welcome to the Macy’s Inc. Second Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

I would now like to turn the call over to Pamela Quintiliano, VP of Investor Relations. Pamela, you may now begin.

Pamela Quintiliano, VP of Investor Relations, Macy’s Inc.: Thank you, operator. Good morning, everyone, and thanks for joining us. With me on the call today are Tony Spring, our Chairman and CEO and Tom Edwards, our COO and CFO. Along with our second quarter twenty twenty five press release, a Form eight ks has been filed with the Securities and Exchange Commission and a presentation has been posted on the Investors section of our website, macysinc.com, and is being displayed live during today’s webcast. Unless otherwise noted, the comparisons we provide will be versus 2024.

All references to our prior expectations, outlook or guidance refer to information provided on our May 28 earnings call. On today’s call, we will refer to certain non GAAP financial measures. Reconciliations of these measures can be found in our earnings presentation and SEC filings available at www.macysinc.com/investors. All references to comp sales throughout today’s prepared remarks represent comparable owned plus licensed plus marketplace sales and owned plus licensed sales for our store locations unless otherwise noted. Go forward Macy’s Inc.

Comp sales include the approximately three fifty Macy’s go forward locations and digital and Bloomingdale’s and Blue Mercury nameplates inclusive of stores and digital. Go forward Macy’s comp sales includes the approximately three fifty Macy’s go forward locations and Macy’s digital. All forward looking statements are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today. A detailed discussion of these factors and uncertainties is contained in our filings with the SEC.

Today’s call is being webcast on our website. A replay will be available approximately two hours after the conclusion of this call. With that, I will turn it over to Tony.

Tony Spring, Chairman and CEO, Macy’s Inc.: Good morning and thank you for joining us today. We are encouraged by recent quarterly performance and the execution of our Bold New Chapter strategy. We have made substantive enterprise wide improvements to our business yielding meaningful results. For the second quarter, top line, bottom line and core adjusted EBITDA exceeded our guidance. Macy’s Inc.

And Macy’s nameplate both had their strongest comparable sales in twelve quarters. Macy’s go forward comparable sales were positive inclusive of growth in our Re imagine 125 locations and digital. Bloomingdale’s achieved its fourth consecutive quarter of comparable sales growth and continued to gain market share. And Blue Mercury achieved its eighteenth consecutive quarter of comparable sales gains. I want to thank our teams and our brand partners for helping us deliver improved product and omnichannel experiences for our customers.

Turning to a more detailed view of the quarter. Macy’s Inc. Achieved comparable sales growth of 1.9% and our go forward businesses delivered comparable sales growth of 2.2. Adjusted EPS of $0.41 was above our guidance range of $0.15 to $0.20 reflecting comparable sales growth, disciplined expense controls and tariff mitigation actions. End of quarter inventories were down 0.8% and we feel good about our composition headed into the fall season.

Our second quarter results highlight the benefit of being a portfolio of nameplates that are multi brand, multi category and multi channel. This model provides sourcing optionality, economies of scale and negotiations and product and price diversification. And with our off price to luxury offerings and strong financial position, we are leaning into areas of opportunity, chasing important trends and providing more reasons for the customer to shop with us. Now let’s discuss how each pillar of the Bold New Chapter strategy contributed to our results beginning with strengthening and reimagining Macy’s. Our goal for Macy’s is simple, offer customers access to the brands and categories they are looking for at a great value with a compelling omni channel shopping experience.

Macy’s achieved 1.2% comparable sales growth in the quarter. This was led by go forward Macy’s which rose 1.5 inclusive of the reimagined 125 that were up 1.4%. Macy’s off price concept Backstage along with Macy’s Marketplace were both strong contributors. These still white space in our assortments and help us retain customers seeking more price and brand variety. Recent results illustrate that improvements in our Macy’s omni channel customer experience are resonating.

We have shifted from being an operationally led to customer led organization and are calibrating our assortments on both a brand and category basis. Highlighting our progress, Macy’s delivered its strongest second quarter Net Promoter Score on record. We view this as an important measure of customer sentiment and a leading indicator of future sales. I recently received a note from a customer who had just visited a store and they said shopping at Macy’s was such a pleasant surprise. The store was clean and organized and most importantly the employees were a joy to interact with.

The service has improved tremendously over what it was just a few years ago. I will definitely recommend shopping there and I will return to shop there myself. I read every customer note that I receive. Listening to feedback is one of the most important ways we can improve and grow our business. In addition to improving the shopping experience, we’ve also made strides in product curation.

Our vendor relationships are strong and we are viewed as a valued partner that helps broaden their reach and deliver against customer needs. Our balance sheet, large addressable market and loyal customer base are attractive differentiators and market brands are excited to work alongside our teams. As one of their largest partners, we received compelling product from the brands our customers are asking for including Coach, Donna Karan, Levi’s and Ralph Lauren just to name a few. And as these brands thrive at Macy’s, other brands are taking notice. We’ve been attracting new partners including Abercrombie Kids, expanding our distribution of existing labels such as Sam Edelman, HUGO BOSS, Good American and we’re continuing to update our private brand assortment.

Turning to category performance, comparable sales of women’s contemporary and career as well as men’s tailored clothing outperformed. In addition, Fine Droid and watches, textiles and mattresses continued to experience strong demand. The success of these categories illustrates the breadth of product and price points that we offer and our ability to cater to customers’ evolving lifestyle needs. Rounding out the conversation on Macy’s, our strategy of closing underperforming locations while investing in areas of opportunities will create a more focused and profitable store base. I believe we are positioned to deliver long term growth in our Macy’s go forward business inclusive of digital.

This is driven by exceptional customer omni channel experiences, improved selling, enhanced colleague development and inspired merchandising including more variety with reduced redundancies. The second pillar of the Bold New Chapter strategy is accelerating and differentiating luxury. In the second quarter both Bloomingdale’s and Blue Mercury maintained their positive comparable sales trend. Bloomingdale’s achieved a positive 5.7% comp and its highest second quarter sales and Net Promoter Score on record. Our ambition is to be the leader in local markets that we serve and our recent performance underscores that Bloomingdale’s is gaining momentum.

Our strong heritage of customer service and premium contemporary to luxury positioning is differentiated in the market and we are able to offer the best of current trends in an accessible and compelling environment that has broad multi generational appeal. During the second quarter, ready to wear, fine jewelry, fragrance and tabletop performances were a few standouts. Bloomingdale’s is also well known for its special and exclusive capsule collections and partnerships, which build brand heat and excitement and support increased visits to our stores and online. This summer, we had takeovers by contemporary brands Mother and Staud and introduced our latest limited edition Aqua collaboration, Aqua and EvaPhilippi. This week, we are launching our fall campaign, which is called Just Imagine.

The campaign celebrates creativity, art and style and is supported by a robust lineup of activations, impressive visuals and new and exciting and exclusive product. Looking ahead, we remain focused on growing Bloomingdale’s through attracting new brands and partnerships, expanding distribution, growing digital and increasing our national footprint through Bloomingdale’s small format stores and Bloomingdale’s outlet locations. These initiatives help us to take additional share across categories, markets and brands as we capitalize on disruption in the marketplace. Our other luxury concept Blue Mercury achieved 1.2% comparable sales growth representing its eighteenth consecutive quarter of gains. Results were driven by dermatological skincare and recent brand launches including by Vireto, Victoria Beckham Beauty and Charlotte Tilbury.

Our Bloomingdale’s and Blue Blue Mercury customers responding well to our aspirational to luxury positioning. We have proven growth strategies in place for both and are confident in the luxury category and its long term potential. The third pillar of our Bold New Chapter strategy is simplifying and modernizing end to end operations. We have an always on approach to profit improvement and are finding efficiencies through automation, resource optimization and the streamlining of processes. Our end to end work gives us the ability to invest in our growth ambitions while delivering an improved return for our shareholders.

Now let’s discuss our view on the consumer. Our customer across nameplates has remained resilient through the first half of the year and quarter to date. However, given the uncertainty regarding the impact of tariffs on demand, we believe it’s prudent to continue to incorporate a more choice for consumer into our guidance for the remainder of the year. Our third quarter and full year ranges assume we continue to reinvest most of the savings from closed stores and distribution centers in initiatives that support our long term growth aspirations. In addition, reflecting the incremental tariffs that have been announced since our last earnings call, full year guidance now incorporates a 40 to 60 basis point tariff impact to gross margin.

This compares to our prior expectation of 20 to 40 basis points and equates to roughly $0.25 to $0.40 of EPS versus our prior expectation of $0.10 to $0.25 To conclude, I like where Macy’s Inc. Is positioned. Our first half and third quarter to date performance is encouraging, especially in our go forward business inclusive of Reimagine one hundred twenty five, Bloomingdale’s and Blue Mercury. We’ve made meaningful positive changes to our product and to our omni channel experiences across nameplates and our customer is responding. At Macy’s, we’re testing, we’re iterating and we’re refining our initiatives to drive relevant assortments, inspiring experiences and compelling value for our customers.

At Bloomingdale’s, we’re continuing to drive profitable growth through our unique positioning, our strong appeal to our customers and our partners and we’ll continue to capitalize on the disruption in the marketplace. And at Blue Mercury, our curated assortments and agnostic selling are both strong differentiators. This is all supported by the important work in end to end operations. We’ve become increasingly nimble leveraging knowledge and relationships to improve responsiveness and create more productive operations. Now before turning the call over to our new COO and CFO, Tom Edwards, I’d like to take a moment to welcome him to the team.

Tom joins us following a successful career across a variety of publicly traded consumer discretionary companies. While many of you know him from his time as COO and CFO at Capri, he has held senior positions at Brinker and Wyndham as well. Tom’s experiences and financial acumen uniquely complement the hospitality oriented work we’re doing to support the Bold New Chapter strategy, our focus on building and strengthening brand partnerships and our ability to deliver long term growth. Tom, welcome.

Tom Edwards, COO and CFO, Macy’s Inc.: Thanks, Tony. I’m thrilled to be here. And I believe we have a tremendous opportunity ahead of us as momentum builds across the Bold New Chapter strategy. My first weeks here have reinforced my conviction in our ability to return to profitable growth and create significant value for our shareholders in the years to come. The enterprise wide improvements we have made are resonating with our customers.

The evidence of this is clear with our recent results, including our encouraging second quarter performance, which I’ll now walk through. Macy’s Inc. Comparable sales of 1.9% were our strongest in twelve quarters, benefiting from positive results at each of our nameplates. Adjusted EPS of $0.41 was above the high end of our guidance on better than expected sales, gross margin and SG and A. Looking at a detailed view of the second quarter, Macy’s Inc.

Net sales were $4,800,000,000 down 2.5% to last year. Roughly $170,000,000 of the sales decline was attributable to the 64 non go forward stores that closed at the end of last year. Excluding the impact of these stores, sales grew 0.9%. Macy’s Inc. Achieved comparable sales growth of 1.9% led by go forward business comparable sales growth of 2.2%.

By nameplate, Macy’s net sales were down 3.8%. Macy’s comparable sales were up 1.2% with go forward business comparable sales continuing to outperform, rising 1.5%. Re imagine 01/2025 comparable sales rose 1.4% with the first 50 and next 75 locations both achieving positive comparable sales results. Customers responded well to elevated merchandise, more effective staffing and localized events and we continue to see stronger Re imagine 01/2025 performance in traffic, average order value and Net Promoter Scores relative to the broader fleet. In luxury, Bloomingdale’s net sales were up 4.6% and comparable sales rose 5.7% and Blue Mercury net sales were up 3.3% and comparable sales rose 1.2%.

Turning to revenue, total revenue was $5,000,000,000 Other revenue, which is comprised of credit card and Macy’s media network, was 187,000,000 Net credit card revenue was $153,000,000 or $28,000,000 higher than the prior year. Credit card revenue was driven by our healthy credit portfolio and the prudent management of net credit card losses. Macy’s Media Network revenue was $34,000,000 flat to last year and in line with our internal expectations. Gross margin was $1,900,000,000 or 39.7% of net sales compared to 40.5% last year and was slightly better than our expectations. As discussed on our last earnings call, there were two unique factors impacting second quarter gross margin.

First, we took proactive markdowns on remaining early spring product to maintain healthy inventories. And second, the flow through of product brought under the 145% tariffs primarily impacted the most recent quarter. Inventory was $4,300,000,000 down 0.8% to last year. We are comfortable with our inventory composition for the fall season and have ample open to buy for the remainder of the year. SG and A expense of $1,900,000,000 declined $29,000,000 from last year, reflecting the net impact of the benefit from our closed Macy’s locations and ongoing cost containment efforts, partially offset by investments in our go forward business, including the Re imagine 125 locations and Bloomingdale’s.

As a percent of total revenue, SG and A expense was 38.9% compared to 38.7% in the prior year. We are continuing to carefully manage our expenses and drive efficiencies throughout the organization. During the quarter, we recognized $16,000,000 of asset sale gains. Adjusted EBITDA was $393,000,000 or 7.9% of total revenue. Core adjusted EBITDA, which is adjusted EBITDA excluding asset sale gains, was $377,000,000 or 7.5% of total revenue, above our guidance of 6% to 6.2.

Second quarter adjusted EPS of $0.41 was also above our guidance of $0.15 to $0.20 We continue to take a disciplined approach to our cash flow and balance sheet. Year to date operating cash flow was two fifty five million dollars versus $137,000,000 last year and free cash flow was an outflow of $13,000,000 versus an outflow of $244,000,000 last year. Capital expenditures were $343,000,000 down from $432,000,000 spent last year and monetization proceeds were $75,000,000 compared to $51,000,000 last year. We returned $251,000,000 to shareholders through $100,000,000 of consistent quarterly cash dividends and $151,000,000 of share repurchases, including $50,000,000 of buybacks in the second quarter. This leaves approximately $1,200,000,000 remaining on our share buyback authorization.

And we ended the quarter with $829,000,000 of cash on our balance sheet. To further fortify our already strong balance sheet and provide additional flexibility, we recently completed a series of financing transactions to extend our debt maturities and modestly reduce leverage. This resulted in a net long term debt reduction of approximately $340,000,000 With these transactions, we extended our material long term debt maturities by three years and do not have any meaningful maturities due until 02/1930. Now I would like to turn to our view of the consumer and guidance. The consumer has been resilient.

We are pleased with second quarter results and momentum has continued third quarter to date. However, the macro environment remains fluid. As such, we believe it is prudent to maintain our cautious view on the consumer for the remainder of the year. As a result, our third quarter and full year guidance assumes that current tariff rates remain in place and provides flexibility to respond to consumer demand and the competitive landscape. Guidance also assumes that bold new chapter initiatives continue to gain traction and reinvest most of the savings from closed stores and distribution centers to support our long term growth.

For the fiscal year, we have raised and narrowed our net sales and adjusted EPS guidance ranges. Our revised forecast assumes net sales of approximately 21,150,000,000.00 to $21,450,000,000 As a reminder, fiscal twenty twenty four store closures contributed roughly $700,000,000 to net sales. Comparable sales to be down approximately 1.5% to down 0.5% with Macy’s Inc. Go forward comparable sales to be down roughly 1.5% to flat. Other revenue of $840,000,000 to $850,000,000 with an anticipated year over year improvement in both credit card revenues, which are expected to be $635,000,000 to $645,000,000 and Macy’s Media Network, which is expected to be approximately $2.00 $5,000,000 Gross margin as a percent of net sales to be roughly 60 to 100 basis points below the prior year.

Assuming current tariffs remain in place, we estimate a combined tariff impact to gross margin of roughly 40 to 60 basis points versus our prior expectation of 20 to 40 basis points. This equates to a roughly $0.25 to $0.40 impact to EPS compared to our prior expectation for a $0.10 to $0.25 impact. Given the anticipated timing of receipts, we expect the additional impact to our gross margin rate and EPS to primarily flow through the fourth quarter. Our teams are working diligently to offset tariffs through mitigation actions that include shared cost negotiations, vendor discounts and strategically raising tickets. SG and A to be down low single digits on a dollar basis to last year, in line with our prior guidance or up 60 to 80 basis points as a percent of total revenue, with third quarter SG and A dollars down low single digits and fourth quarter dollars down low to mid single digits.

Adjusted EBITDA as a percent of total revenue of 7.4% to 7.9% and core adjusted EBITDA of 7% to 7.5% interest expense of roughly $100,000,000 reflecting our recent financing transactions and finally, we expect adjusted EPS of 1.7 to $2.05 which does not include potential future share buybacks. For the third quarter, we expect net sales of approximately 4,500,000,000.0 to 4,600,000,000 As a reminder, last year’s store closures contributed about $160,000,000 to sales in the comparable period. Comparable sales of down approximately 1.5% to up 0.5%. Core adjusted EBITDA as a percent of total revenue of 3.3% to 3.7% and adjusted EPS of a loss of $0.20 to a loss of $0.15 including asset sale gains of roughly 20,000,000 To sum up, we are pleased with recent results, which are a reflection of the bold new chapter strategy. We are well positioned to thoughtfully navigate the near term and deliver our long term goals.

Looking ahead, we will remain focused on the fundamentals and initiatives that provide meaningful value to our customers and to our shareholders, supported by our healthy balance sheet, which we have further strengthened, ample liquidity profile, disciplined approach to inventory management and prudent capital allocation strategy. Now, I would like to turn the call back over to Tony.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thank you, Tom. In closing, we are encouraged by our second quarter results. Initiatives are resonating as we deliver an improved product and omni channel experience. Looking to the back half, we are well positioned for the fall and holiday seasons. Our multi brand, multi category and multi nameplate model gives us the flexibility to respond to consumer demand in all environments.

And longer term, we remain confident that the Bold New Chapter strategy will deliver sustainable profitable growth and increase shareholder value. With that operator, we’re now ready for questions.

Conference Operator: Thank you. The floor will now be open for questions. Today’s first question is coming from Matthew Boss of JPMorgan. Please go ahead.

Matthew Boss, Analyst, JPMorgan: Great. Thanks and congrats on a nice quarter. So Tony, could you maybe help rank order drivers of the sequential improvement that you saw in same store sales and the progression that you saw during the quarter? And any change in momentum so far in the third quarter maybe just any perspective on the forecasted moderation that you’ve built into comps?

Tony Spring, Chairman and CEO, Macy’s Inc.: Sure. Thanks Matt. Appreciate it. We had a strong quarter across the board. The first growth at Macy’s Inc.

And Macy’s brand in 12 quarters. And it was across many different categories of business which is why we’re so I think invigorated by seeing growth in women’s apparel, men’s, kids, home furnishings, parts of center core. And as you note the second quarter was strong with July the strongest month of the quarter and that carries into the beginning of the third quarter which we obviously identified. That’s driven by a healthy start to back to school and I think an early read on some of the outerwear and colder weather categories which you can’t bank on what August represents but it’s nonetheless a good start. Gives us I think cautious optimism meaning that we’re celebrating the second quarter good start to the third quarter but we’re being prudent in our guidance for the third quarter and the remainder of the year because we want to see how the tariff environment plays out in totality.

Matthew Boss, Analyst, JPMorgan: Great color. Best of luck.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thanks, Matt.

Conference Operator: Thank you. The next question is coming from Dana Telsey of Telsey Advisory Group. Please go ahead.

Dana Telsey, Analyst, Telsey Advisory Group: Hi, good morning everyone and nice to see the progress. If you think about the store portfolio and what you saw from the reimagined stores, any learnings from those and do you expand it to 200 stores, two fifty stores? And then lastly, on the gross margin with the incremental tariff, how are you thinking on pricing for the different categories and brands both private label and branded? Thank you.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thanks Dana. Let me take the first part and then I’ll have Tom cover the second. In terms of the R125, we had a strong quarter and it was both in the first 50 and in the next 75. So positive performance in both. And the performance is a combination of what we’ve talked about.

It’s the additional staffing where the customer was asking for it. It’s in the fitting rooms. It’s these ambassadors and key families of businesses. It’s better storytelling, visual merchandising dedicated to each of these stores. And then I think finally the piece we probably haven’t talked about enough, it’s local empowerment.

While we’re going to get 70% or 75% right, we’re asking those local leaders to put their stamp on what’s necessary to deliver for the customer. That’s why we had best Net Promoter Score on record in the second quarter with the R125 Net Promoter Score even stronger. I think as it relates to tariffs, we are taking a surgical approach. We’re going to have price increases. We’ve had some price increases.

Negotiating with the marketplace. It’s not a one size fits all. So we’ve tried to be really thoughtful about what categories can bear the cost and the increases and where we’ve had to negotiate a little bit harder. Tom, what would you add?

Tom Edwards, COO and CFO, Macy’s Inc.: Tony, I’d just add a little background on the tariffs Dana. We previously had a guidance in of a 20 to 40 basis point impact, which was $0.10 to $0.25 and have increased it to $0.40 to $0.60 which is $0.25 to $0.40 and that is net of mitigation factors such as partnering with our suppliers and vendors and diversifying our countries of origin. We expect the majority of the incremental impact to impact Q4 given our timing of receipts. And as Tony mentioned, we’re adjusting prices, but as appropriate, not broad based and really assessing it with our partners in an effort to remain competitive. And I believe that we are really well positioned to navigate through this time given our business model of multi brand, multi channel, multi category and multi price point.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thanks Dana.

Dana Telsey, Analyst, Telsey Advisory Group: Thank

Conference Operator: you. The next question is coming from Blake Anderson of Jefferies. Please go ahead.

Blake Anderson, Analyst, Jefferies: Hi, good morning. Congrats on the nice results. So I wanted to just build on Matt’s question earlier about the quarter to date and second half. So, Tony, if you think about now versus maybe three months ago when we last spoke to you, are you still embedding essentially the same level of uncertainty and caution for the consumer? Or are you able to say you feel a little bit better about the consumer?

Just curious how maybe the tone has changed, especially in light of the pending tariff increases still coming through and then Tom just mentioning your adjusting prices? Thank you.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thanks Blake. We still view the consumer as choiceful, but we also view the consumer as resilient. And I think the beat in the second quarter says what we thought at the end of the first quarter, the consumer was more resilient. And we’ve seen that continue into the beginning of the fall season. That being said, we want to be prudent in our guidance and make sure we see the full impact of the tariffs across a broad spectrum of categories in retail and other things kind of play out before we I think understand the true impact of this change in the way pricing is going to occur in the marketplace.

We feel good about our customer. She’s buying newness. He’s buying fashion. They’re interested in the new brands and the changes in the assortment. And we’re seeing it across each of our nameplates.

The last thing I would add is that we have the customer base at Macy’s that’s approximately 50 plus percent over $100,000 household income. So while we have exposure to lower income levels, it’s not nearly what it was. And obviously we talked to an even more affluent consumer at the Bloomingdale’s brand. And I think as you go by income level, you certainly see a healthier performance in the higher tiers of income. Thanks Blake.

Blake Anderson, Analyst, Jefferies: Great. Thanks so much.

Conference Operator: Thank you. The next question is coming from Oliver Chen of TD Cowen. Please go ahead.

Oliver Chen, Analyst, TD Cowen: Hi, Tony and Tom. Private brands have been an exciting initiative. What’s ahead in terms of catalyst there and trying to drive differentiation versus the competitive landscape? And as we think about your third quarter guidance, what’s assumed in terms of the negative 1.5% comp relative to the plus 0.5%? And lastly, as we think more longer term, and what comp do you need to leverage your fixed expenses in terms of a longer term comp to generate margin expansion overall?

Thank you.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thanks, Oliver. Let me take the first part and I’ll have Tom address the last. So as you’ve noted, we’ve been reimagining private brands for the last two point five years. We’re in the process of working through the home assortment this year and pleased with some of the initial response. We did a partnership with Alex Freiberg with On thirty fourth which resonated well with the consumer.

I think leaning into Palm Royale as a show and as a way to kind of add relevancy to the Macy’s private brands was a good move. We have our fashion show with INC celebrating its fortieth anniversary, week from Friday with Christian Siriano, another way to add relevancy and interest to our private brand portfolio. We’re pleased with the launch of Stay To Day excited by the growth in Style and Co. So there’s broad based improvement I think in the private brand portfolio. But the best is still to come because our penetration of private brands is still well below our 20% high watermark.

And we know that that’s an opportunity for us to grow sales and expand differentiation and improve margins. I think relative to Q3, we just continue to say we’re going to take a prudent approach to our guide making sure we understand the fullness of the impact of the environment and the consumer. So far Q2, the beginning of the fall season, we see a resilient consumer who’s interested in newness and fashion. Tom, what would you add on Oliver’s question on improved comps necessary?

Tom Edwards, COO and CFO, Macy’s Inc.: Sure. Thanks, Tony and Oliver. In terms of SG and A, I think there’s an opportunity longer term to leverage our SG and A. And in terms of the comps, I won’t give a specific number Oliver, but I’m looking at the quarter and what we’ve done here is deliver $30,000,000 of savings in SG and A net while reinvesting some in the business and generating top line growth. So that’s the type of characteristic and outlook that I think will move going forward and enable us to really leverage it, but importantly grow the top line, which I think is key longer term to leveraging sales growth.

In terms of gross margin and I want to build on the private label comment again, we also have an opportunity longer term to expand our gross margin. Expanding private brands, which historically around 20% of sales and now in the lower teens, will help drive gross margin. They typically have a higher margin. And then our initiatives which are helping to better serve customers and getting better merchandise assortments out there as well as other end to end efficiencies will also help on the gross margin side. So I really see opportunities on both gross margin and SG and A, as the initiatives for Bold New Chapter continue to resonate.

Thank you. Best regards.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thanks, Oliver.

Conference Operator: Thank you. The next question is coming from Alex Stratton of Morgan Stanley. Please go ahead.

Alex Stratton, Analyst, Morgan Stanley: Perfect. Thanks so much for taking the question and congrats on a nice quarter. Maybe for Tom, just on the SG and A improvement on that rate versus your last full year guidance. Can you just talk about where you’re finding more savings maybe both in the quarter and also for the back half? And I think it assumes a little bit more reduction in the back half than you’ve delivered in the first.

So just curious about that. And then maybe for Tony, I’m just curious about that acceleration in the Bloomingdale’s comp, if you could unpack that a little bit more sequentially. Thanks so much.

Tom Edwards, COO and CFO, Macy’s Inc.: Thanks, Alex. Well, looking at SG and A, as Tony mentioned, we have an always on approach to profit improvement and that gives us the room to invest in our growth, while delivering improved returns and ultimately levering the P and L. SG and A was down nearly $30,000,000 in the quarter and that was across benefits from the store closures that we implemented last year. There was continued end to

Jay Sole, Analyst, UBS: end

Tom Edwards, COO and CFO, Macy’s Inc.: savings benefits as those initiatives pay dividends and we’ll continue to do so over the next several years. And also just making sure we’re very conscious in managing costs on an ongoing basis. You are correct. In the second half, we expect SG and A dollars to continue to be down in Q3 down low single digits and in Q4 down low to mid single digits. So this is really a reflection of those continued savings in both store and end to end and otherwise.

And it’s a little more weighted to Q4 given the timing of store closures and other benefits. And I wouldn’t point out this is a net number because we’re still reinvesting in the business to drive the top line and enjoying the benefits of bold new chapter initiatives which are resonating and driving a difference in performance where we are implementing those.

Tony Spring, Chairman and CEO, Macy’s Inc.: And Alex, I would say the Bloomingdale’s business just continues to build momentum. They have a terrific strategy, a strong leadership team, great continuity in the focus in a market that is somewhat disrupted. They’ve had additional brand additions which have been a part of their growth. They’ve grown their digital business which is a part of their growth. They’ve done some wonderful collaborations with their private brands and market brands which has been a part of their growth.

And they’re adding, Blooming’s locations and Blooming does outlet locations. So we see plenty of runway for the Bloomingdale’s business. And I think it’s uniquely positioned in this aspirational to luxury positioning where that advanced contemporary customer which is such a growing part of the business it’s right in the sweet spot of what Bloomingdale’s does best in the marketplace.

Alex Stratton, Analyst, Morgan Stanley: Thanks so much. Good luck.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thanks, Alex.

Conference Operator: Thank you. The next question is coming from Chuck Grom of Gordon Haskett. Please go ahead.

Matthew Boss, Analyst, JPMorgan: Hey, guys. This is Ryan Bulger on here for Chuck. I wanted to ask a little bit about the traffic sorry, the comp compensation traffic versus ticket, both on an owned basis and an OLM basis. And then also broadly speaking, what are you seeing in the marketplace for more in terms of pricing in terms of pricing on in terms of tariffs from peers? And then what you’re doing about that in response?

Thanks very much.

Tony Spring, Chairman and CEO, Macy’s Inc.: Ryan, let me take the first part and then I’ll let Tom take the second part. Our improvement in business was broad based as I said by category and was also driven by improvement in traffic, improvement in average order value and like we’ve said improvement in customer experience. The one pocket that was a little softer was unit demand. And obviously I think that’s partly reflecting the consumer being choiceful and partly reflecting the beginning impacts of some pricing. But I think we’ve bought it that way.

We’ve got a good composition of inventory across a broad base of categories and I think are well prepared for the fall season. I like our inventory position being down 0.8% kind of going into the fall season having opened to buy and having the strength of market place as well as our license businesses to support even more growth beyond what we’ve bought. Tom, what would you add relative to what you’re seeing in the marketplace or tariffs?

Tom Edwards, COO and CFO, Macy’s Inc.: I’d just emphasize Tony your comment on beginning to see the impact. So we’ve built in a more prudent outlook in the second half with a more choiceful consumer depending on tariff impact overall. But we are in the early stages of seeing that as they are beginning to flow through. So we’re going to monitor it really carefully and adjust prices as appropriate, but again not do a broad based approach or and make sure we assess it down to a really granular level with our partners and remain competitive.

Tony Spring, Chairman and CEO, Macy’s Inc.: And I think to close we have room in what we have guided to be able to be competitive, to be able to hold on to market share without buying the business. And I think that’s the balance how we satisfy the customer and how we return value to shareholders. Thanks for the question, Ryan.

Conference Operator: Thank you. The next question is coming from Paul Lejuez of Citigroup. Please go ahead.

Pamela Quintiliano, VP of Investor Relations, Macy’s Inc.0: Thanks. It’s Tracy Kogan filling in for Paul. I just wanted to follow-up on the last question. I know you said you’re just starting to see some price increases. And I was wondering, how that is falling out between your own private brands and national brands?

Are you seeing already some increases in both? And then I’m just wondering, since you have seen some increases as of now, how has the elasticity been looking relative to what you expected? Is it kind of are the unit changes in line with what you would expect so far? Thanks.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thanks for the question, Tracy. Yes, I think it’s the early innings on how the consumer is responding to the changes in the marketplace. I think the good news is there’s a level of resiliency. There’s a level of interest in newness in fashion. We are not bought completely into the fall season.

We have the leverage points of marketplace and our license businesses. And I would say that in some cases where tickets were higher or costs were higher we bought fewer units. In other cases we remain consistent with units. And in other cases we didn’t buy as much of a brand or category. So I think this is just such a wonderful example of being a multi brand, multi category, multi channel and multi price point.

And I want to say again multi price point because when you can go from off price to luxury you’re not reliant on one thing. And if something wasn’t competitive, if we felt it was too big a reach for the consumer, we didn’t buy it or buy as much. And I think that’s one of those moments where being this modern marketplace or department store is an absolute advantage in this environment.

Tom Edwards, COO and CFO, Macy’s Inc.: And Tracy, I’d just build on that. Regardless of the external environment, our Bold New Tractor initiatives are really positioned to support performance. And what we saw in the second quarter was performance and improvement in traffic. So people are buying more and coming in and it’s really due to those base initiatives, which are going to continue through the second half regardless of what’s happening elsewhere.

Pamela Quintiliano, VP of Investor Relations, Macy’s Inc.0: Got you. Thanks so much.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thank you.

Conference Operator: Thank you. Our next question is coming from Michael Binetti of Evercore ISI. Please go ahead.

Blake Anderson, Analyst, Jefferies: Hey, guys. Thanks for taking our question here. First one, just on adding to the Bloomingdale’s question from earlier, nice to see the comp there. We’ve seen continued pressures and even bankruptcies in the luxury market here lately. Just maybe speak to what you’re seeing in that market and where you’re seeing the accelerating opportunities to gain share there, as that category seems to be getting a little tougher, nicely counterintuitive there, suppose.

Tom, how much did tariffs impact the second quarter? And then finally, see it looks like you lowered the back half credit growth rate a little bit, maybe 11% to 15% 20s in the first half. Just any comment on you made a comment on the health of the portfolio there. So I’m just curious what you’re baking in on the deceleration as we think about the run rate into next year? Thanks.

Tony Spring, Chairman and CEO, Macy’s Inc.: Well, let me start with Bloomingdale’s and I’ll let Tom cover the tariffs and the credit portfolio which is healthy and he can speak to Look we see the Bloomingdale’s business has been terrific and this is now four straight quarters of growth. They are taking market share. They are adding additional brands. We are seeing Mike broad based growth across ready to wear, denim, men’s, home, kids, beauty, fragrances. I think that this brand has done a terrific job.

And when you think of kind of continuity of leadership, continuity of strategy, continuity of partnerships in the market, paying our bills, strong balance sheet, the strong corporate support of Macy’s Inc. Bloomingdale’s is positioned for continuous growth. And I think we have the additional opportunities of obviously brand expansions, digital growth, additional door expansions with Bloomingdale’s and off price. The Bloomingdale’s off price business continues to grow had a really good quarter. So I don’t look at the marketplace as defining Bloomingdale’s opportunity.

I look at Bloomingdale’s defining Bloomingdale’s opportunity.

Tom Edwards, COO and CFO, Macy’s Inc.: And Mike regarding tariffs and credit, tariffs in the second quarter we had provided a prior full year guidance of 20 basis to 40 basis points or $0.10 to $0.25 And that was a little bit more in the second quarter. We saw some of the higher tariffs coming in at the 145% level. So we did see a GM impact related to that. And our gross margin rate was also a little lower than last year in Q1. We moved through inventory and really put us in a great position to start to fall in the back half of the year with a really clean inventory position.

And I would point out that our gross margin was better than our expectations in the second quarter. So all that considered, we’re doing better than we expected and coming into the second half in a great position. From a credit portfolio perspective, really pleased with the growth. The significant growth $28,000,000 in revenue in the second quarter and we expect to see continued strong results. It’s really due to the credit portfolio strength and how we’re underwriting and managing that and really linking up with our store colleagues and across the business to support that which is an integral part of the overall Macy’s ecosystem.

Blake Anderson, Analyst, Jefferies: Thanks a lot guys. Appreciate it.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thank you, Mike.

Conference Operator: Thank you. Our next question is coming from Paul Carney of Barclays. Please go ahead.

Pamela Quintiliano, VP of Investor Relations, Macy’s Inc.1: Hey, good morning. Thanks for taking my question. On tariffs, how should we think about that impact as we look into next year? How much do you anticipate being able to mitigate? And should we anticipate a step up in mitigation in the spring season and then over time?

Thank you.

Tony Spring, Chairman and CEO, Macy’s Inc.: Let me take the first part and then I’ll let Tom add his color. I think it’s a little early to be forecasting tariffs in 2026. We don’t know the magnitude of tariffs. We don’t know what tariffs that currently are in place are going to hold. We’re certainly going to have more opportunities to mitigate.

We could mitigated the second quarter better than we currently did. But I think it’s early to kind of comment on the tariff situation in 2026. I think what we are focused on as a team is how we continue to build on this momentum that is growing for Macy’s Inc. How do we make sure that things that we control that we’re continuing to improve upon whether that’s customer experience, newness in our assortments, variety within our pricing, better balance between our owned, licensed and marketplace businesses, off price, full price businesses. I think those things we can continue to do a better job than we’ve done.

We got credit in the second quarter for the improvements that we’ve made, but we have plenty of room to continue to grow.

Tom Edwards, COO and CFO, Macy’s Inc.: And I’d just add and emphasize that right now we don’t have total clarity on levels of tariffs in 2026. And there is on the other hand more time to address. So the key takeaway would be we’re really well positioned to navigate it. Our teams are doing an amazing job currently and we’ll certainly talk more about it as we get towards the end of the year and provide guidance for next year as we normally do on our fourth quarter call. Thank you.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thanks Paul.

Conference Operator: Thank you. The next question is coming from Jay Sole of UBS. Please go ahead.

Jay Sole, Analyst, UBS: Great. Thank you so much. This has come up a couple of times in the call, but Tony I want to ask about the investments that you’re making. Obviously, you sound very pleased with the investments you’re making in service, especially across Macy’s, Inc. But also the SG and A leverage you’re delivering.

How do you find the right balance between leveraging growth? What would it are there opportunities that you see to maybe grow SG and A dollars more that could maybe get that comp growth rate a couple of 100 basis points higher? And how do you think about what to invest in versus what to maybe allow to flow through to the bottom line?

Tony Spring, Chairman and CEO, Macy’s Inc.: Thanks Jay for the question. Let me take the first part and I’m sure Tom would like to add some color as well. I think what you described is how you balance your strategy. And I think as the leader we have to do a good job of managing a portfolio of investments. That means some things we’re going to put more money into.

I’m a big believer in colleagues on the floor. Those customer facing initiatives are really important to changing the character of the department store experience. We see it in letters in a daily basis on what we’re doing to change the experience for the customer in our stores. We need to add more stores next year. We’ll talk about that on the fourth quarter call in terms of how many more stores.

We’re obviously doing that also in our digital experience. I invite you to look at macys.com today versus just three months ago. We’re providing a richer product driven trend driven storytelling experience. But to your challenge, our job is to satisfy the customer and in turn satisfy the shareholder. We have to make sure we’re delivering a better experience investing to grow the comp sales and then leverage our structure so that we’re delivering more on the bottom line.

Tom, what would you add?

Tom Edwards, COO and CFO, Macy’s Inc.: I’d add that we are always on savings and we have a large pipeline of savings from continued store closures as we previously announced and end to end initiatives and just managing the business to be more efficient on a daily basis. And as we do that, we’re reviewing initiatives, we’re testing, we’re learning, we’re improving. So there’s a process here Jay as we move forward to make sure we’re doing things that are impactful and creating a return for shareholders. As part of that, that’s really the balance generating savings, reinvesting some and really getting to the point where we’re leveraging based on driving sales growth, which we saw in this quarter across all of our banners and we’re really pleased with that result, while generating $30,000,000 in SG and A savings versus the prior year.

Jay Sole, Analyst, UBS: Got it. Thank you so much.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thanks, Jay.

Conference Operator: Thank you. Our next question is coming from Janet Kloppenburg of JJK Research Associates. Please go ahead.

Pamela Quintiliano, VP of Investor Relations, Macy’s Inc.2: Good morning, Tony and Tom, and congratulations on a wonderful quarter. I have too many questions, so I’m going to get yelled at. Have you any thoughts on what the incremental markdowns that you carried into the second quarter? What influence that had on the comp performance, which was, of course, excellent? And I also was wondering, I know it’s early, Tom, but have you seen any pushback from the consumer on the incremental pricing that you’ve delivered.

For instance, I know that Levi has raised their prices. And I am wondering about the wraparound of the tariffs into the first and second quarter of next year? We’re seeing hearing that from a lot of your competitors and I wondered about that. Thank you so much.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thanks Janet. The question on markdowns impacting the comps in the second quarter, I would say there’s some. It’s a minor part of the improvement in our performance in the second quarter. The areas that had the strongest growth were not the areas that had the biggest markdowns or liabilities kind of coming into the second quarter. So we took those markdowns.

The composition of our inventory is clean. I like the early read of August and what the customer is buying because that is not markdown related. It’s newness related. It’s back to school related. It’s early fall product and winter weight categories.

So all of that is very positive. You mentioned the Levi’s business. I mentioned on the call Levi’s continues to be a terrific business for us in all areas of the business and they’re great partners. We’re getting top tier products from them. And it’s the fashion in Levi’s that is really selling best for us.

So again I think it underscores the customer is more concerned about value than they are about the price point. Is there a reason for something to be more expensive? That might be true in a piece of outerwear that might be much harder to get on a T shirt.

Tom Edwards, COO and CFO, Macy’s Inc.: Thank you. With regard to tariffs Janet, I think it’s a little to talk about the Q1, Q2 for next year. We will have a little more clarity on it, in terms of tariff levels. We do have more time to mitigate and we’ll certainly be talking more about that on our Q4 call. But as I mentioned before, I think we’re really well positioned to navigate through it and have been navigating through it, across all our teams really effectively.

Pamela Quintiliano, VP of Investor Relations, Macy’s Inc.2: And what about the pricing and early indication from the consumer?

Tom Edwards, COO and CFO, Macy’s Inc.: I would just state that the consumer has been resilient. And we’ve seen that in Q2 and we’ve seen it at the beginning of Q3. We are to be more prudent in the second half forecasting a little more choiceful consumer, but what we’ve seen so far is resiliency.

Pamela Quintiliano, VP of Investor Relations, Macy’s Inc.2: Thank you very much. Good luck.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thank you, Janet. Appreciate it.

Conference Operator: Thank you. At this time, I would like to turn the floor back over to Mr. Spring for closing comments.

Tony Spring, Chairman and CEO, Macy’s Inc.: Thank you all for joining us today. We look forward to providing an update on our progress on our next earnings call. Have a great day everyone.

Conference Operator: Ladies and gentlemen, this concludes today’s event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.