Macy's, Inc. (M) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a mixed picture. Financial performance shows lower sales but improved core adjusted EBITDA. Product development is positive, with new initiatives like the Reimagine 125 stores. Market strategy seems cautious due to macroeconomic uncertainties, and gross margin compression is expected. However, the company is optimistic about Q4 and confident in its competitive positioning. The Q&A reveals some concerns about consumer behavior and gross margin compression. Overall, the sentiment is neutral, with some positive aspects balanced by uncertainties and challenges.
Key Financial Performance
Macy's, Inc. comparable sales Increased by 3.2%, marking the strongest growth in 13 quarters. This was driven by the Go-Forward Macy's, Inc. business, which grew by 3.4%.
Adjusted EPS Reported at $0.09, significantly above the guidance range of a loss of $0.15 to $0.20 and higher than last year's $0.04. This improvement was attributed to better-than-expected net sales, comparable sales, gross margin, and SG&A.
Macy's nameplate comparable sales Grew by 2%, marking the second consecutive quarter of positive results. This was driven by the Go-Forward Macy's business (up 2.3%) and the Reimagine 125 stores (up 2.7%).
Bloomingdale's comparable sales Increased by 9%, the best in 13 quarters, driven by strong brand partnerships and category performance in ready-to-wear, men's apparel, fine jewelry, shoes, and tabletop.
Bluemercury comparable sales Grew by 1.1%, driven by dermatological skincare and expanded brand partnerships.
Net sales Reported at $4.7 billion, down 0.6% year-over-year due to the closure of 64 non-go-forward stores, which contributed $160 million in sales last year. Excluding these closures, sales grew by 2.9%.
Gross margin Reported at 39.4% of net sales, slightly down from 39.6% last year. Excluding a 50 basis point tariff impact, the gross margin rate would have expanded by approximately 30 basis points.
SG&A expense Decreased by $40 million year-over-year, reflecting benefits from closed Macy's locations and cost containment efforts, partially offset by investments in the go-forward business. As a percentage of total revenue, SG&A improved by 90 basis points to 41.2%.
Core adjusted EBITDA Reported at $273 million or 5.6% of total revenue, above last year's 4.2% and the guidance range of 3.3% to 3.7%.
Inventory Increased by 0.7% year-over-year in dollar terms, reflecting tariff-related cost increases. On a unit basis, inventories were down.
Operating cash flow Year-to-date operating cash flow was $247 million, compared to an outflow of $30 million last year.
Free cash flow Reported as an outflow of $183 million, an improvement from an outflow of $492 million last year.
Capital expenditures Decreased to $525 million from $649 million last year.
Shareholder returns Returned $350 million to shareholders through $149 million in dividends and $201 million in share repurchases.
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Operating Highlights
New product introductions: Introduced brands like Rodd & Gunn, Reiss, Prada Beauty, and expanded Barbour, Mackenzie-Childs, and MFK. Added new designer brands at Bloomingdale's such as Totême, TWP, Zimmermann, Victoria Beckham, Christian Louboutin, and Roger Vivier.
Category performance: Fine jewelry, watches, handbags, men's career, and ready-to-wear outperformed, while active categories were softer.
Luxury market expansion: Bloomingdale's achieved a 9% comp growth, its best in 13 quarters, and expanded its brand offerings. Bluemercury also grew with a 1.1% comp increase, driven by dermatological skincare and new brand partnerships.
Omnichannel and digital growth: Macy's nameplate benefited from digital growth, including Macy's marketplace, and the off-price concept Backstage.
Operational efficiencies: Opened a new state-of-the-art distribution center in China Grove, North Carolina, incorporating automation, robotics, and AI to improve delivery speed and reduce costs.
SG&A expense management: Reduced SG&A expenses by $40 million year-over-year, leveraging revenue growth and cost containment efforts.
Bold New Chapter strategy: Focused on three pillars: reimagining Macy's, accelerating luxury, and modernizing operations. Achieved three consecutive quarters of better-than-expected results and two quarters of comparable sales growth.
Customer experience enhancement: Improved Net Promoter Scores and customer feedback, with initiatives like selling education and curated product assortments.
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Risk or Challenges
Tariff Impact: The company faced a 50 basis point tariff impact on gross margin, though mitigation actions helped reduce the impact. This remains a challenge for cost management and profitability.
Consumer Behavior: The company noted that consumers are becoming more discerning about spending, which could impact sales and revenue growth, especially during the holiday season.
Store Closures: The closure of 64 non-go-forward stores contributed to a $160 million sales decline compared to the prior year, impacting overall revenue.
Economic Uncertainty: The company continues to incorporate a cautious outlook on consumer spending into its guidance, reflecting broader economic uncertainties.
Inventory Management: While inventory levels were in line with expectations, tariff-related cost increases and the need for disciplined inventory management remain challenges.
Competitive Landscape: The company faces competitive pressures in the retail sector, requiring continuous innovation in product offerings and customer experience to maintain market share.
Operational Costs: Ongoing investments in go-forward business operations and new distribution centers, while necessary, add to operational costs and require careful management to ensure profitability.
Asset Sale Gains: The company revised its expectations for asset sale gains downward, impacting adjusted EPS guidance and reflecting challenges in monetizing underproductive stores.
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Guidance & Outlook
Fourth Quarter Guidance: Net sales expected to be approximately $7.35 billion to $7.5 billion. Comparable sales projected to be down approximately 2.5% to flat, with go-forward comparable sales down 2% to flat. Core adjusted EBITDA as a percent of total revenue expected to be 9.4% to 10.1%. Adjusted EPS forecasted at $1.35 to $1.55.
Full Year 2025 Guidance: Net sales projected to be approximately $21.475 billion to $21.625 billion. Comparable sales expected to be flat to up 0.5%, with Macy's, Inc. Go-Forward comparable sales flat to up roughly 1%. Gross margin as a percent of net sales anticipated to be 37.7% to 37.9%. Adjusted EPS raised to $2 to $2.20.
Gross Margin Outlook: Gross margin for the full year expected to be 37.7% to 37.9%, reflecting effective tariff mitigation efforts. Tariff impact estimated at 40 to 50 basis points, equating to roughly $0.25 to $0.35 of EPS.
Capital Expenditures: Capital expenditures for the year projected to be $525 million, down from $649 million spent last year.
Luxury Segment Growth: Bloomingdale's and Bluemercury expected to continue growth, with opportunities to expand distribution, increase digital penetration, and open additional small-format and outlet locations.
Operational Enhancements: New China Grove distribution center to enhance delivery speed and reduce costs, supporting future operational efficiency.
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Shareholder Return Plan
Dividends Paid: $149 million in consistent quarterly cash dividends were returned to shareholders in the third quarter.
Share Repurchase: $201 million worth of shares were repurchased, including $50 million in the third quarter. Approximately $1.2 billion remains on the buyback authorization.
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Key Q&A
Q:With two straight quarters of positive comps, what traction is being seen with reimagined store initiatives in terms of traffic versus basket, and what are the November comp trends and customer behaviors?
A:The reimagined store initiatives are showing positive growth, with a 2.7% comp improvement driven by new brands, better presentation, and more staff in the right places. Traffic in stores and digital business is consistent, with continued improvement in AUR. November comp trends are in line with the third quarter, and the company is confident in its strategy for the fourth quarter.
Q:What are the most important drivers for sustaining momentum into 2026, and how is the company addressing core adjusted EBITDA margin delivery and tariff margin pressure?
A:Key drivers include a balanced product assortment, omnichannel retailing, and shedding underproductive stores. Core adjusted EBITDA is performing better than a year ago despite lower sales, and tariff impacts are being mitigated through cost negotiations, vendor discounting, and pricing adjustments. The company plans to continue these efforts into 2026.
Q:What is the behavior of the aspirational customer in Q3, and what is expected for Q4? How does the store closure strategy impact SG&A savings versus reinvestment needs?
A:Aspirational customers are more active in Q4, and the company is prepared with inventory, marketing, and promotions to cater to them. SG&A savings from store closures are being balanced with reinvestments to drive top-line growth, with Q3 SG&A leveraged by 90 basis points and expected to be down low single digits in Q4.
Q:Is the company more or less confident in the consumer compared to 90 days ago, and how does this reconcile with the fourth-quarter guidance? What are the trends in traffic, ticket, AUR, and category performance?
A:The company is more confident in its strategy and results than 90 days ago. Fourth-quarter guidance reflects a cautious approach due to a more choiceful consumer. Traffic and ticket improved in Q3, with AUR up year-over-year. Key categories like apparel, home, and footwear are performing well.
Q:How has the department store competitive landscape evolved, and what is the outlook for next year? Why does the fourth-quarter gross margin guidance show the worst compression of the year?
A:The company believes it is well-positioned against competitors, with sharp pricing, engaged staff, and strong assortments. Fourth-quarter gross margin compression is due to tariff impacts (70-100 basis points) and flexibility to respond to competitors, though full-year gross margin guidance has improved.
Q:What is the response to pricing increases and vendor support, and how is the credit business performing?
A:Pricing increases on newness and fashion have had little impact on consumer appetite, especially among middle to upper-income customers. The credit business is performing well, with higher applications and improved net credit loss results, contributing to strong revenue growth.
Q:What is the status of the store closure program, and what is the outlook for Macy's Media Network?
A:The company will announce store closures at the end of the year and remains committed to its store optimization program. Macy's Media Network is growing strongly, with Q4 expected to be up double digits year-over-year, despite a slight recalibration of advertising spending.
Q:Why was the active category weaker, and how does the Reimagine 125 initiative compare to the rest of the Macy's nameplate stores?
A:The active category was softer due to a focus on dress-up cycles and other categories like tailored clothing and dresses. The Reimagine 125 stores are outperforming the rest of the Macy's nameplate stores, with a 2.7% comp compared to 1.5% for Go-Forward stores, and the company plans to expand the initiative.
Q:What is the planned allocation of SG&A increases, and how is the digital versus in-store mix expected to evolve by 2026?
A:SG&A increases are tied to higher sales and investments in the business to drive top-line growth. The company focuses on an omnichannel strategy, aiming for a bigger business where customers decide how, where, and when to shop, rather than emphasizing digital penetration.
Q:What is the recapture rate for customers from closed stores, and how does proximity affect retention?
A:The recapture rate is consistent with past experiences, with better retention for customers near other stores. Customers further away or shopping only online are harder to retain, but personalized marketing efforts help maintain relationships.
Q:What is the opportunity for Macy's and Bloomingdale's amidst competitive turbulence, and how is the handbag category performing?
A:Macy's and Bloomingdale's are well-positioned to take market share with strong assortments and engaged teams. The handbag category is performing well, supported by newness and a balanced assortment.
Q:How is newness being maintained in assortments, and what are the opportunities for gross margin improvement?
A:Newness is being maintained through balanced assortments across price points and categories, with a focus on contemporary collections and career sportswear. Gross margin improvement opportunities include better regular price sell-throughs, inventory discipline, and end-to-end efficiencies.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the specific number of store closures planned for the year and the exact impact of Macy's Media Network recalibration on future growth. Responses were vague about the detailed allocation of SG&A increases and the precise evolution of the digital versus in-store mix by 2026.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bluemercury sale
China Grove
Forward Macy
Herald Square
Holiday Campaign
Macy Holiday
PAC MAN
POP Mart
Promoter
Street
campaign event
comp quarter
customer base
customer fulfillment
customer relationship
customer response
delivery
expectation tariff
experience start
facility
float
forward
fulfillment store
future
gain expectation
gift
mix newness
opening
patience
platform
replenishment
sale result
start majority
M Transcript
Macy's, Inc. (M) Q1 2026 Earnings Call Transcript
Positive6-3
Macy's demonstrates strong financial performance with positive revenue guidance and gross margin expansion. The Reimagine program and AI initiatives are driving growth, with Reimagine stores outperforming overall comps. Despite higher fuel costs, the impact is offset by reduced tariffs. Strong AUR growth and a healthy credit portfolio further bolster the outlook. While some categories lag, overall strategic investments and positive consumer engagement, especially among younger shoppers, suggest a positive stock price movement.
Macy's, Inc. (M) Q4 2025 Earnings Call Transcript
Positive3-18
Macy's earnings call reveals strong financial performance, with growth in key segments like Bloomingdale's and Bluemercury, and positive guidance for 2025. The Q&A section highlights strategic flexibility, digital growth, and initiatives targeting younger consumers, boosting confidence. Despite some management evasiveness on specifics, the overall sentiment is positive, supported by increased AUR, margin improvements, and a robust shareholder return plan. Given the lack of market cap data, a positive stock movement of 2% to 8% is anticipated over the next two weeks.
Macy's, Inc. (M) Q3 2025 Earnings Call Transcript
Unknown12-3
The earnings call summary presents a mixed picture. Financial performance shows lower sales but improved core adjusted EBITDA. Product development is positive, with new initiatives like the Reimagine 125 stores. Market strategy seems cautious due to macroeconomic uncertainties, and gross margin compression is expected. However, the company is optimistic about Q4 and confident in its competitive positioning. The Q&A reveals some concerns about consumer behavior and gross margin compression. Overall, the sentiment is neutral, with some positive aspects balanced by uncertainties and challenges.
Macy's, Inc. (M) Q3 2026 Earnings Call Transcript
Unknown12-3
The earnings call summary reveals mixed signals: improved traffic and ticket, strong category performances, and raised Q4 guidance are positives. However, gross margin compression due to tariffs, cautious consumer outlook, and reduced media network guidance are concerns. The Q&A section adds confidence with strategic positioning and credit business strength, but uncertainties around store closures and media guidance persist. Overall, the sentiment is balanced, leading to a neutral prediction for stock price movement.
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