Macy's, Inc. (M) Q1 2026 Earnings Call Transcript
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Overview
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.
Key Financial Performance
Net Sales Net sales grew 1.8% to $4.7 billion compared to $4.6 billion last year. Excluding a roughly $40 million impact from the 14 non-go-forward store closures at the end of last year, net sales grew 2.7%. The growth was attributed to strong performance across all nameplates and channels.
Comparable Sales Comparable sales on a reported basis rose 3% versus negative 2% last year. Go-forward comps grew 3.1%. Macy's comparable sales rose 1.6%, Bloomingdale's comparable sales were up 10.2%, and Bluemercury comparable sales increased 6.4%. The growth was driven by strong customer engagement and the success of the Bold New Chapter strategy.
Adjusted EPS Adjusted EPS of $0.13 was well above the high end of guidance, reflecting stronger sales and expense management. Results included a roughly $0.04 tariff impact.
Gross Margin Gross margin was $1.8 billion or 38.9% of net sales compared to 39.2% last year. Excluding an approximately 30-basis-point tariff impact, gross margin rate would have been even with last year.
SG&A Expenses SG&A rate of 39.9% was flat with last year. SG&A dollars were $1.95 billion compared to $1.91 billion last year, reflecting investments in growth initiatives offset by expense savings.
Adjusted EBITDA Adjusted EBITDA was $290 million or 5.9% of total revenue, exceeding the high end of guidance and compared to $304 million or 6.3% of total revenue last year.
Operating Cash Flow Operating cash flow was an inflow of $292 million versus an outflow of $64 million last year, reflecting improved financial performance.
Free Cash Flow Free cash flow was an inflow of $140 million versus an outflow of $203 million last year, driven by better cash management.
Inventory End of quarter inventory dollars were up 3.6% compared to last year, in line with expectations and comp sales growth. The increase was attributed to newness across price points and lower aged inventories.
Capital Expenditures Capital expenditures were $177 million, flat to the prior year period.
Shareholder Returns Returned $100 million to shareholders through $50 million of quarterly cash dividend and $50 million of share repurchases, leaving approximately $1.1 billion remaining on buyback authorization.
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Operating Highlights
Introduction of new brands: Several new brands were introduced, including Rotie's, Donna Karan Weekend, and Ted Baker Men's. Abercrombie Kids offerings were expanded to include infants and toddlers. Store distribution of Reiss, Free People, Theory, and Rodd & Gunn was further expanded.
AI-powered shopping assistant: Launched 'Ask Macy's,' an AI-powered conversational shopping assistant to enhance customer experience. Initial response has been favorable.
Luxury market expansion: Bloomingdale's achieved a 10.2% comparable sales increase, its highest first-quarter sales in 154 years. New luxury brands such as Chloe Ready-to-Wear, Isabel Marant, and Phoebe Philo were introduced. Bluemercury also saw a 6.4% increase in comparable sales, driven by makeup, skincare, and fragrances.
Digital and curated marketplace: Digital sales contributed positively, supported by foundational platform improvements and curated marketplace expansion, enhancing Macy's fashion authority.
Reimagine locations: Expanded the 'Reimagine' initiative to 200 locations, accounting for 60% of go-forward Macy's stores and 75% of fiscal 2025 store sales. These locations achieved 2.4% comparable sales growth.
Operational efficiencies: Leveraged AI for inventory forecasting and management. Expanded automation in distribution facilities, improving service levels and cost efficiencies.
Bold New Chapter strategy: Focused on three pillars: strengthening Macy's, accelerating luxury, and modernizing operations. Delivered 3% comparable sales growth, the strongest first quarter since 2022.
Customer engagement initiatives: Hosted events like Macy's Flower Show and World Cup activations to drive traffic and engagement. Partnered with Live Nation and Major League Baseball for summer celebrations.
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Risk or Challenges
Macroeconomic and Geopolitical Uncertainty: The guidance reflects concerns about macroeconomic and geopolitical uncertainties, which could impact consumer demand and the competitive landscape.
Tariffs and Fuel Costs: Higher fuel costs and tariffs are expected to negatively impact gross margins and earnings per share, with a combined negative impact of $0.10 to $0.20 on EPS for the fiscal year.
Big-Ticket Home and Plus-Size Business: Soft trends were observed in big-ticket home items, especially furniture, and the plus-size business, which could affect overall sales performance.
Media Network Revenue Decline: Macy's Media Network revenue declined by 5% year-over-year, reflecting the timing of advertising spend, which could impact overall revenue growth.
Inventory Management: While inventory levels are aligned with expectations, there is a focus on managing aged inventories and forecasting to meet customer needs, which could pose challenges if not executed effectively.
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Guidance & Outlook
Revenue Guidance: Macy's, Inc. has raised its full-year revenue guidance to $21.5 billion to $21.75 billion, reflecting better-than-expected first-quarter results and a modest increase in sales for the remaining quarters.
Comparable Sales: Full-year comparable sales are expected to grow by 0.5% to 1.2%. Second-quarter comparable sales are projected to be flat to up 1%.
Adjusted EPS: Full-year adjusted diluted EPS is projected to be between $2.00 and $2.20. Second-quarter adjusted diluted EPS is expected to range from $0.29 to $0.34.
Gross Margin: Full-year gross margin is expected to be between 38.4% and 38.6%, with a 20- to 30-basis-point negative impact from tariffs and fuel costs.
SG&A Expenses: SG&A expenses are expected to increase by 1% to 2% on a dollar basis compared to last year, with the rate roughly in line with the prior year in the second and fourth quarters and above in the third quarter due to timing of growth investments.
Adjusted EBITDA: Full-year adjusted EBITDA as a percentage of total revenue is expected to be between 7.7% and 7.9%. Second-quarter adjusted EBITDA is projected to be 6.9% to 7.2% of total revenue.
Tariff and Fuel Costs: Tariffs and fuel costs are expected to have a net neutral impact on the fiscal year, with a combined $0.10 to $0.20 negative impact on adjusted EPS.
Capital Expenditures: Capital expenditures for the year are expected to remain consistent with prior levels, supporting ongoing growth initiatives.
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Shareholder Return Plan
Quarterly Cash Dividend: Macy's returned $50 million to shareholders through a quarterly cash dividend in the first quarter of 2026.
Share Repurchase Program: Macy's repurchased $50 million worth of shares in the first quarter of 2026, leaving approximately $1.1 billion remaining on its buyback authorization.
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Key Q&A
Q:Can you talk about the recent comp performance and your ability to deliver upside in Q2?
A:The second quarter performance has been consistent across all categories and nameplates. Management is cautiously optimistic about continuing to drive performance despite geopolitical and macroeconomic factors. The updated guide reflects flat comps in the second half, with confidence in delivering positive comps.
Q:How confident are you in achieving medium-term targets of sales growth and margin expansion?
A:Management is confident in delivering long-term profitable growth. They highlighted Q1 EPS growth, opportunities in gross margin improvement, and leveraging SG&A to drive the top line. They also emphasized initiatives like improving assortments, adding new brands, and managing inventory.
Q:Can you elaborate on the cross-functional collaboration between Macy's and Bloomingdale's?
A:The collaboration involves sharing trends, brand opportunities, and geographic insights while maintaining the uniqueness of each brand. Macy's is focusing on making its assortment more fashionable and introducing new brands like Theory and Free People.
Q:What are the drivers of gross margin versus plan in Q1 and the build for the year?
A:Gross margin in Q1 was flat excluding tariffs. Drivers for the year include expanding the Reimagine program, improving regular price sell-through, managing inventory, and leveraging AI forecasting tools.
Q:What are the drivers of comp acceleration across banners, and what is the role of AUR?
A:Comp acceleration is driven by AUR growth and consistent traffic. AUR growth is attributed to selling higher-priced materials and balancing price points across banners. Management is focused on ensuring the assortment architecture attracts a wide range of consumers.
Q:What is the impact of higher fuel costs on the business?
A:Higher fuel costs are expected to be a full-year headwind of 10 to 20 basis points, impacting EPS by $0.05 to $0.15. However, this is offset by lower tariffs, resulting in a net neutral impact for the year.
Q:What is the performance of the Reimagine Macy's stores, and how is marketing spend being managed?
A:Reimagine stores have shown consistent growth across all cohorts, with improvements in assortment, presentation, and service. Marketing spend remains consistent, focusing on balancing top-of-funnel and bottom-of-funnel investments.
Q:What is the current promotional environment?
A:The promotional environment remains comparable to previous years, with no significant changes observed.
Q:What is the status of traffic and credit portfolio health?
A:Traffic has improved sequentially, and the credit portfolio is healthy, with 12% growth in Q1 driven by reduced net credit losses. Management expects the credit card business to grow in line with the overall business.
Q:What drove the significant AUR growth in Q1, and how does it relate to gross margin?
A:AUR growth of 8.3% was driven by a mix of higher-priced materials, new brands, and reduced clearance. Gross margin was flat excluding tariffs, with plans to expand gross margin throughout the year.
Q:What is driving the growth in the beauty category?
A:Growth in beauty is attributed to newness in skincare and fragrances, full-service experiences, and investments in beauty advisors. Bluemercury and other brands are leveraging these factors to drive growth.
Q:What is the performance difference between Reimagine stores and the overall Macy's comp?
A:Reimagine stores, representing 60% of the store base, are growing at 2.4%, compared to the overall Macy's comp of 1.6%. The difference is attributed to additional investments in staffing, brands, and visual enhancements.
Q:How is Macy's leveraging AI in its operations?
A:Macy's is using AI across customer-facing areas, supply chain, and associate support. Initiatives include Ask Macy's for improved search and conversion, as well as AI-driven forecasting tools for inventory management.
Q:What are the key drivers for back-to-school performance?
A:Key drivers include a compelling assortment across private and market brands, regional timing adjustments, and investments in categories like kids' apparel and activewear.
Q:What is the strategy for private label initiatives within the Reimagine program?
A:Private label initiatives are tailored to specific categories, focusing on areas where market brands do not meet needs or where private labels can offer better margins. The strategy is integrated into the overall assortment architecture.
Q:What are the lagging categories, and how is Macy's addressing them?
A:Lagging categories include big-ticket items like furniture and plus sizes. Management is working on improving assortments and addressing consumer demand in these areas.
Q:How is Macy's Media Network performing, and what is its outlook?
A:Macy's Media Network was down 5% in Q1 due to timing shifts but is expected to grow for the year. Initiatives include engaging new advertisers and leveraging partnerships like the Amazon Ad partnership.
Q:What is the gross margin outlook for Q2 and the rest of the year?
A:Gross margin for Q2 is expected to be consistent, excluding tariffs and fuel costs, which are a 20 to 40 basis point headwind. Management expects gross margin to expand in the back half of the year.
Q:How is Macy's attracting younger shoppers and leveraging loyalty programs?
A:Macy's is attracting younger shoppers through partnerships with popular brands and engaging loyalty programs. Credit card sign-ups and loyalty memberships are increasing across all demographics.
Q:How is Macy's balancing marketing spend to drive traffic and conversion?
A:Marketing spend is focused on balancing top-of-funnel brand storytelling with bottom-of-funnel conversion efforts. Management is also leveraging marquee events to drive engagement and traffic.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the question about whether traffic is flat, down, or up compared to Q4, providing only a general statement about sequential improvement.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
California
Day
Herald Square
Macy forward
Macy store
Reimagine location
SGA dollar
Street
World Cup
brand matrix
celebration
change landscape
client
dedication
disclosure
dollar line
flow inflow
forward location
inflow outflow
inspiration
journey
line result
location Reimagine
medium coverage
merchandise
messaging
moment
outlook line
pillar New
place term
refund
sale Reimagine
sale quarter
sale store
sale volume
shoe
summer
tariff fuel
tariff rate
update
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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