Macy's, Inc. (M) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Macy's, Inc. comparable sales 3.2% increase year-over-year, marking the strongest in 13 quarters. Growth was driven by Go-Forward Macy's, Inc. which grew 3.4%, and positive contributions from all nameplates.
Adjusted EPS $0.09, up from $0.04 in the prior year. This was driven by better-than-expected net sales, comparable sales, gross margin, and SG&A.
Net sales $4.7 billion, down 0.6% or $29 million year-over-year. The decline was attributed to the closure of 64 non-go-forward stores, which contributed $160 million in sales in the prior year. Excluding these closures, sales grew 2.9%.
Bloomingdale's comparable sales 9% increase year-over-year, marking its best performance in 13 quarters. Growth was attributed to strong brand partnerships and category performance in ready-to-wear, men's apparel, fine jewelry, shoes, and tabletop.
Bluemercury comparable sales 1.1% increase year-over-year, driven by dermatological skincare and expanded brand partnerships.
Gross margin 39.4% of net sales, slightly down from 39.6% in the prior year. Excluding a 50 basis point tariff impact, gross margin rate would have expanded by approximately 30 basis points.
SG&A expense $2 billion, down $40 million year-over-year. This decline was due to benefits from closed Macy's locations and cost containment efforts, partially offset by investments in the go-forward business.
Core adjusted EBITDA $273 million or 5.6% of total revenue, up from 4.2% in the prior year. This improvement was driven by better-than-expected sales, gross margin, and SG&A.
Inventory Up 0.7% year-over-year in dollar terms, reflecting tariff-related cost increases. On a unit basis, inventories were down.
Operating cash flow $247 million year-to-date, compared to an outflow of $30 million in the prior year. This improvement reflects disciplined cash flow management.
Free cash flow Outflow of $183 million year-to-date, compared to an outflow of $492 million in the prior year.
Capital expenditures $525 million year-to-date, down from $649 million in the prior year.
Shareholder returns $350 million returned to shareholders through $149 million in cash dividends and $201 million in share repurchases, including $50 million in the third quarter.
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Operating Highlights
Introduction of new brands: Macy's introduced Rodd & Gunn, Reiss, Prada Beauty, and expanded Barbour, Mackenzie-Childs, and MFK.
Luxury brand expansion: Bloomingdale's added designer brands like Totême, TWP, Zimmermann, Victoria Beckham, Christian Louboutin, and Roger Vivier.
Luxury market growth: Bloomingdale's achieved a 9% comparable sales growth, its best in 13 quarters, and Bluemercury recorded a 1.1% growth.
Digital and omnichannel growth: Macy's digital sales, including its marketplace, contributed to overall growth, and omnichannel improvements were highlighted.
New distribution center: Opened a state-of-the-art distribution center in China Grove, North Carolina, incorporating automation, robotics, and AI to improve delivery speed and reduce costs.
Inventory management: End-of-quarter inventories were in line with expectations, with a compelling mix of newness across brands and categories for the holiday season.
Bold New Chapter strategy: Focused on three pillars: reimagining Macy's, accelerating luxury, and modernizing operations, which drove better-than-expected results.
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
Consumer Spending Behavior: Consumers are becoming more discerning about how and where they spend their dollars, which could impact sales and revenue.
Tariff Impact: Tariffs have impacted gross margins, though mitigation efforts have been implemented. This remains a potential risk to profitability.
Store Closures: The closure of 64 non-go-forward stores has contributed to a decline in sales, which could affect overall revenue performance.
Economic Uncertainty: The guidance incorporates a cautious view of a 'choiceful consumer,' indicating concerns about economic conditions and consumer spending.
Inventory Management: While inventory levels are disciplined, any mismanagement could lead to overstock or stockouts, impacting sales and customer satisfaction.
Competitive Landscape: The company acknowledges the need to respond to changes in consumer demand and the competitive landscape, which could pose challenges to market share.
Supply Chain and Distribution: Although investments in automation and new distribution centers have been made, any disruptions in the supply chain could impact delivery timelines and costs.
Luxury Market Expansion: While expanding in the luxury market, there is a risk of not meeting the expectations of high-end consumers, which could affect brand reputation and sales.
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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. Core adjusted EBITDA as a percent of total revenue expected to be 7.5% to 7.7%.
Consumer and Holiday Outlook: The company remains cautious, incorporating a more choiceful consumer into its guidance for the remainder of the quarter. Early fourth-quarter performance is positive, but the majority of sales volume is still ahead. The company is confident in its mix of categories and brands to meet holiday demand.
Luxury Segment Growth: Bloomingdale's and Bluemercury are expected to continue their growth trajectory. Bloomingdale's plans to expand its distribution, increase digital penetration, and open additional small-format Bloomies and outlet locations. Bluemercury focuses on dermatological skincare and expanded brand partnerships.
Operational Enhancements: The new China Grove distribution center is expected to improve delivery speed, reduce costs, and support all product categories. This facility will initially support Macy's nameplate with plans to expand to other nameplates.
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Shareholder Return Plan
Dividends Paid: $149 million of consistent quarterly cash dividends were returned to shareholders in the third quarter.
Share Repurchase: $201 million of share repurchases were made, including $50 million of buybacks in the third quarter. Approximately $1.2 billion remains on the buyback authorization.
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Key Q&A
Q:Could you speak to traction that you're seeing with your reimagined store initiatives as it relates to traffic versus basket? And could you elaborate on November comp trends and customer behaviors that you're seeing maybe relative to the third quarter?
A:Antony Spring stated that they are seeing positive growth in their reimagined stores (R 125), with a 2.7% comp improvement. This growth is attributed to new brands, better presentation, and more colleagues in the right place at the right time. Traffic in stores and digital business has been consistent, with continued improvement in AUR. November trends and customer behaviors are in line with the third quarter, and the company remains confident in its strategy.
Q:What are the most important drivers in the business that you think can sustain the momentum as you look ahead into 2026? How are you thinking about the opportunity for core adjusted EBITDA margin delivery? Do you see the recent tariff margin pressure as recapturable into 2026?
A:Antony Spring highlighted drivers such as having the right product assortment, balance across price points, and a strong omnichannel presence. The company is shedding underproductive stores and focusing on comp performance. Core EBITDA has improved despite tariff pressures, which are expected to persist into 2026. Thomas Edwards added that proactive mitigation efforts, such as cost negotiations and vendor discounting, have reduced tariff impacts, and the company plans to continue these efforts.
Q:Can you talk a little bit more about the aspirational customer behavior in Q3 and expectations for Q4? How are they shopping, and what are you expecting for Macy's versus the Bloomingdale's banner? Also, how do we think about flowing through SG&A savings versus reinvestment needs?
A:Antony Spring explained that aspirational customers shop more broadly in Q4, and the company is prepared with a wide assortment of value, promotions, and price points. The company is confident in its inventory, marketing, and hiring strategies. Thomas Edwards noted that SG&A savings from store closures and cost disciplines are being balanced with reinvestments to drive top-line growth.
Q:Are you more or less confident today than you were 90 days ago about the consumer front? Can you provide details on traffic versus ticket and category performance, particularly in apparel, home, and footwear?
A:Antony Spring expressed more confidence in the strategy and results compared to 90 days ago. Traffic and ticket have improved, with AUR also up. Apparel, home, and footwear categories are performing well. Thomas Edwards added that traffic was a key driver of momentum in Q3, and the company raised its Q4 guidance.
Q:Can you talk about how the department store competitive landscape has evolved in the last year and where you see it going next year and beyond? Also, what is causing the gross margin compression in Q4 compared to Q3?
A:Antony Spring stated that the company is performing well against competitors, with sharp pricing, engaged colleagues, and strong assortments. The company is well-positioned for the holidays. Thomas Edwards explained that Q4 gross margin compression is due to tariffs and competitive flexibility, but the full-year gross margin guidance has improved.
Q:Can you expand on pricing increases or ticket increases and the response of the consumer, as well as vendor support? Also, can you discuss the credit business and its trends into Q4 and 2026?
A:Antony Spring noted that pricing on newness and fashion has had little impact on consumer appetite, especially among middle to upper-income customers. The company is offering a variety of prices and promotions. Thomas Edwards highlighted strong credit business performance, with higher applications and improved net credit loss results, contributing to revenue growth.
Q:Where do you expect to be at the end of this year with the store closure program? Do you expect to close fewer or more than the 150 stores over the 3-year period? Can you also provide details on the Macy's Media Network reduction?
A:Thomas Edwards stated that store closure announcements will be made at the end of the year, and the company remains committed to its optimization program. Macy's Media Network guidance was slightly reduced due to recalibrated advertising spending but is still expected to grow strongly year-over-year.
Q:Active was mentioned as a weaker category. Can you provide details on that? Also, can you discuss the performance of the Reimagine 125 stores versus the rest of the Macy's nameplate stores?
A:Antony Spring explained that active was softer due to a focus on dress-up 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 the Go-Forward stores. Investments in these stores are yielding positive payback.
Q:Can you elaborate on the planned SG&A increases and how they will be allocated? How do you see the mix of digital versus in-store evolving over 2026?
A:Thomas Edwards explained that SG&A increases are due to higher sales and variable costs, with a focus on leveraging the business and investing in growth. Antony Spring emphasized the importance of an omnichannel approach, with digital and physical stores complementing each other to meet customer preferences.
Q:What do you see as the opportunity for Macy's and Bloomingdale's given the turbulence among competitors? Can you also discuss the uptrend in the handbag category?
A:Antony Spring stated that Macy's and Bloomingdale's are well-positioned to take market share, with strong assortments and engaged teams. Handbags are experiencing a resurgence, contributing to the company's overall strength in gifting and fashion categories.
Q:Have you analyzed how many customers from closed stores are recaptured in other stores or online?
A:Antony Spring explained that the company has a recapture plan for customers from closed stores, with retention rates meeting or exceeding expectations. Proximity to other stores and the type of customer (omnichannel vs. single-channel) influence retention rates. Loyal and credit card customers are more likely to be retained.
Q:What do you see as the opportunity for newness in Macy's and Bloomingdale's assortments? How do you plan to capture new customers and get more from existing ones?
A:Antony Spring emphasized the importance of newness across price points and categories, with a focus on balance and variety. Macy's is adding brands like Reiss and Theory, while Bloomingdale's is expanding designer and advanced contemporary assortments. The company is leveraging social media and visual merchandising to inspire customers.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the specific number of store closures expected by the end of the year, stating that announcements would be made later. Additionally, while they acknowledged the recalibration of Macy's Media Network guidance, they did not provide detailed reasons for the reduction beyond general advertising spending adjustments.
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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
campaign event
center
comp quarter
customer base
customer fulfillment
customer relationship
delivery
expectation tariff
expense
experience start
facility
float
forward
fulfillment store
future
gain expectation
mix newness
offering
opening
outflow
patience
response
sale result
start majority
store replenishment
volume consumer
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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M Report
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