Macy's, Inc. (M) Q4 2025 Earnings Call Transcript
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Overview
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.
Key Financial Performance
Net Sales (Q4 2025) $7.6 billion, a decrease from $7.8 billion in Q4 2024. Excluding the $200 million impact from 64 non-go-forward stores closed at the end of fiscal 2024, sales grew 0.9%. The decline was attributed to store closures.
Comparable Sales (Q4 2025) Increased by 1.8% year-over-year, exceeding guidance of down 2.5% to flat. Growth was driven by go-forward business comparable sales growth of 2%.
Bloomingdale's Comparable Sales (Q4 2025) Increased by 9.9%, benefiting from its best holiday result on record.
Bluemercury Comparable Sales (Q4 2025) Increased by 1.3%, driven by dermatological skincare and fragrances.
Adjusted Diluted EPS (Q4 2025) $1.67, well above the guidance range of $1.35 to $1.55. Performance was supported by better-than-expected sales and disciplined cost management.
Gross Margin (Q4 2025) $2.7 billion or 35.2% of net sales, compared to 35.7% in Q4 2024. Excluding a 60 basis point tariff impact, gross margin rate would have expanded by 10 basis points.
SG&A Expense (Q4 2025) $2.4 billion, a decline of $23 million or 1% from Q4 2024. The decline reflected benefits from store closures and expense savings initiatives, offset by investments in the go-forward business.
Credit Card Revenue (Q4 2025) $205 million, up 17.1% year-over-year, driven by a healthy credit portfolio.
Macy's Media Network Revenue (Q4 2025) $72 million, up 12.5% year-over-year.
Inventory (Year-End 2025) $4.4 billion, down 1.3% year-over-year. The composition improved with more newness, less aged goods, and open-to-buy flexibility.
Operating Cash Flow (2025) $1.4 billion, compared to $1.3 billion in 2024, reflecting strong cash generation.
Free Cash Flow (2025) $797 million, compared to $679 million in 2024, representing a free cash flow yield of over 15%.
Capital Expenditures (2025) $740 million, down from $882 million in 2024, reflecting the completion of long-term projects.
Adjusted EBITDA (Q4 2025) $840 million or 10.6% of total revenue, compared to $903 million or 11.3% in Q4 2024.
Adjusted Diluted EPS (Full Year 2025) $2.32, well above the most recent guidance of $2 to $2.20.
Macy's Nameplate Comparable Sales (2025) Increased by 0.6%, representing a 190 basis point improvement versus 2024.
Bloomingdale's Comparable Sales (2025) Increased by 7.4%, representing a 490 basis point improvement versus 2024.
Bluemercury Comparable Sales (2025) Increased by 1.6%, driven by dermatological skincare and fragrances.
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Operating Highlights
New Brands Introduced: In 2025, Macy's introduced 60 new brands, including Abercrombie Kids, MFK, BCBG, and Good American. Bloomingdale's added brands like Toteme, Christian Louboutin, Victoria Beckham Beauty, Skims, Messika, and Vuori.
Digital Channel Enhancements: Macy's digital channel, representing 1/3 of annual sales, was modernized with a more editorialized approach to reinforce fashion authority and facilitate shopping.
Luxury Market Expansion: Bloomingdale's achieved 7.4% comparable sales growth, with strength across stores and digital. New brands and exclusive products were introduced, and there is significant room for expansion in small-format stores and outlets.
Omnichannel Growth: Macy's omnichannel strategy, including the Reimagined 125 and 200 locations, contributed to positive sales growth. Digital sales also saw improvement.
Operational Efficiencies: AI was leveraged in over 35 use cases, including supply chain, merchandising, and customer service. The China Grove distribution center improved delivery times and reduced costs.
Inventory Management: Inventory composition improved with more newness, less aged goods, and better in-stock levels.
Bold New Chapter Strategy: The strategy focuses on reimagining Macy's, accelerating luxury, and simplifying operations. It delivered better-than-expected results in 2025, including positive comparable sales and strong financial performance.
Store Optimization: Macy's plans to optimize its fleet to 350 locations, focusing on profitable growth and market-by-market frameworks.
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Risk or Challenges
Tariffs: Unanticipated impact of tariffs negatively affected financial performance, including a $0.13 impact on adjusted EPS in Q4 and a projected $0.10 to $0.20 impact on adjusted EPS for fiscal 2026.
Lower-than-expected asset sale gains: Asset sale gains were below expectations, impacting financial results. For example, Q4 asset sale gains were $3 million compared to an expected $15-$20 million.
Macroeconomic and geopolitical uncertainties: Potential risks to discretionary consumer spending due to macroeconomic and geopolitical factors, which could impact overall financial performance.
Lower-tier consumer spending: Lower-income consumer segments remain more cautious in spending, which could affect sales performance.
Store closures: Planned closure of approximately 65 additional stores by 2028 could impact short-term revenue and operational efficiency.
Tariff environment evolution: Changes in tariffs could further impact gross margins and financial performance, with a projected 20-30 basis point impact on gross margin for fiscal 2026.
SG&A expenses: SG&A expenses are expected to increase by 1%-2% in fiscal 2026, reflecting investments in growth initiatives and omnichannel shopping experiences, which could pressure margins.
Competitive landscape: Potential changes in the competitive landscape could require adjustments in strategy and operations, impacting financial performance.
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Guidance & Outlook
Revenue Expectations: For fiscal 2026, Macy's expects net sales of approximately $21.4 billion to $21.65 billion. Macy's, Inc. comparable sales are projected to range from down approximately 0.5% to up 0.5%. For the first quarter, net sales are expected to be approximately $4.575 billion to $4.625 billion, with comparable sales up approximately 0.5% to 1.5%.
Margin Projections: Gross margin as a percent of net sales is expected to be 38.3% to 38.6% for fiscal 2026, with a tariff impact of roughly 20 to 30 basis points. Gross margin rate is expected to be down in the first quarter but up in the second through fourth quarters.
Adjusted EBITDA and EPS: Adjusted EBITDA as a percent of total revenue is projected to be 7.7% to 7.9% for fiscal 2026. Adjusted diluted EPS is expected to range from $1.90 to $2.10, incorporating a $0.10 to $0.20 tariff impact. For the first quarter, adjusted EPS is expected to range from negative $0.01 to positive $0.01, with a tariff impact of $0.05 to $0.10.
Capital Expenditures: Capital expenditures for fiscal 2026 will focus on supporting growth, efficiencies, and customer experience improvements. Macy's plans to invest in omnichannel shopping enhancements and talent development.
Store Portfolio and Expansion: Macy's plans to maintain a go-forward fleet of approximately 350 locations, completing the closure of 65 additional stores by 2028. Bloomingdale's is exploring opportunities for expansion in small-format stores and outlets, with significant room for growth in the top 50 U.S. markets.
Omnichannel and Digital Investments: Macy's will continue to enhance its omnichannel shopping experience, leveraging AI in supply chain, merchandising, marketing, and customer-facing areas. Digital channels currently represent approximately one-third of annual sales.
Market Trends and Consumer Behavior: Macy's anticipates resilience among middle and upper-income customers, while lower-income tiers remain more selective. The company is taking a prudent approach to guidance, considering macroeconomic and geopolitical uncertainties.
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Shareholder Return Plan
Cash Dividends: $197 million returned to shareholders in 2025.
Dividend Growth: Annual payout amount has risen 27% since reinstating the quarterly dividend in 2021.
Share Repurchases: $251 million worth of shares repurchased in 2025, including $50 million in the fourth quarter.
Remaining Authorization: Approximately $1.1 billion remains on the share repurchase authorization.
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Key Q&A
Q:How does Macy's plan to remain resilient amidst macro and consumer volatility?
A:CEO Antony Spring expressed confidence in Macy's strategy, citing growth across Macy's, Bloomingdale's, and Bluemercury, reimagined stores outperforming, and a healthy balance sheet with inventories below the prior year. COO Thomas Edwards added that Macy's multi-brand, multi-category, and multichannel business model allows flexibility to adjust to consumer needs.
Q:What is Macy's outlook on Average Unit Retail (AUR) and units sold?
A:Macy's has seen consistent growth in AUR, driven by improved assortments, better brands, and modernized digital channels. While units sold may be slightly down, overall basket size and dollar spending have increased. Traffic is steady, and the company expects AUR growth to continue.
Q:What is the growth outlook for Bloomingdale's and Macy's reimagined stores?
A:Bloomingdale's is experiencing broad-based growth across categories and store formats, supported by vendor partnerships and capital investments. Macy's reimagined stores, now covering 60% of the fleet and 75% of sales, are expected to continue delivering comp growth. Digital business at Macy's, comprising one-third of sales, is also growing.
Q:How is Macy's addressing price-sensitive consumers amidst inflation?
A:Macy's employs a balanced approach with value offerings through Backstage, promotional events, and private brand portfolios. The company aims to cater to both value-seeking and premium customers by offering a range of price points and brands across its portfolio.
Q:What are the drivers of Macy's gross margin improvement in 2026?
A:Gross margin improvement is driven by initiatives like better assortments, improved brands, and enhanced omnichannel experiences. While tariffs impact margins, the underlying trend is positive, with expectations of margin expansion throughout the year.
Q:What is the progress and outlook for Macy's reimagined stores and store closures?
A:Macy's reimagined stores have shown consistent growth, with 7 of 8 quarters of positive performance. The company plans to add 75 more stores to the program in 2026. Store closures are being extended through 2028 to optimize real estate value, with an expected cash generation of $650-$700 million from the initiative.
Q:What are Macy's plans for private brands and AI initiatives?
A:Private brands account for 12% of Macy's business, with ongoing efforts to improve quality and value. AI initiatives focus on enhancing customer experience, simplifying operations, and driving efficiency across supply chain, customer experience, and marketplace.
Q:What is the outlook for Macy's digital business and profitability?
A:Digital sales, comprising one-third of Macy's business, are growing and profitable. The company is modernizing its digital platforms to enhance fashion authority and customer experience, supporting overall business growth.
Q:What are the financial expectations for Macy's reimagined stores and CapEx in 2026?
A:Reimagined stores are capital-light and designed for incremental sales growth. Macy's plans to invest approximately $800 million in CapEx for 2026, focusing on Bloomingdale's growth, Macy's stores, technology, and supply chain.
Q:What is the health of Macy's credit card and media network revenues?
A:Credit card revenues grew 24% in 2025 due to improved credit quality and higher applications. Macy's Media Network is also growing, supported by partnerships and initiatives like Amazon ads. Both are integral to Macy's business, contributing to a guided $920 million in other revenue for 2026.
Q:What is Macy's strategy for attracting younger consumers?
A:Macy's targets younger consumers through events like prom activations, partnerships with high schools, and digital initiatives. The company also focuses on life moments like first jobs and weddings, offering relevant products and experiences.
Q:What is the update on Macy's beauty business and Bluemercury?
A:Macy's beauty business is expanding with new brands and enhanced in-store experiences. Bluemercury continues to grow, focusing on dermatological skincare and exclusive brands. Both segments aim to attract younger consumers and meet diverse customer needs.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the breakdown of credit card revenues between go-forward and non-go-forward stores, as well as the exact gross margin and SG&A profiles for these categories. Additionally, they did not provide quarterly specifics for gross margin improvements or elaborate on the exact metrics for AI initiatives.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI
Bluemercury
Bold New
Carousel California
Chapter balance
Macy omnichannel
Macy store
Prom
allocation priority
approach store
area Macy
base
campaign
capability
change landscape
customer focus
disclosure
distribution brand
ecosystem strength
excellence efficiency
expense saving
forward fleet
foundation
impression
improvement basis
item sale
line item
location Reimagine
marketing event
merchandising marketing
observation
parade
point improvement
progress term
sale OLM
sheet capital
shopping environment
spend
store product
tariff asset
timing transaction
M Transcript
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.
Macy's, Inc. (M) Presents At 2025 Global Consumer & Retail Conference Transcript
Neutral10-8
M Slides
M Report
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