Macy’s Earnings Call Signals Momentum Amid Cost Pressures
Macy’s ((M)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Macy’s latest earnings call struck a cautiously upbeat tone, with management emphasizing broad-based sales gains, strong cash generation, and progress on its turnaround plan despite pressure from tariffs, fuel costs, and softness in select categories. The raised full-year outlook underlined growing confidence, even as executives acknowledged macro and geopolitical risks that could temper momentum.
Comparable Sales Strength Across Enterprise
Macy’s, Inc. posted 3.0% comparable sales growth, or 3.1% on a go-forward basis, marking its strongest first quarter since 2022 and signaling improving demand across the portfolio. All nameplates and channels contributed, with Macy’s up 1.6%, Bluemercury gaining 6.4%, and Bloomingdale’s leading with a double-digit increase.
Net Sales and Total Revenue Growth
Net sales increased 1.8% to $4.7 billion, or 2.7% excluding roughly $40 million of impact from non-go-forward store closures, highlighting underlying strength in the core business. Total revenue grew 2.1% to $4.9 billion versus the prior year, setting a more constructive top-line backdrop than many investors had expected.
Bloomingdale’s Record Quarter
Bloomingdale’s delivered a standout 10.2% comparable sales gain and the highest first-quarter sales in its 154-year history, underscoring the resilience of higher-end consumers. Management pointed to broad-based channel and category strength, reinforcing Bloomingdale’s role as a key growth engine within the Macy’s portfolio.
Reimagine Store Program Momentum
The Reimagine store initiative expanded to 200 locations, now covering about 60% of go-forward Macy’s stores and representing roughly three quarters of projected 2025 Macy’s store sales. These locations have posted positive comps in eight of the last nine quarters, with Q1 Reimagine comps up 2.4%, validating the investment strategy.
Adjusted EPS and EBITDA Above Guidance
Adjusted diluted EPS came in at $0.13, surpassing the high end of management’s prior range and signaling better-than-modeled profitability. Adjusted EBITDA reached $290 million, or 5.9% of total revenue, handily topping guidance of 4.9% to 5.1% and giving the company more room to maneuver on strategic priorities.
Improved Cash Flow and Stronger Balance Sheet
Operating cash flow flipped to an inflow of $292 million from a $64 million outflow a year earlier, while free cash flow improved to positive $140 million from negative $203 million. Macy’s ended the quarter with $1.3 billion in cash on hand versus $932 million last year, strengthening its balance sheet and financial flexibility.
Other Revenue and Credit Card Performance
Other revenue rose 8% year over year to $210 million, supported in part by a rebound in the credit business. Credit card revenue grew 12% to $172 million on a healthier portfolio and lower net credit losses, offering a profitable income stream that helps offset pressure in the core retail margin.
Product, Brand and Digital Initiatives
Management highlighted new brands and expanded assortments, including additions such as Rotie’s, Donna Karan Weekend, and Ted Baker Men’s, as part of efforts to refresh product and attract younger shoppers. Digitally, Macy’s rolled out its Ask Macy’s AI conversational shopping assistant, which has seen an early positive response, while automation ramped at its China distribution facility.
Capital Returns and Share Repurchases
The company returned $100 million to shareholders in the quarter, splitting the amount evenly between dividends and share repurchases to balance income and buyback strategies. Macy’s still has roughly $1.1 billion remaining under its existing repurchase authorization, giving it significant dry powder for future capital deployment.
Gross Margin Pressure from Tariffs and Fuel
Gross margin slipped to 38.9% of net sales from 39.2% a year earlier, with management attributing roughly 30 basis points of pressure in the quarter to tariffs alone. Looking ahead, the company expects tariffs and fuel to weigh on gross margin by about 20 to 40 basis points in the second quarter and 20 to 30 basis points for the full year.
Adjusted EBITDA and Margin Below Last Year
Despite beating internal guidance, adjusted EBITDA of $290 million was slightly below last year’s $304 million, with margin contracting to 5.9% from 6.3%. The modest erosion reflects ongoing cost and margin pressures, reminding investors that the turnaround is progressing but not yet fully insulating results from external headwinds.
Macy’s Media Network and Other Revenue Mix
Macy’s Media Network revenue declined 5% to $38 million, as the timing of advertising spend pulled forward some headwinds in the period and partially muted the growth in other revenue. Even so, overall other revenue still increased, suggesting that underlying drivers like credit remain solid despite variability in media monetization.
Category Weakness in Big-Ticket Home and Plus-Size
Executives flagged softness in big-ticket home categories, especially furniture, citing higher tariffs, elevated interest rates, and a sluggish housing backdrop as key pressures. The plus-size business also underperformed, prompting management to review assortments and strategy as they seek to re-ignite growth in these challenged areas.
Tariff Refund and Macro Uncertainty
The company is pursuing tariff refunds, but management emphasized that the timing and size of any refunds remain uncertain and are excluded from current guidance, limiting their near-term benefit. Leaders also pointed to ongoing macro and geopolitical risks that could impact spending patterns, keeping the tone realistic despite recent outperformance.
Inventory and SG&A Discipline
Inventory dollars ended the quarter up 3.6% year over year, roughly in line with comparable sales growth, which suggests Macy’s is managing stock tightly and avoiding excess. SG&A expenses rose modestly to $1.95 billion from $1.91 billion, with the SG&A rate flat at 39.9% as the company funded growth investments without losing cost discipline.
Q2 Tariff and Fuel EPS Headwinds
For the second quarter, management baked in a combined tariffs and fuel headwind of roughly $0.03 to $0.04 to adjusted EPS, as these costs flow through the income statement. The company also projected a 20 to 40 basis point negative impact to gross margin in Q2 from the same factors, making the headwinds highly visible for investors tracking profitability.
Raised Outlook and Forward Guidance
Macy’s lifted its full-year outlook after a stronger-than-expected first quarter and now expects net sales of about $21.5 billion to $21.75 billion, with comparable sales rising 0.5% to 1.2% and adjusted EBITDA margin of 7.7% to 7.9%. Adjusted diluted EPS is forecast at $2.00 to $2.20, and for Q2 the company guided to net sales of $4.75 billion to $4.80 billion and adjusted EPS of $0.29 to $0.34, all excluding potential tariff refunds.
Macy’s earnings call painted a picture of a retailer regaining its footing, with improving comps, strong cash generation, and a more confident outlook offsetting pressure from tariffs, fuel, and pockets of category weakness. For investors, the combination of raised guidance, solid balance sheet, and ongoing strategic initiatives suggests the Bold New Chapter is gaining traction, though macro and cost risks remain key variables to watch.
