10-K: Macy's 2025 Annual Report: Strategic Progress Amidst Sales Dip

Macy's, Inc. reports a 1.5% comparable sales increase for 2025, driven by its "Bold New Chapter" strategy, despite a 2.4% decline in net sales due to store closures.

Summary

• Macy's, Inc. operates 665 stores, websites, and mobile applications under three iconic brands: Macy's, Bloomingdale's, and Bluemercury.
• The multiyear enterprise strategy, "Bold New Chapter," aims to return the Company to sustainable, profitable growth by improving customer experience, elevating product relevance, evolving its store and digital footprint, investing in growth areas, and modernizing operations.
• Key progress in 2025 included "Reimagine 125" Macy's locations outperforming the rest of the fleet, Bloomingdale's achieving its highest comparable sales growth in 14 quarters, and Bluemercury achieving its 20th consecutive quarter of comparable sales growth.
• A new state-of-the-art fulfillment and store replenishment center in China Grove was opened, incorporating automation, robotics, and AI to modernize the supply chain.
• Total net sales for 2025 were $21,764 million, a 2.4% decrease from $22,293 million in 2024, primarily due to store closures which impacted prior year sales by approximately $700 million.
• Comparable sales on an owned-plus-licensed-plus-marketplace basis increased 1.5% in 2025, with Macy's up 0.4%, "Reimagine 125" locations up 1.0%, Bloomingdale's up 7.4%, and Bluemercury up 1.6%.
• Net income for 2025 was $642 million, up from $582 million in 2024, and diluted EPS was $2.32, up from $2.07.
• Gross margin rate decreased by 40 basis points to 38.0% in 2025, primarily due to the impact of tariffs.
• Other revenue increased by $132 million (25%) due to strong credit card revenues and $12 million (7%) from Macy's Media Network, boosted by an Amazon ad partnership.
• The Company recorded $328 million in income from the settlement of credit card interchange fee litigation.
• The Company repurchased 17.7 million shares of common stock for $251 million in 2025, with $1.1 billion remaining under authorization.
• Long-term debt was reduced by approximately $340 million in 2025 through debt repayment and refinancing transactions.
• Capital expenditures for 2025 were $740 million, with an estimated $800 million projected for 2026, focusing on digital, technology, and omni-channel capabilities.
• Adrian Mitchell, former Chief Operating Officer and Chief Financial Officer, separated from Macy's on June 21, 2025, receiving a severance package including $1.9 million in base salary, $19,469.52 for healthcare premiums, and $2.7 million for long-term incentive claims and other damages.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive report, reflecting strategic progress in key areas like luxury and digital, and improved comparable sales. However, the overall net sales decline and gross margin pressure, coupled with significant one-time gains from litigation settlement, suggest ongoing challenges in the core business that warrant continued monitoring.

Positives

• Comparable sales on an owned-plus-licensed-plus-marketplace basis increased 1.5% in 2025, reversing a previous decline.
• "Reimagine 125" Macy's locations outperformed the rest of the Macy's fleet, with comparable sales up 1.0%.
• Bloomingdale's achieved its highest comparable sales growth in 14 quarters (up 7.4%) and its best holiday season on record.
• Bluemercury achieved its 20th consecutive quarter and sixth consecutive year of comparable sales growth (up 1.6%).
• Macy's delivered its best net promoter score on record in 2025, indicating improved customer satisfaction.
• Net income increased to $642 million in 2025 from $582 million in 2024.
• Diluted earnings per share increased to $2.32 in 2025 from $2.07 in 2024.
• Other revenue increased by $132 million (25%) due to a strong credit portfolio and $12 million (7%) from Macy's Media Network, boosted by an Amazon ad partnership.
• The Company received $328 million in income from the settlement of credit card interchange fee litigation.
• Long-term debt was reduced by approximately $340 million in 2025 through debt repayment and refinancing transactions.
• The Company repurchased 17.7 million shares of its common stock for $251 million in 2025, with $1.1 billion remaining under authorization.
• A new state-of-the-art fulfillment and store replenishment center in China Grove was opened, incorporating automation, robotics, and AI to modernize the supply chain, increase accuracy, and reduce delivery costs.
• The Company maintained effective internal control over financial reporting as of January 31, 2026.

Negatives

• Net sales for 2025 were down $529 million, or 2.4%, compared to 2024, primarily due to store closures.
• Gross margin rate decreased by 40 basis points from 38.4% in 2024 to 38.0% in 2025, driven by the impact of tariffs.
• Impairment, restructuring, and other costs increased to $230 million in 2025 from $171 million in 2024, primarily related to non-go-forward store locations and employee termination/severance.
• Pension settlement charges increased to $67 million in 2025 from $46 million in 2024, due to pro-rata recognition of net actuarial losses from lump sum distributions.
• Loss on extinguishment of debt was $33 million in 2025, up from $1 million in 2024.
• Cash and cash equivalents decreased to $1,246 million at January 31, 2026, from $1,306 million at February 1, 2025.
• Proprietary credit card sales penetration decreased to 40.1% in 2025 from 41.6% in 2024.
• Adjusted diluted earnings per share decreased to $2.32 in 2025 from $2.64 in 2024.

Risks

• Strategic plans and initiatives, such as the "Bold New Chapter" strategy, may not be successful, negatively affecting profitability and growth.
• Inability to timely identify or effectively respond to consumer needs, expectations, or trends could adversely affect customer relationships, demand for products and services, and market share.
• Advertising, marketing, and loyalty programs may not be successful in increasing brand awareness and building personalized customer experiences.
• Inability to manage inventory levels and merchandise selection, or protect against inventory shortage, could negatively impact gross margins and operating results.
• Significant competition from a broad set of retailers and platforms, including department stores, off-price retailers, specialty retailers, mass merchants, marketplaces, and direct-to-consumer brands.
• Failure to effectively deploy artificial intelligence (AI) technology as effectively or faster than competitors could lead to a loss of competitive advantage or market share.
• A significant decline in customer store traffic or migration of sales from brick-and-mortar stores to digital platforms could lead to additional store closures, restructuring, and other costs.
• The Company's ability to grow depends in part on its stores remaining relevant and attractive to customers, with changes in consumer shopping habits or mall environments posing risks.
• Inability to successfully execute the real estate strategy, including monetization and redevelopment, due to the cyclical nature of real estate markets and development risks.
• The seasonal nature of the business, with a high proportion of revenues and operating cash flows in the second half of the year, means sales falling below expectations during this period could have a disproportionately negative impact.
• Dependence on attracting, training, developing, and retaining quality colleagues, facing challenges from low unemployment, labor shortages, intense competition for talent, and a competitive wage environment.
• Increases in labor costs and the cost of employee benefits, particularly health care, could impact financial results and cash flow.
• Declines in revenue from private label and co-branded credit cards due to deterioration in economic conditions, shifts to alternative payment methods, or new federal and state regulations (e.g., CFPB late fee rule).
• Defined benefit plan funding requirements or plan settlement expense could impact financial results and cash flow due to significant changes in interest rates, decreases in plan asset fair value, and timing/amount of benefit payments.
• If the Company's reputation and brand image are not maintained at a high level, operations and financial results may suffer due to incidents, adverse publicity, social media, or events like active shooter incidents.
• Inability to protect intellectual property (copyrights, trademarks, trade dress, trade secrets, private brands) could damage brands and business.
• Unforeseen disruptions in distribution and fulfillment centers due to fire, severe weather, natural disasters, health pandemics, labor disagreements, or other shipping problems.
• Failure of key information technology systems or processes, including security breaches, cyberattacks, data theft, or errors, could significantly disrupt operations, impair data security, and adversely impact reputation.
• AI creates business, legal, and ethical challenges, including incorrect output, release of private information, algorithmic bias, unintentional discrimination, intellectual property violations, and regulatory uncertainty.
• Disruptions in customer-facing technology systems could impair the digital retail strategy and give rise to negative customer experiences.
• Dependence on foreign sources of production (primarily Asia) exposes the Company to supply chain disruptions, political/financial instability, trade restrictions, tariffs, currency exchange rates, and increased costs.
• Geopolitical, trade, and investment tensions (e.g., U.S.-China trade dispute, tariffs) could create additional uncertainty, supply disruptions, and higher costs of products sourced or imported from China.
• Prolonged manufacturing or transportation disruptions for vendors or raw material suppliers due to public health conditions or other unforeseen events could adversely impact product sourcing.
• Quality and other concerns over the Company's own brands, manufactured by third parties, could negatively impact brand reputation and earnings.
• Material disruptions in relationships with third-parties (suppliers, service providers, lenders, joint ventures) could adversely affect operations.
• The Company's business is subject to discretionary consumer spending, unfavorable economic and political conditions, and other related risks (e.g., inflation, interest rates, consumer confidence, armed conflicts).
• Extreme weather conditions, natural disasters, or regional/global health pandemics could materially adversely affect business and results of operations.
• Legislation, litigation, regulatory requirements, or non-compliance (e.g., consumer protection, tax law changes, data privacy laws, environmental regulations) could increase compliance costs and adversely affect business.
• Inability to meet evolving regulatory requirements and stakeholder expectations regarding environmental, social, or governance matters.
• Climate change, or legal, regulatory, or market measures to address climate change, could adversely affect business and results of operations, including regulatory compliance costs, reputational risk, and acute/chronic physical risks.
• Incurrence of future charges in connection with the impairment of tangible and intangible long-lived assets, including goodwill, if macroeconomic or industry conditions deteriorate.
• Inability to access capital markets due to changes in credit and capital markets, limited liquidity, interest rate fluctuations, or a downgrade in credit ratings.
• The Company's level of indebtedness ($2,432 million as of January 31, 2026) may adversely affect its ability to operate, remain in compliance with debt covenants, react to changes, or make payments on its indebtedness.

Future Outlook

The Company expects capital expenditures to be approximately $800 million during 2026, primarily focused on digital and technology investments, go-forward locations, and omni-channel capabilities. It does not anticipate making funding contributions to its Pension Plan in 2026. Future dividends and share repurchases will be subject to Board approval, market conditions, and other relevant factors. The Company also plans to continue evaluating and potentially retiring outstanding indebtedness. The Company is currently evaluating the impacts of new accounting standards (ASU 2024-03, ASU 2025-05, ASU 2025-06) that will become effective in future fiscal years.

Management Comments

• "Our multiyear enterprise strategy, Bold New Chapter, is designed to help the Company return to sustainable, profitable growth by improving the customer experience, elevating product relevance, evolving our store and digital footprint, investing in the growth areas of our business and modernizing our operating model."
• "The Reimagine 125 locations outperformed the rest of the Macy's fleet in 2025. These locations are now better organized, easier to shop and have a more compelling visual presentation."
• "Bloomingdale's achieved its highest owned-plus-licensed-plus-marketplace comparable sales growth in 14 quarters, sequential improvement in its net promoter score and its best holiday on record."
• "Bluemercury achieved its 20th consecutive quarter and sixth consecutive year of comparable sales growth."
• "We opened our new state-of-the-art fulfillment and store replenishment center, China Grove, which incorporates automation, robotics and artificial intelligence into our delivery ecosystem. The facility helps modernize and strengthen our supply chain and provides us the opportunity to increase accuracy and timeliness of deliveries and further reduce our delivery costs."
• "Our end-to-end work gives us the ability to invest in our growth ambitions, while simplifying our business model."
• Tony Spring, Chief Executive Officer, stated that the integrity and consistency of the Consolidated Financial Statements are the responsibility of management and properly include amounts based upon estimates and judgments.

Industry Context

StockSavvy.ai notes that Macy's "Bold New Chapter" strategy, focusing on omnichannel experience, luxury growth, and operational modernization, aligns with broader retail trends of adapting to evolving consumer behaviors and digital migration. The emphasis on personalized experiences, AI integration, and supply chain efficiency reflects industry-wide efforts to enhance competitiveness against diverse retail channels, including digitally-native brands and off-price retailers. The decline in net sales due to store closures is a common strategy among traditional department stores seeking to optimize their physical footprint and focus on more profitable locations, a trend seen across the sector as retailers right-size their brick-and-mortar presence.

Comparison to Industry Standards

• The Compensation and Management Development Committee uses companies within the S&P 500 Retail Select Index for evaluating compensation related to the Company's performance-based restricted stock units.
• The Compensation and Management Development Committee uses a peer group for general comparisons and benchmarking to assess and evaluate executive compensation, including: Best Buy Co., Inc., Burlington Stores Inc., Dicks Sporting Goods, Inc., Dillard's, Inc., Dollar Tree, Inc., Foot Locker, Inc., Gap Inc., Kohl's Corporation, Lowe's Companies, Inc., Nordstrom, Inc., Ross Stores, Inc., Target Corporation, TJX Companies, Inc., Ulta Beauty, Inc. and Williams-Sonoma, Inc.
• StockSavvy.ai notes that Macy's comparable sales increase of 1.5% in 2025, while positive, lags behind some high-growth segments of the retail industry, particularly e-commerce pure-plays or specialty retailers experiencing stronger post-pandemic surges.
• The strong performance of Bloomingdale's (up 7.4%) and Bluemercury (up 1.6%) indicates successful differentiation within the luxury and beauty segments, which often show resilience or growth even when broader department store trends are challenged.
• The 35% digital sales penetration is competitive for a traditional brick-and-mortar retailer undergoing digital transformation, though still below leading pure-play e-commerce companies.

Management Changes

Legal Proceedings

• The Company and its subsidiaries are involved in various proceedings that are incidental to the normal course of their businesses.
• As of the date of this report, the Company does not expect that any of such proceedings will have a material adverse effect on its financial position or results of operations.
• The Company recorded $328 million in income in 2025 from the settlement of credit card interchange fee litigation matters.

Related Party Transactions

• The Company has a long-term marketing and servicing alliance (Credit Card Program Agreement) with Citibank, N.A., where Citibank owns most of the credit card accounts and receivables, and the Company receives fees and shares in profits.
• The Unsecured Notes are debt obligations of Macy's Retail Holdings, LLC (a 100%-owned subsidiary) and are fully and unconditionally guaranteed by Macy's, Inc., representing an intra-company financial relationship.

Stakeholder Impact

• Shareholders are impacted by the ongoing $1.1 billion share repurchase program, declared quarterly dividends of 19.15 cents per share, and the overall financial performance, including increased net income and diluted EPS.
• Employees (colleagues) are affected by the "Bold New Chapter" strategy, which includes store closures leading to restructuring charges and severance, as well as investments in enhanced education and staffing; approximately 8% of employees are union-represented.
• Customers are targeted by efforts to improve the shopping experience, elevate product relevance, and expand digital and physical locations, supported by loyalty programs like Macy's Star Rewards, Bloomingdale's Loyallist, and Bluemercury BlueRewards.
• Suppliers and vendors are part of a globally diversified network, with no single supplier accounting for more than 4% of purchases, but face potential impacts from supply chain disruptions, tariffs, and economic conditions; the Company provides credit enhancement to vendors.
• Creditors are affected by the Company's total indebtedness of $2,432 million, debt reduction efforts, and compliance with debt covenants, with stable credit ratings from Moody's (Ba1), S&P (BB+), and Fitch (BBB-).

Next Steps

• Continue to make value-enhancing investments primarily focused on digital and technology, data and analytics, supply chain modernization, and omni-channel capabilities.
• Continue to explore opportunities to monetize the real estate portfolio, including sales of stores and non-store real estate, and redevelopment.
• Capital expenditures of approximately $800 million are expected during 2026, focused on supporting the Bold New Chapter strategy.
• The Board of Directors will continue to approve future dividends.
• The Company may continue, discontinue, or resume purchases of common stock under its share repurchase program.
• The Company may purchase, redeem, prepay, refinance, or otherwise retire any amount of outstanding indebtedness.
• Monitor developments regarding the Consumer Financial Protection Bureau's rule on credit card late fees.
• Monitor key inputs to the fair values of reporting units for goodwill impairment.
• Evaluate the impacts of adopting new accounting standards (ASU 2024-03, ASU 2025-05, ASU 2025-06) in future fiscal years.

Key Dates

Recommendation

Macy's is executing a critical multi-year transformation ("Bold New Chapter") that shows early signs of success in key areas like luxury brands (Bloomingdale's, Bluemercury) and enhanced customer experience, reflected in positive comparable sales growth for these segments and an improved Net Promoter Score. The significant debt reduction and ongoing share repurchase program demonstrate a commitment to shareholder returns and balance sheet health. However, the overall net sales decline, even if partly due to planned store closures, and the decrease in adjusted diluted EPS, along with gross margin pressure from tariffs, indicate that the core Macy's brand still faces substantial headwinds. The one-time litigation settlement also boosted net income, making underlying operational improvements less clear. Given the mixed signals and the ongoing nature of the strategic transformation, a "hold" recommendation is appropriate as the company navigates its turnaround, with investors awaiting more consistent and broad-based improvements across the entire portfolio.

Keywords

Macy's, Retail, Department Store, Omnichannel, Bloomingdale's, Bluemercury, 10-K, Financial Report, Strategy, Comparable Sales, Net Sales, Profitability, Share Repurchase, Debt Reduction, Supply Chain, Digital Sales, Credit Card Revenue, Tariffs, Risk Factors, Corporate Governance, ESG, AI, Real Estate, Consumer Spending, SEC Filing