10-Q: Macy's Q3 Earnings Dip Amid Strategic Revamp

Macy's, Inc. reported a significant decline in net income and diluted EPS for Q3 and the first 39 weeks of 2025, despite positive comparable sales growth driven by its 'Bold New Chapter' strategy.

Summary

• Net income for the 13 weeks ended November 1, 2025, decreased to $11 million ($0.04 diluted EPS) from $28 million ($0.10 diluted EPS) in the prior year.
• For the 39 weeks ended November 1, 2025, net income fell to $135 million ($0.48 diluted EPS) from $240 million ($0.85 diluted EPS) in the previous year.
• Total revenue for the third quarter slightly increased by $10 million to $4,913 million, while for the 39 weeks, it decreased by $294 million to $14,705 million.
• Comparable sales on an owned-plus-licensed-plus-marketplace (O+L+M) basis increased by 3.2% for the third quarter and 1.3% for the 39 weeks.
• The company's 'Bold New Chapter' strategy, focusing on reimagining 125 Macy's locations, accelerating luxury growth (Bloomingdale's, Bluemercury), and modernizing operations, showed progress.
• Macy's Reimagine 125 locations outperformed the rest of the fleet, with comparable sales up 2.7% on an owned-plus-licensed basis.
• Bloomingdale's achieved its highest O+L+M comparable sales growth in 13 quarters, increasing by 9.0%.
• Bluemercury comparable sales increased by 1.1%.
• Gross margin rate declined by 20 basis points in Q3 and 30 basis points for the 39 weeks, primarily due to tariff impacts and proactive markdowns.
• Selling, general and administrative (SG&A) expenses decreased by $40 million in Q3 and $67 million for the 39 weeks, reflecting cost containment efforts and benefits from store closures.
• The company completed significant debt financing activities, including issuing $500 million in new senior notes and redeeming $587 million of existing debt, resulting in a $33 million loss on extinguishment of debt.
• The ABL Credit Facility was amended, reducing it to $2,100 million and extending its maturity to April 2030, with no outstanding borrowings as of November 1, 2025.
• Macy's repurchased 15.4 million shares of common stock for approximately $201 million during the 39 weeks, with $1.174 billion remaining under its authorization.

Sentiment

Score: 4

Explanation: While comparable sales growth and strategic initiatives show positive momentum, the significant decline in GAAP net income and diluted EPS, coupled with gross margin pressure and a loss on debt extinguishment, indicates underlying financial challenges. The strategic progress is encouraging, but it has not yet translated into improved bottom-line GAAP profitability.

Positives

• Comparable sales on an owned-plus-licensed-plus-marketplace (O+L+M) basis increased by 3.2% for the third quarter, a significant improvement from a 1.3% decrease in the prior year.
• Macy's 'Reimagine 125' locations continued to outperform the rest of the Macy's fleet, with comparable sales up 2.7% on an owned-plus-licensed basis.
• Bloomingdale's achieved its highest O+L+M comparable sales growth in 13 quarters, increasing by 9.0%, driven by strong performance in ready-to-wear, men's apparel, fine jewelry, shoes, and tabletop.
• Bluemercury achieved another quarter of comparable sales growth, increasing by 1.1%, fueled by dermatological skincare and expanded brand partnerships.
• Macy's delivered its highest third quarter Net Promoter Score on record, indicating improved customer experience.
• Other revenue increased by $38 million in Q3 and $102 million for the 39 weeks, primarily due to a strong credit portfolio and active management of net credit loss.
• Selling, general and administrative (SG&A) expenses decreased by $40 million in Q3 and $67 million for the 39 weeks, reflecting ongoing cost containment efforts and benefits from closed locations.
• Net cash provided by operating activities significantly improved to $247 million for the 39 weeks ended November 1, 2025, compared to cash used of $30 million in the prior year.
• The company successfully refinanced debt, issuing $500 million in new senior notes and redeeming $587 million of existing debt, and extended its ABL Credit Facility to April 2030, providing $2,100 million in committed liquidity.
• Repurchased 15.4 million shares of common stock for approximately $201 million during the 39 weeks, demonstrating a commitment to returning capital to shareholders.

Negatives

• Net income for the 13 weeks ended November 1, 2025, decreased by 60.7% to $11 million from $28 million in the prior year.
• Diluted earnings per share for the 13 weeks decreased by 60% to $0.04 from $0.10 in the prior year.
• Net income for the 39 weeks ended November 1, 2025, decreased by 43.8% to $135 million from $240 million in the prior year.
• Diluted earnings per share for the 39 weeks decreased by 43.5% to $0.48 from $0.85 in the prior year.
• Operating income decreased by 34.4% to $42 million in Q3 and by 30.5% to $285 million for the 39 weeks.
• Net sales for the third quarter decreased by 0.6% to $4,713 million, primarily due to the closing of 64 non-go-forward locations, which contributed approximately $160 million to the decline.
• Net sales for the 39 weeks decreased by 2.8% to $14,125 million, with store closures contributing approximately $490 million to the decline.
• Gross margin rate declined by 20 basis points in Q3 (to 39.4%) and 30 basis points for the 39 weeks (to 39.5%), driven by an approximate 50 basis point tariff impact and proactive markdowns.
• A $33 million loss on extinguishment of debt was recognized in 2025 due to debt financing transactions.
• Merchandise inventories increased significantly to $6,298 million as of November 1, 2025, from $4,468 million at February 1, 2025.

Risks

• The possible invalidity of the underlying beliefs and assumptions related to forward-looking statements.
• The company's ability to successfully implement its 'A Bold New Chapter' strategy, including realizing anticipated benefits within the expected timeframe or at all.
• The success of operational decisions, including product sourcing, merchandise mix and pricing, and marketing and strategic initiatives.
• Competitive pressures from various retail channels, including department stores, specialty stores, general merchandise stores, manufacturers' outlets, websites, off-price and discount stores, and digitally-native retailers.
• The company's ability to remain competitive and relevant as consumer shopping behaviors migrate to other channels.
• Risks related to transactions and strategy involving the company's real estate portfolio.
• The seasonal nature of the company's business.
• Colleague costs, including wage inflation, cost of benefits, and attracting/retaining quality colleagues.
• Declines in the company's credit card revenues.
• The company's ability to maintain its brand image and reputation.
• Possible systems failures and/or security breaches or other types of cybercrimes or cybersecurity attacks, including theft or unauthorized disclosure of information.
• Business, legal, and ethical challenges related to the use of artificial intelligence in business operations.
• Possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions, including supply chain disruptions, inventory shortage, labor shortages, wage pressures, and rising inflation.
• Possible actions taken or omitted by third parties, including customers, suppliers, business partners, competitors, banks, and governmental authorities.
• Changes in relationships with vendors and other product and service providers.
• Reliance on foreign sources of production, including risks from labor disputes, health pandemics, and political/economic conditions.
• Duties, taxes, tariffs, other charges, and quotas on imports.
• Possible inability of manufacturers or transporters to deliver products timely or meet quality standards.
• General consumer shopping behaviors and spending levels, impact of economic conditions, disposable income, consumer confidence, debt availability/cost, and costs of basic necessities.
• The effects of weather and natural disasters, including climate change and health pandemics, on business, store operations, customer demand, and supply chain.
• Unstable political conditions, civil unrest, terrorist activities, and armed conflicts, including the ongoing conflict between Russia and Ukraine and the Israel-Hamas war.
• Currency, interest, and exchange rates and other capital market, economic, and geo-political conditions.
• The potential for the incurrence of charges in connection with the impairment of tangible and intangible assets, including goodwill.
• The company's level of indebtedness.
• The company's ability to declare and pay future dividends and continue its share repurchases.
• The company's ability to execute on its strategies or achieve expectations related to environmental, social, and governance matters.

Future Outlook

The company believes its available cash, expected future cash from operations, and the Amended & Extended ABL Credit Facility will be sufficient to satisfy anticipated needs for working capital, capital expenditures, and cash dividends for at least the next twelve months and the foreseeable future thereafter. Subsequent dividends will be subject to Board approval. The company may continue or suspend share repurchases based on market conditions and capital uses. The One Big Beautiful Bill Act (OBBBA) is not expected to materially impact the estimated fiscal 2025 effective tax rate but is expected to decrease fiscal 2025 cash tax payments.

Management Comments

• The 'Bold New Chapter' strategy firmly places energy and focus on the needs of our customer and is centered on an enhanced omni-channel shopping experience across all three of our nameplates.
• The Reimagine 125 locations continued to outperform the rest of the Macy's fleet in the third quarter of 2025, being better organized, easier to shop, and having a more compelling visual presentation.
• Our assortment matrix evolution continues to gain traction as we elevate our product curation to deliver a more compelling mix of newness and fashion.
• Our strong balance sheet, large addressable market, and loyal customer base are attractive differentiators to brands and partners.
• Macy's delivered its highest third quarter net promoter score on record.
• Bloomingdale's is known for its special capsules and exclusive partnerships, which build brand excitement and support increased visits to our stores and online, and serves as a house of discovery, providing an experience that is vibrant, inviting, original and anchored on exceptional customer service.
• Our new state-of-the-art fulfillment and store replenishment center, China Grove, incorporates automation, robotics and artificial intelligence into our delivery ecosystem, helping modernize and strengthen our supply chain and providing opportunities to increase accuracy, timeliness, and reduce delivery costs.
• Our end-to-end work gives us the ability to invest in our growth ambitions, while simplifying our business model.

Industry Context

Macy's results reflect the ongoing transformation within the retail industry, characterized by a shift towards omni-channel experiences and increased competition from digital-native brands. While overall net sales declined due to strategic store closures, the positive comparable sales growth across its core brands (Macy's go-forward, Bloomingdale's, Bluemercury) indicates successful adaptation to evolving consumer preferences. The investment in a new automated fulfillment center aligns with broader industry trends of leveraging technology to enhance supply chain efficiency and customer delivery, crucial for competing with e-commerce giants. The decline in gross margin due to tariffs and markdowns highlights persistent pressures on profitability in a competitive and cost-sensitive market.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results for direct industry benchmarking. However, the company notes that its change to the LIFO cost method for inventory valuation is 'consistent with the practices of many other retailers, improving comparability'.

Legal Proceedings

• The company and its subsidiaries are involved in various proceedings incidental to the normal course of their businesses, but none are expected to have a material adverse effect on financial position or results of operations.

Stakeholder Impact

• **Shareholders**: Impacted by decreased diluted EPS and net income, but also by share repurchases and consistent dividend payments. The strategic initiatives aim for long-term profitable growth, which could benefit shareholders.
• **Employees**: The 'Bold New Chapter' strategy involves closing underproductive Macy's stores, which may lead to job impacts, but also investments in go-forward businesses and a new fulfillment center, potentially creating new roles or requiring reskilling.
• **Customers**: Expected to benefit from an enhanced omni-channel shopping experience, revitalized assortments, new designer brands, and improved delivery accuracy and timeliness through supply chain modernization.
• **Suppliers**: The company's supplier finance programs allow qualifying suppliers to sell receivables to third-party financial institutions, potentially offering them earlier payment options, though Macy's obligations remain unchanged.
• **Creditors**: Debt financing activities, including the issuance of new notes and redemption of existing debt, along with the extension of the ABL Credit Facility, impact the company's debt structure and liquidity profile. The company aims to maintain investment-grade credit metrics.

Next Steps

• Continue execution of the 'A Bold New Chapter' strategy, focusing on enhancing the omni-channel shopping experience.
• Further invest in the go-forward business, including 'Reimagine 125' locations and luxury brands like Bloomingdale's and Bluemercury.
• Leverage the new China Grove fulfillment and store replenishment center to modernize and strengthen the supply chain, aiming for increased accuracy, timeliness, and reduced delivery costs.
• Monitor and evaluate the impacts of new accounting pronouncements (ASU 2023-09, ASU 2024-03, ASU 2025-05, ASU 2025-06) on financial statements.
• Potentially continue share repurchases under the existing $1.174 billion authorization, depending on market conditions and capital allocation priorities.
• Pay the declared quarterly dividend of 18.24 cents per share on January 2, 2026.

Key Dates

Recommendation

Macy's reported a significant decline in GAAP net income and diluted EPS for both the quarter and the year-to-date, which is a clear negative. However, the underlying comparable sales growth across its key brands, particularly Bloomingdale's and the 'Reimagine 125' Macy's locations, indicates that the 'Bold New Chapter' strategy is gaining traction and resonating with customers. The improved cash from operations and proactive debt management are also positive signs of financial discipline. The gross margin pressure from tariffs and markdowns, along with the loss on debt extinguishment, are headwinds. Given the mixed results – strong strategic execution and sales momentum in key areas offset by a weaker bottom line and ongoing retail challenges – a 'hold' recommendation is appropriate. Investors should monitor the continued execution of the strategy and its ability to translate into sustainable GAAP profitability.

Keywords

Macy's, Retail, Department Store, Omni-channel, Bloomingdale's, Bluemercury, SEC Filing, 10-Q, Earnings, Comparable Sales, Net Income, EPS, Debt Refinancing, Share Repurchase, Retail Strategy, Supply Chain, Tariffs, Credit Card Revenue, Inventory Management