Macy's Q2 Sales Beat Guidance

Macy's(NYSE:M) reported second quarter 2025 results on July 29, 2025, delivering 1.9% comparable sales growth and adjusted earnings per share (EPS) of $0.41, both above guidance. The quarter featured continued execution of the Bold New Chapter strategy, luxury segment outperformance, and disciplined expense and inventory management amid rising tariffs. The following highlights examine key drivers, risk mitigation, and operational execution shaping the long-term outlook.

Comparable sales growth returns at Macy's

Net sales reached $4.8 billion, down 2.5% year-over-year due to the closure of 64 stores, while GoForward businesses posted 2.2% comparable sales growth. The Reimagined 125 store cohort delivered a 1.4% comparable sales increase, and Bloomingdale's and Bluemercury continued their multi-quarter streaks of positive comparable sales.

"Macy's Inc. and Macy's nameplate both had their strongest comparable sales in 12 quarters. Macy's GoForward comparable sales were positive, inclusive of growth in our Reimagined 125 locations and digital. Bloomingdale's achieved its fourth consecutive quarter of comparable sales growth and continued to gain market share, and Bluemercury achieved its 18th consecutive quarter of comparable sales gains."
-- Tony Spring, Chairman and CEO

The sustained positive momentum across both core and luxury banners demonstrates the effectiveness of the multi-nameplate portfolio model in capturing market share despite industry headwinds.

Tariff impact prompts Macy's to act

Management doubled its full-year gross margin impact estimate from tariffs to 40%-60% basis points, equating to a $0.25 to $0.40 EPS hit, compared to the prior $0.10 to $0.25 range. Gross margin for the quarter was 39.7% of net sales, down 80 basis points year-over-year, but still ahead of internal expectations due to proactive markdowns and vendor negotiations.

"In addition, reflecting the incremental tariffs that have been announced since our last earnings call, full-year guidance now incorporates a 40 to 60 basis point tariff impact to gross margin. This compares to our prior expectation of 20 to 40 basis points and equates to roughly $0.25 to $0.40 of EPS versus our prior expectation of $0.10 to $0.25."
-- Tony Spring, Chairman and CEO

Macy's is offsetting tariff headwinds through targeted price increases, cost-sharing with vendors, and country-of-origin diversification, highlighting management's ability to adapt and preserve margin resilience.

Macy's strengthens balance sheet and returns capital

Year-to-date operating cash flow rose to $255 million from $137 million in the prior year, aided by a $29 million reduction in selling, general, and administrative (SG&A) expense. Macy's ended the quarter with $829 million in cash, reduced long-term debt by $340 million, and has $1.2 billion remaining on its share repurchase authorization after $151 million in buybacks year-to-date.

"To further fortify our already strong balance sheet and provide additional flexibility, we recently completed a series of financing transactions to extend our debt maturities and modestly reduce leverage. This resulted in a net long-term debt reduction of approximately $340 million. With these transactions, we extended our material long-term debt maturities by three years and do not have any meaningful maturities due until 2030."
-- Tom Edwards, COO and CFO

Strong liquidity, active capital returns, and no significant debt maturities until 2030 provide Macy's with strategic flexibility and reduced financial risk during a period of industry disruption and macroeconomic uncertainty.

Looking Ahead

Management raised and narrowed full-year net sales guidance to $21.15 billion to $21.45 billion, with adjusted EPS now forecast at $1.70 to $2.05. Third quarter guidance assumes net sales of $4.5 billion to $4.6 billion. Gross margin is projected to decline 60% to 100% basis points year-over-year, with tariffs expected to account for 40% to 60% basis points of the decline, while SG&A is expected to decline in the low single digits in absolute dollars for Q3 and in the low to mid-single digits for Q4.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.