Macy’s Earnings: Continuing Improvement Despite Some Near-Term Uncertainty

Key Morningstar Metrics for Macy’s

• Fair Value Estimate
  : $25.50
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : High

What We Thought of Macy’s Earnings

In the second quarter, Macy’s M posted 2.7% comparable sales growth on increases of 1.1% at its eponymous concept, 11.3% at Bloomingdale’s, and 6.2% at Bluemercury. Excluding a tariff refund, adjusted earnings per share rose to $0.40 from $0.35 on sales growth and operating cost leverage.

Why it matters: Macy’s plan to increase luxury sales, operate more efficiently, and upgrade its namesake stores continues to improve results at Bloomingdale’s, Bluemercury, and remodeled Macy’s locations. After two years of declines, the company has had five consecutive quarters of comparable sales gains.

• Macy’s comparable sales were 2 percentage points better than our 0.7% estimate, and adjusted EPS beat our $0.35 forecast by $0.05 (excluding a tariff refund). One encouraging sign of progress on its premiumization plan is that average unit retail prices rose 9%.
• In the long run, we project Macy’s yearly same-store sales growth at 0.5% and operating margin at 4.5% (about 4.0% recently). We believe the company can improve margins through its strategic plan and store closures, but gains are likely to be limited without stronger sales growth.

The bottom line: No-moat Macy’s shares are undervalued relative to our $25.50 fair value estimate, which we do not expect to change materially. We think investors are discounting the gains that Macy’s has achieved in its operating results and balance-sheet health.

• Shares fell about 3% early on Sept. 10 as third-quarter guidance for adjusted EBITDA margin of 3.5%-4% and an adjusted loss per share of $0.19-$0.23 was below our forecast. However, 2026 guidance for comparable sales growth (1%-1.5%) and adjusted EPS ($2.15-$2.35) aligns with our expectations.
• Given higher gas and transportation prices and economic conditions, Macy’s may be ramping up spending to support sales. We think this is a reasonable strategy to defend share, but it also indicates how Macy’s weak competitive position limits its ability to drive margin gains.