Macy’s Earnings: Solid Start to Year Provides More Confidence in Plan

Key Morningstar Metrics for Macy’s

• Fair Value Estimate
  : $25.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : High

What We Thought of Macy’s Earnings

Macy’s M had 3% overall comparable sales growth in 2026’s first quarter. Comparable sales rose 1.6%, 10.2%, and 6.4% at Macy’s, Bloomingdale’s, and Bluemercury, respectively. Gross margin on net sales slipped 30 basis points to 38.9% on higher tariffs, while adjusted EBIT margin fell to 1.6% from 1.8%.

Why it matters: After three years of negative results, Macy’s has achieved four consecutive quarters of positive same-store sales. These results provide confidence in CEO Tony Spring’s strategy to operate more efficiently, invest in Macy’s stores, and grow luxury.

• Macy’s beat our forecast for 1.5% same-store sales growth and a 0.8% operating margin. As shown by strong results at Bloomingdale’s and Bluemercury, Macy’s is separating itself from its many discount rivals by offering higher-end merchandise and attracting more affluent shoppers.
• Moreover, the 200 Macy’s stores that have undergone remodeling and changes in merchandising and service levels had 2.4% same-store sales growth. Consistent performance of the upgraded locations suggests greater stability for the nameplate after more of the weaker stores are closed.

The bottom line: Macy’s shares are slightly undervalued relative to our $25 fair value estimate, which we may raise by a low-single-digit rate. Although we rate the firm as no-moat due to department stores’ challenges, we think its efforts have brought better results and less risk.

• Macy’s guidance for 2026 same-store sales growth of 0.5%-1.2% suggests a slowdown as the year progresses. Although it is prudent to be cautious given uncertainty regarding oil prices and tariffs, consumer spending trends are positive, so there could be upside to Macy’s outlook.

Key stats: Most of Macy’s debt matures in 2032 or later, and its net debt fell to $1.1 billion from $1.8 billion over the past year. With its improving liquidity, we anticipate annual dividend increases (3.5% current yield) and consistent share buybacks (forecast $200 million this year).