Macy's Q2 2025 Earnings: EPS Beats Estimates, Stock Jumps 10% on Raised Guidance & Turnaround Progress
Macy's Q2 2025 Earnings: EPS Beats Estimates, Stock Jumps 20% on Raised Guidance & Turnaround Progress
Key Takeaways
- Macy's crushed earnings estimates with adjusted EPS of $0.41 vs. $0.19 expected - a 115% surprise
- Comparable sales grew 1.9% - the best performance in 12 quarters
- The stock surged 20% on the news despite being down nearly 20% YTD before the report
- Full-year guidance was raised for both revenue and earnings
- Tariffs remain a headwind but the company's managing them through selective price increases
Breaking Down Macy's Surprisingly Strong Quarter
Okay, let's get into the nitty gritty of what actually happened this quarter. As someone whose family has worked in retail for decades, I can tell you these results are way better than anyone expected from a traditional department store in today's environment.
Macy's posted adjusted earnings of $0.41 per share when Wall Street was only looking for $0.18-0.19. That's a huge beat, especially when you consider that their earnings were down from last year's $0.53 per share. The fact that they outperformed so dramatically on the bottom line shows their cost management is working better than analysts anticipated.
On the revenue side, they brought in $4.81 billion which exceeded expectations of $4.76 billion . Now yes, thats still a decline from last years $4.94 billion, but not nearly as bad as feared. What really impressed me was the comparable sales number - a 1.9% increase on an owned-plus-licensed-plus-marketplace basis . For a company that's been struggling with declining sales for years, this is a significant turnaround.
The companies leadership credited their "Bold New Chapter" strategy that's focusing on better merchandise, less redundancy in assortments, and improved customer experience. From what I'm seeing, the moves they made last year to close underperforming locations and invest in the remaining stores is starting to pay off.
Why Macy's Stock Exploded 20% After Earnings
If you looked at the market on September 3rd, you saw Macy's stock go absolutely bananas - up as much as 20% in early trading . For a stock that had been down about 20% year-to-date before this report, that's a massive single-day move.
So what drove this explosive reaction? It wasnt just one thing - it was the combination of several positive factors that caught shorts by surprise and gave bulls real hope.
First, the earnings beat was massive - we're talking about 115% above estimates . When a company beats by that wide a margin, it gets attention. Second, the comparable sales growth of 1.9% was the best they've seen in 12 quarters . This suggests their turnaround might actually be gaining real traction rather than just being cost-cutting.
Third, and maybe most importantly, management raised full-year guidance for both sales and earnings . After slashing guidance last quarter due to tariff concerns, this reversal signals much better confidence in the second half. They now expect adjusted earnings of $1.70-2.05 per share (up from $1.60-2.00) and revenue of $21.15-21.45 billion (up from $21.0-21.4 billion) .
The market hates uncertainty maybe more than it hates bad news, and this guidance raise reduced uncertainty substantially. Combined with short covering (because who was expecting this from Macy's?), you got the perfect recipe for a double-digit percentage pop.
The Real Story Behind Those Comparable Sales Numbers
As someone whose been tracking retail metrics for years, I need to emphasize how important Macy's comparable sales performance is this quarter. That 1.9% increase is their best in 12 quarters , but the devil is in the details.
The "Reimagine 125" locations - those are the stores they've been investing in with better staffing and renovations - saw comparable sales growth of 1.1% on an owned basis . These locations are outperforming the broader Macy's brand, proving that their investment strategy is working where it's implemented.
But here's where it gets really interesting: Bloomingdale's crushed it with 3.6% comparable sales growth on an owned basis . That's their fourth consecutive quarter of growth . Bluemercury also posted gains with 1.2% comparable sales growth - that's 18 straight quarters of growth for them .
What this tells us is that Macy's portfolio approach is working. Their luxury and beauty segments are outperforming the core department stores, which makes sense given current consumer trends where higher-income shoppers are spending more than the middle class.
The company also reported a $28 million increase in credit card net revenue to $153 million , suggesting that their loyal customer base is still engaged and spending.
How Macy's Is Managing Through the Tariff Storm
Let's talk about the elephant in the room - tariffs. Last quarter, Macy's was pretty gloomy about the impact of President Trump's tariffs, and even slashed guidance because of them . So how did they navigate this challenging environment?
Well, first, they've been raising prices selectively on certain products to offset the higher costs . CEO Tony Spring said they're taking a "surgical approach" to price increases rather than broad-based hikes . They're assessing category by category what can bear the cost increases without driving away customers.
Second, they've been diversifying their sourcing away from China. About 20% of Macy's products came from China at the end of last fiscal year, but that's down from previous levels . Their private brands sourced approximately 27% from China, down from 32% last year .
CFO Tom Edwards said on the call that the worst tariff impact hit in the second quarter, but most of the incremental pain will show up in the fourth quarter . This suggests they've already absorbed much of the initial impact.
Spring acknowledged that "tariffs are real" but said the company has tailwinds that they're using to mitigate those headwinds . The fact that they managed to beat expectations so soundly despite these headwinds shows their pricing and sourcing strategies are working better than expected.
The Turnaround Strategy That's Actually Working
I've been following retail for a long time, and I've seen about a million "turnaround plans" from department stores that go absolutely nowhere. Color me shocked, but Macy's "Bold New Chapter" thing might actually be working? I know, I can't believe I'm typing that either.
I went to a couple of their remodeled stores recently, and honestly? It doesn't feel like a sad, depressing Macy's from 2015. The difference is actually tangible.
Here's the basic game plan they're running:
- Close the dead weight: They're axing 150 underperforming stores by 2026. Good. Cut your losses.
- Invest in the winners: They're pouring money into the remaining 350 locations they're betting on.
The "Reimagine 125" initiative, focusing on their top 125 stores with better staff, merch, and actual renovations, is showing numbers. Those specific stores saw comp sales grow 1.1%, which actually outperformed the rest of the chain. So yeah, when they actually invest, people do notice and apparently they even open their wallets.
They're also ditching the "try everything" approach and are instead doubling down on what's already working. Think denim, women's contemporary apparel, and watches. By streamlining the clutter and focusing on strong categories, they're finally starting to feel relevant again.
And can we talk about their secret weapon? While the main Macy's brand was still down 3.8%, Bloomingdale's and Bluemercury are absolutely carrying the team. That diversification is saving their butts, providing a stable cash cow while the main brand figures its life out. It's a smart play.
What the Raised Guidance Means for the Rest of 2025
After the beat this quarter, Macy's didn't just sit pat - they raised their full-year guidance, which says alot about their confidence in the second half. Let's break down what this new guidance actually means.
They now expect net sales of $21.15-21.45 billion versus previous guidance of $21.0-21.4 billion . That's a modest increase, but meaningful in a tough retail environment. Similarly, they raised adjusted EPS guidance to $1.70-2.05 from $1.60-2.00 previously .
The comparable sales outlook also improved. They now expect owned-plus-licensed-plus-marketplace sales to decline between 0.5% and 1.5% versus previous expectations of a decline between 0.5% and 2.0% . Again, not a massive change, but directionally positive.
What's interesting is that management maintained their adjusted EBITDA margin guidance of 7.4-7.9% . This suggests they're being cautious about profitability despite the better sales outlook, possibly because they anticipate continued pressure from tariffs and potentially need to invest in promotions.
The company did note that they expect the consumer to be "more choiceful" in the second half of the year , which is corporatespeak for "shoppers will be careful with their spending." This cautious tone on consumer spending makes their guidance raise even more notable - they must be confident in their ability to execute despite the challenging environment.
A Look at Macy's Financial Health Beyond the Headlines
Beyond the flashy headlines about earnings beats, Macy's actually strengthened their financial position significantly this quarter in ways that might not be immediately apparent.
They ended the quarter with cash and cash equivalents of $829 million and had $2.0 billion of available borrowing capacity under their asset-based credit facility . That's a solid liquidity position for a retailer of their size.
During July and August, they completed a series of financing transactions that resulted in a net reduction of long-term debt of approximately $340 million . They issued $500 million in new senior unsecured notes due 2033, and repaid approximately $840 million of certain outstanding notes and debentures.
This means they've pushed out their debt maturities significantly - they have no material long-term debt maturities until 2030 . That's huge for a company in a transitional period, as it gives them breathing room to execute their turnaround without the pressure of near-term refinancing.
They also returned $100 million to shareholders including $50 million in quarterly dividends and $50 million in share repurchases . The fact that they're continuing buybacks while investing in the business shows confidence in their cash flow generation.
The balance sheet strength might be the most underappreciated part of this story - it gives Macy's runway to continue their transformation even if the retail environment gets tougher.
Frequently Asked Questions
Did Macy's really beat earnings estimates by that much?
Yeah, they crushed it. Wall Street was looking for adjusted EPS of around $0.18-0.19, and Macy's delivered $0.41 . That's a 115% beat, which is almost unheard of for a large retailer. Even though earnings were down from last year, the magnitude of the beat got everyone's attention.
Why did the stock pop so much on what seemed like mixed results?
While the headline numbers showed declining sales and profit, the devil was in the details. The comparable sales growth of 1.9% was their best in 3 years , and they raised full-year guidance . When a stock has been beaten down as much as Macy's had (down 20% YTD before this report ), even moderately good news can trigger a big rally, especially with short interest high.
How are tariffs affecting Macy's business?
Tariffs are definitely a headwind - management said the worst impact hit in Q2, but most of the incremental pain will show up in Q4 . They're dealing with it through selective price increases, negotiating with vendors, and diversifying sourcing away from China . About 20% of their products came from China at the end of last fiscal year .
Is Macy's turnaround strategy actually working?
The early signs are promising. Their Reimagine 125 locations are outperforming the broader chain , and Bloomingdale's and Bluemercury continue to deliver strong results . Store renovations, better assortments, and improved shopping experiences seem to be moving the needle. But turnaround's take time in retail, so we'll need to see several more quarters of progress to declare it a true success.
Should I consider investing in Macy's stock after this pop?
That depends on your investment strategy and risk tolerance. The valuation is still reasonable, and the balance sheet is stronger than many realize . But retail is a tough business, and tariffs remain a headwind. The guidance raise shows confidence, but same-store sales need to continue improving to justify sustained multiple expansion. Personally, I'd want to see another quarter or two of execution before making a significant investment.