M — Macy's, Inc.

Summary of Macy's, Inc. Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Net Sales: $7.6 billion, exceeding guidance of $7.35 billion to $7.5 billion, but down from $7.8 billion in Q4 2024.
• Comparable Sales: Increased by 1.8%, significantly above the guidance of a decline of 2.5% to flat.
• Adjusted EBITDA: $840 million (10.6% of total revenue), down from $903 million (11.3% last year).
• Adjusted Diluted EPS: $1.67, surpassing guidance of $1.35 to $1.55 and up from $2.15 in the year-ago period.
• Operating Cash Flow: $1.4 billion, up from $1.3 billion last year; Free Cash Flow: $797 million, up from $679 million.
• Gross Margin: 35.2%, slightly down from 35.7% last year, impacted by tariffs.

2. Strategic Updates and Business Highlights

• Bold New Chapter Strategy: Continued execution led to positive comparable sales for Macy's and Bloomingdale's, with Bloomingdale's achieving a notable 9.9% growth.
• Reimagine Program: Expanded to 200 locations, with a focus on enhancing customer experience through localized events and improved assortments.
• Digital Growth: Digital sales represent about one-third of total sales, benefiting from a modernized website and improved omnichannel shopping experiences.
• Customer Engagement: Record Net Promoter Score achieved, indicating strong customer satisfaction and engagement.
• New Brand Introductions: 60 new brands launched, enhancing product assortment and relevance.

3. Forward Guidance and Outlook

• Fiscal 2026 Guidance:
  • Net sales expected between $21.4 billion and $21.65 billion.
  • Comparable sales forecasted to range from a decline of 0.5% to an increase of 0.5%.
  • Adjusted EBITDA as a percentage of total revenue expected to be 7.7% to 7.9%.
  • Adjusted diluted EPS projected at $1.90 to $2.10, reflecting a tariff impact of $0.10 to $0.20.
• Q1 2026 Guidance: Net sales expected between $4.575 billion and $4.625 billion, with comparable sales anticipated to be up 0.5% to 1.5%.

4. Bad News, Challenges, or Points of Concern

• Tariff Impact: Ongoing tariffs are expected to negatively affect gross margins, particularly in Q1 2026.
• Competitive Pressures: Competitors are increasingly focusing on value, which may impact Macy's pricing strategy and customer retention.
• Consumer Sentiment: While higher-income consumers are showing resilience, there are concerns about spending from lower-income tiers amid macroeconomic uncertainties.
• Store Closures: Approximately 65 additional store closures planned through 2028, which may impact local market presence and sales.

5. Notable Q&A Insights

• Resilience Amid Macroeconomic Uncertainty: Executives expressed confidence in their strategy and ability to navigate challenges, citing strong performance across all nameplates.
• Traffic and AUR Trends: Despite some weather-related traffic softness, AUR continues to rise, indicating strong consumer response to improved assortments.
• Focus on Younger Consumers: Initiatives like prom events are aimed at engaging younger demographics, with positive turnout and interest noted.
• AI and Operational Efficiency: The company is leveraging AI to enhance customer experience and operational efficiency, with multiple use cases identified.
• Credit Card and Media Network Growth: Both segments are performing well, with credit card revenue up 24% year-over-year, reflecting improved credit quality.

Overall, Macy's, Inc. reported a strong Q4 2025 performance, driven by strategic initiatives and a focus on customer engagement, while also navigating challenges related to tariffs and competitive pressures. The outlook for 2026 remains cautiously optimistic, with plans for continued growth and investment in key areas.