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 guidance of a decline between 2.5% to flat.
• Adjusted EBITDA: $840 million (10.6% of total revenue), down from $903 million (11.3%).
• Adjusted Diluted EPS: $1.67, well above guidance of $1.35 to $1.55.
• Full Year Adjusted EPS: $2.32, exceeding guidance of $2.00 to $2.20.
• Operating Cash Flow: $1.4 billion, up from $1.3 billion in 2024; Free Cash Flow: $797 million, up from $679 million.
• Inventory: $4.4 billion, down 1.3% from last year.

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 9.9% growth in Q4.
• Reimagine Initiative: Expanded to 200 stores, with 60% of the go-forward Macy's fleet now included. Positive performance noted in these locations.
• Digital Channel: Represents approximately one-third of annual sales, benefiting from improved website experience and brand assortment.
• New Brand Introductions: 60 new brands launched, including Abercrombie Kids and Good American, enhancing product offerings.
• Customer Engagement: Record Net Promoter Score achieved, reflecting improved customer satisfaction.

3. Forward Guidance and Outlook

• Fiscal 2026 Guidance:
  • Net sales expected between $21.4 billion and $21.65 billion.
  • Comparable sales projected to be flat (down 0.5% to up 0.5%).
  • Adjusted EBITDA margin expected between 7.7% and 7.9%.
  • Adjusted diluted EPS forecasted at $1.90 to $2.10.
• Q1 2026 Guidance: Net sales of approximately $4.575 billion to $4.625 billion, with comparable sales expected to be up 0.5% to 1.5%.

4. Bad News, Challenges, or Points of Concern

• Tariff Impact: Expected to negatively affect gross margin by 20 to 30 basis points for the full year and 40 to 60 basis points in Q1.
• Competitive Pressures: Increased competition in the value segment may challenge Macy's ability to attract price-sensitive consumers.
• Store Closures: Approximately 65 additional store closures planned through 2028, which may impact overall sales and market presence.
• Economic Uncertainty: Macroeconomic and geopolitical factors could influence discretionary spending, leading to a cautious approach in guidance.

5. Notable Q&A Insights

• Consumer Resilience: Management expressed confidence in the resilience of their customer base, particularly among middle and upper-income tiers.
• Traffic and AUR: Traffic was flat due to weather impacts, but AUR continued 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 feedback noted.
• AI Utilization: Ongoing investments in AI across various operational areas to enhance customer experience and drive efficiencies.
• Credit Card and Media Network Growth: Both segments are performing well, with credit card revenue up 24% year-over-year, reflecting improved customer credit quality.

In conclusion, Macy's, Inc. demonstrated strong performance in Q4 2025, driven by strategic initiatives and a focus on customer engagement, despite facing challenges from tariffs and competitive pressures. The company maintains a cautious yet optimistic outlook for 2026, emphasizing the importance of adaptability in a changing retail landscape.