Macy's Retail Turnaround: Can Costco-Level Execution Save the Department Store Giant?

The retail landscape has long been a graveyard for once-dominant brands that failed to adapt. Yet, Macy's Inc. (M) is defying expectations in 2025, posting better-than-anticipated financial results and raising full-year guidance amid a broader industry slump. This resurgence, driven by CEO Tony Spring's "Bold New Chapter" strategy, raises a compelling question: Can Macy's operational discipline and consumer experience reengineering replicate Costco's success in creating value through simplicity and execution?

Operational Discipline: From Cost Containment to Strategic Reinvestment

Macy's Q3 2025 results underscore the effectiveness of its cost containment strategies. The company closed 64 underperforming stores, reducing SG&A expenses by $40 million year-on-year. While net sales dipped 0.6% to $4.7 billion, comparable sales grew 3.2% on an O+L+M basis-the strongest performance in over 13 quarters. This outperformance is not accidental but a product of disciplined reinvestment in high-impact areas.

Spring's "reimagined" stores-125 locations revamped with improved merchandising, fresh product assortments, and increased staffing in high-traffic zones like women's shoes and fitting rooms-have delivered measurable results. These stores report higher net promoter scores and sales growth compared to non-reimagined locations. By prioritizing customer-centric initiatives, Macy's is shifting from an operationally led model to one driven by consumer demand, a strategy that mirrors Costco's focus on operational efficiency.

Consumer Experience Reengineering: A Costco-Style Focus on Fundamentals

Costco's success hinges on its ability to simplify retail: low prices, limited SKUs, and a treasure-hunt merchandising approach. Macy's is adopting a similar philosophy, albeit in a luxury department store context. By accelerating its premium divisions-Bloomingdale's and Bluemercury-Macy's is targeting high-margin customer segments while maintaining the core principles of simplicity and execution.

For example, Bloomingdale's reported an 8.6% sales increase in Q3 2025, driven by curated product assortments and enhanced in-store experiences. Similarly, Bluemercury's 1.1% comp sales growth reflects its focus on beauty specialists and personalized service. These efforts align with Costco's emphasis on high-value private-label products (e.g., Kirkland Signature), which account for 33% of its sales. Macy's is not selling private-label goods but is instead leveraging its brand equity to justify premium pricing through superior service and aesthetics.

The Power of Execution: Comparing Retail Models

While Macy's and Costco operate in different segments, their strategies share a common thread: executional excellence. Costco's operational efficiency is evident in its high revenue per square foot ($260 million per warehouse) and streamlined staffing model. Macy's, meanwhile, is optimizing its store footprint, aiming to reduce locations to 350 by 2026. Both companies recognize that fewer, better-run locations outperform sprawling, underperforming ones.

Moreover, Macy's investment in digital platforms and AI-driven personalization mirrors Costco's expansion into e-commerce, which contributed 16% of its 2025 sales. By integrating omnichannel capabilities-such as buy-online-pickup-in-store and AI-powered product recommendations-Macy's is bridging the gap between traditional retail and modern consumer expectations.

A Compelling Investment Thesis

Macy's recent outperformance- adjusted earnings per share of $0.09 in Q3 2025, exceeding Wall Street's loss forecast-demonstrates the viability of Spring's strategy. The company's gross margin resilience, despite a 20-basis-point decline due to tariffs, and its raised full-year sales guidance to $21.4–21.6 billion, further validate its operational discipline.

For investors, the key takeaway is clear: Macy's is no longer a dying department store but a company reengineering itself for long-term profitability. By adopting Costco-level execution-focusing on fundamentals like staffing, merchandising, and cost control-Macy's is proving that even traditional retail models can adapt. As the retail sector continues to consolidate, shares of companies that master execution, not just innovation, are likely to outperform.