Macy's 2026 Q3: Contradictions Emerge on Tariff Pricing Strategies, Sales Growth, Consumer Behavior, and Promotional Tactics

Date of Call: December 3, 2025

Financials Results

• Revenue: Total revenue $4.9B; net sales $4.7B, down 0.6% YOY (~$29M); excluding 64 closed stores, sales grew 2.9%
• EPS: Adjusted EPS $0.09, up from $0.04 prior-year; well above guidance (loss of $0.15 to $0.20)
• Gross Margin: Gross margin $1.9B (39.4% of net sales) vs 39.6% prior year; excluding ~50 bps tariff impact, rate would have expanded ~30 bps

Guidance:

• Q4 net sales $7.35B–$7.50B; comparable sales down ~2.5% to flat; Go‑Forward comps down ~2% to flat
• Q4 core adjusted EBITDA 9.4%–10.1% of revenue; Q4 adjusted EPS $1.35–$1.55; Q4 asset-sale gains ~$15M–$20M (reduces EPS ~$0.05–$0.06 vs prior expectation)
• FY net sales $21.475B–$21.625B; comparable sales flat to +0.5%; Go‑Forward comps flat to ~+1%
• FY other revenue ~$830M–$840M (credit card $635M–$645M; Media Network ~$195M); FY gross margin 37.7%–37.9% (tariff impact ~40–50 bps, ~$0.25–$0.35 EPS)
• FY core adjusted EBITDA 7.5%–7.7%; FY adjusted EPS $2.00–$2.20; SG&A expected down low-single-digits on a dollar basis

Business Commentary:

• Revenue and Comp Sales Growth:
• Macy's, Inc. reported net sales of $4.7 billion for Q3, down 0.6% year-over-year, while comparable sales were up 3.2%.

• The growth in comparable sales was driven by the company's Go-Forward Macy's business, which achieved a 3.4% increase, and improvements in areas like digital and the Backstage off-price concept.

  

• Gross Margin Improvement:

• Gross margin was 39.4% of net sales, slightly below the 39.6% of the previous year, but excluding a 50 basis point tariff impact, the gross margin rate would have expanded by approximately 30 basis points.

• Effective mitigation actions against tariff impacts led to a better-than-expected gross margin rate.

• Strong Digital and Omnichannel Performance:

• Macy's Digital and the Macy's marketplace contributed to digital growth, and the company's omnichannel strategy saw improved traffic and an increased average order value (AUR).

• The shift in customer behavior toward a more seamless omnichannel shopping experience contributed to this growth.

• Strategic Store Optimization:

• The company's store optimization program resulted in a decline of Macy's sales by 2.3%, but the go-forward comparable sales rose 2.3%.
• The decline in sales from closed stores was offset by improved performance and newness in the Go-Forward Macy's locations.
  

Sentiment Analysis:

Overall Tone: Positive

• Management: "We're encouraged by recent results... delivered growth... results were meaningfully better than expected." Tom: "Adjusted EPS of $0.09 was well above our guidance..." Management raised full‑year adjusted EPS to $2.00–$2.20 and highlighted improving comps, NPS records and successful tariff mitigation, signaling constructive confidence.

Q&A:

• Question from Matthew Boss (JPMorgan): So Tony, with two straight quarters of positive comps, could you speak to traction that you're seeing with your reimagined store initiatives as it relates to traffic versus basket? And could you elaborate on November comp trends and customer behaviors that you're seeing maybe relative to the third quarter?
  Response: Reimagine 125 stores are showing clear traction (2.7% comp) driving traffic and higher AUR; digital and store traffic are consistent and management is confident though Q4 guidance is prudently framed.

• Question from Brooke Roach (Goldman Sachs): What are the most important drivers in the business that you think can sustain the momentum into 2026? As you continue to execute the Bold New Chapter strategy, how are you thinking about the opportunity for core adjusted EBITDA margin delivery? Do you see the recent tariff margin pressure as recapturable into 2026?
  Response: Sustained momentum comes from curated assortment, omnichannel execution and shedding underproductive stores; tariffs remain a persistent headwind but mitigation (vendor negotiations, pricing, discounts) should limit impact and support continued core EBITDA improvement.

• Question from Blake Anderson (Jefferies): Can you talk about aspirational customer behavior in Q3 and expectations for Q4 across Macy's vs Bloomingdale's? Also, how should we think about SG&A savings from store closures versus reinvestment needs next year?
  Response: Aspirational customers increase in Q4 requiring broader assortments and promotions; SG&A savings from closures largely flow through but will be balanced with reinvestments to drive top‑line growth.

• Question from Charles Grom (Gordon Haskett): Are you more or less confident today than 90 days ago? How do you reconcile a conservative Q4 guide with positive Q3 comps? Can you double-click on traffic vs ticket and AUR vs UBT and category color (apparel, home, footwear)?
  Response: Management is more confident in the strategy than 90 days ago; Q4 guide is intentionally prudent given a more choiceful Q4 consumer—Q3 acceleration was driven by positive traffic and higher AUR/ticket.

• Question from Alexandra Straton (Morgan Stanley): How has the department store competitive landscape evolved and where do you see it heading? On guidance, Q4 gross margin embeds the worst compression—what changes from Q3 to Q4 to make that pressure larger?
  Response: Macy's believes it's better positioned versus prior year with sharper pricing, presentation and newness; Q4 gross‑margin pressure reflects ~70–100 bps of tariff headwind at midpoint with the remainder for competitive flexibility.

• Question from Robert Drbul (BTIG): Can you expand on pricing/ticket increases and consumer response plus vendor support? And update on the credit business—applications, spend and expectations into Q4/’26?
  Response: Pricing on newness has had little adverse effect on demand; promotions remain planned; credit revenue is strengthening (Q3 +~30%, FY guide ~+20%) with higher applications and improved net credit losses.

• Question from Tracy Kogan (Citigroup): On the store‑closure program (150 over 3 years) where do you expect to be at year‑end and will you close fewer/more than 150? Also, details on Macy's Media Network reduction?
  Response: 64 stores closed last year; further closure details will be provided on the Q4 call (no immediate announcements); Media Network guidance was slightly trimmed due to ad‑spend recalibration but still expected to grow strong double digits in Q4 and low double digits for the full year.

• Question from Michael Binetti (Evercore ISI): Active was weaker—can you explain? And the Reimagine 125 has out‑comped go‑forward—how does that performance fit your payback/hurdle expectations and portability to the rest of the fleet?
  Response: Active softened amid a dress‑up cycle but remains strategic; Reimagine 125 is delivering the expected payback trajectory and outperformance validates expanding the program into more stores next year.

• Question from Nicholas Sylvia (TD Cowen): Please elaborate on planned SG&A increases and allocation (digital, store formats, other). How do you see digital vs in‑store mix evolving into 2026?
  Response: Full‑year SG&A percent narrowed (now +40–50 bps) and Q3/Q4 dollars are down low single digits—incremental selling costs are variable tied to higher revenue; digital replatforming and China Grove fulfillment investments support omnichannel growth with focus on growing the overall business rather than optimizing penetration alone.

• Question from Dana Telsey (Telsey Advisory Group): How will the path of newness continue across categories and price points to capture new and existing customers? And where are the puts and takes for gross margin going forward given easing tariff pressure?
  Response: Company will continue adding curated newness across good/better/best (notably women's RTW, contemporary and designer at Bloomingdale's); margin upside expected from better regular‑price sell‑throughs, assortment optimization and end‑to‑end efficiencies.

• Question from Jay Sole (UBS): Regarding customers who shopped at closed stores, how many are you recapturing online or in other stores?
  Response: Recapture programs are in place and retention is on or slightly above expectations; proximity determines whether customers shift to other stores or online, and loyalty/credit customers are more likely to be retained.

• Question from Janet Kloppenburg (JJK Research): Given category shifts and active softness, what is driving the uptrend in handbags and appetite for fashion—better product presentation or social media influence?
  Response: All of the above—stronger assortments, improved visual merchandising and social media trends are increasing fashion appetite and helping Macy's/Bloomingdale's capture trend‑driven demand.

Contradiction Point 1

Tariff Impact and Pricing Strategy

It involves the company's strategy and expectations regarding the impact of tariffs on pricing, which directly affects customer behavior and financial performance.

How has the department store competitive landscape evolved, and what’s your outlook for next year? What caused the change in gross margin compression between Q3 and Q4? - Alex Straton (Morgan Stanley)

2026Q3: While we expect to take some price increases, we also expect to mitigate tariffs through channels, marketplace negotiation, sourcing, marketplace optimization, and other mechanisms. - Antony Spring(CEO)

What learnings have you gained from the Reimagine stores and their impact on the store portfolio? Are plans to expand to 200-250 stores under consideration? How are incremental tariffs influencing your pricing strategies across product categories and brands (private label and branded) regarding gross margin? - Dana Telsey (Telsey Advisory Group)

2025Q2: Tariffs are definitely a headwind for us. We are aggressive about taking price increases where we can and making sure it's surgical so that we're not impacting our comp. - Thomas Edwards(CFO)

Contradiction Point 2

Sales and Revenue Growth Strategy

It reflects differing perspectives on the company's approach to leveraging sales growth and bottom-line impact, which are critical for strategic decision-making and investor expectations.

Could you clarify the aspirational customer's behavior in Q3 and Q4 expectations across different banners? How will store closures impact SG&A savings versus reinvestment? - Blake Anderson (Jefferies LLC)

2026Q3: Our strategy is not a ceiling but a guardrail, allowing for a more choiceful consumer in Q4. - Antony Spring(CEO)

How do you balance leveraging growth with maintaining profitability? - Jay Sole (UBS Investment Bank)

2025Q2: We have a very solid trajectory with our strategy, which we've talked about. We're leveraging that, and the trajectory is very good. - Thomas Edwards(CFO)

Contradiction Point 3

Consumer Behavior and Aspirational Customer

It involves the company's assessment of consumer behavior and the aspirational customer segment, which is crucial for strategic planning and product offerings.

How did Q3 aspirational customer behavior and Q4 expectations manifest across different banners, and how will store closures impact SG&A savings versus reinvestment? - Blake Anderson(Jefferies LLC)

2026Q3: The aspirational customer is broader in Q4, and our strategy caters to that. We expect more of these customers, with guidance not a ceiling but a guardrail. - Antony Spring(CEO)

How would you assess consumer health and category performance across income groups in Q1? - Chuck Grom(Gordon Haskett)

2025Q1: The consumer remains under pressure but is responding to newness and value. The Reimagine 125 stores are outperforming due to localization and new initiatives. - Tony Spring(CEO)

Contradiction Point 4

Tariff Management and Pricing Strategy

It involves the company's approach to managing tariff impacts and pricing strategy, which directly affects gross margins and consumer behavior.

Can you elaborate on pricing increases and customer response, and provide an update on the credit business initiative? - Robert Drbul(Canaccord Genuity)

2026Q3: We are managing tariffs in a very surgical way, so we're not broadly increasing prices. We're surgical in our approach, adjusting selectively for tariffs. - Antony Spring(CEO)

How much has pricing been affected by higher tariffs in Q2, and how are consumers responding to these higher prices? - Paul Kearney(Barclays)

2025Q1: We're actively engaging with marketplace and suppliers. It's a shared approach to sharpen value and leverage price elasticity by category and brand. - Tony Spring(CEO)

Contradiction Point 5

Consumer Health and Promotional Levels

It reflects differing views on consumer health and promotional strategies, which can impact sales and customer engagement.

How did aspirational customer behavior in Q3 and Q4 expectations manifest across different banners? How will the store closure strategy impact SG&A savings versus reinvestment? - Blake Anderson(Jefferies LLC)

2026Q3: The aspirational customer is broader in Q4, and our strategy caters to that. We expect more of these customers, with guidance not a ceiling but a guardrail. - Antony Spring(CEO)

Can you discuss the consumer health in your guidance and the assumed promotional levels? - Ashley Helgans(Jefferies)

2024Q4: Consumer under pressure due to cost of living factors. We aim to make our offerings more compelling and exciting, focusing on promotions and partnerships to enhance customer experience. - Tony Spring(CEO)