Macy's Q2 2025: Contradictions Emerge on Private Label Strategy, Tariff Management, and Consumer Health

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 3, 2025

Financials Results

• Revenue: $4.8B net sales, down 2.5% YOY
• EPS: $0.41 adjusted EPS, above guidance of $0.15–$0.20
• Gross Margin: 39.7%, compared to 40.5% in the prior year

Guidance:

• FY net sales expected at $21.15B–$21.45B; comps down 1.5% to down 0.5%; Go-Forward comps down 1.5% to flat.
• FY other revenue $840M–$850M (credit $635M–$645M; MMN ~ $205M).
• FY gross margin 60–100 bps below 2024; tariffs -40–60 bps to GM (-$0.25 to -$0.40 EPS), mostly in Q4.
• FY SG&A dollars down low-single digits; up 60–80 bps as % of revenue; interest ≈$100M.
• FY adjusted EBITDA margin 7.4%–7.9%; core 7.0%–7.5%; adjusted EPS $1.70–$2.05.
• Q3 net sales $4.5B–$4.6B; comps -1.5% to +0.5%.
• Q3 core adjusted EBITDA margin 3.3%–3.7%; adjusted EPS loss $0.20 to loss $0.15 (incl. ~$20M asset gains).
• Outlook assumes current tariffs; reinvestment of savings; cautious consumer.

Business Commentary:

• Strong Financial Performance and Sales Growth:
• Macy's, Inc. reported a comparable sales growth of 1.9% for the second quarter, marking the strongest performance in 12 quarters.

• Adjusted EPS of $0.41 exceeded guidance, reflecting disciplined expense controls and tariff mitigation actions.

• Improvement in Macy's and Reimagine 125 Locations:

• Macy's Go-Forward businesses achieved comparable sales growth of 2.2%, with Reimagine 125 locations contributing 1.4% growth.

• The growth was driven by enhancements in customer experience, improved staffing, and tailored events at these locations.

• Bloomingdale's and Bluemercury Success:

• Bloomingdale's achieved positive comparable sales growth of 5.7%, maintaining its fourth consecutive quarter of growth, while Bluemercury saw 1.2% growth.

• This success is attributed to strategic brand partnerships and expansions, strong digital growth, and appealing new product launches.

• Tariff Impact and Mitigation Efforts:

• The impact of tariffs on gross margin was adjusted to a 40 to 60 basis point increase, compared to a previous expectation of 20 to 40 basis points.
• Mitigation strategies include partner negotiations and shared cost strategies, with the majority of impacts expected in Q4.

Sentiment Analysis:

• “Top line, bottom line and core adjusted EBITDA exceeded our guidance.” “Strongest comparable sales in 12 quarters.” “We have raised and narrowed our net sales and adjusted EPS guidance ranges.” “Momentum has continued third quarter to date.” Management notes tariff headwinds but emphasizes clean inventory, cost control, and sustained comp strength across nameplates.

Q&A:

• Question from Matthew Boss (JPMorgan): Rank drivers of the sequential comp improvement, quarter progression, and 3Q momentum; explain forecasted moderation in comps.
  Response: Growth was broad-based; July was strongest; early 3Q trends solid on back-to-school. Guidance stays prudent due to tariff uncertainty.

• Question from Dana Telsey (Telsey Advisory Group): Learnings from Reimagine stores and potential expansion; approach to pricing with incremental tariffs.
  Response: Reimagine 125 comps positive, driven by staffing, visual storytelling, and local empowerment. Pricing is surgical; most tariff impact hits Q4 with mitigation via vendor negotiations and diversification.

• Question from Blake Anderson (Jefferies): Has your consumer outlook improved versus 3 months ago amid tariffs and price adjustments?
  Response: Consumer remains choiceful but resilient; early fall demand healthy. Maintain cautious guidance until full tariff effects are clearer; mix skews to higher-income customers.

• Question from Oliver Chen (TD Cowen): Private Brand catalysts and 3Q comp range; comp needed to leverage fixed costs long-term?
  Response: Private brands gaining traction (new launches; penetration below prior ~20% peak), offering margin upside. Guidance remains prudent; SG&A and GM leverage expected via private brands and efficiencies.

• Question from Alexandra Straton (Morgan Stanley): Sources of SG&A savings now and in 2H; details behind Bloomingdale’s comp acceleration.
  Response: SG&A down ~$30M on closures and end-to-end savings; further reductions in 2H, weighted to Q4. Bloomingdale’s momentum from new brands, digital growth, collaborations, and footprint expansion.

• Question from Ryan Bulger (Gordon Haskett): Comp composition (traffic vs ticket) and pricing environment amid tariffs; your response.
  Response: Traffic and AOV up; unit demand softer; inventory clean with OTB. Tariff impact early; pricing adjusted granularly to stay competitive.

• Question from Tracy Kogan (Citigroup): Where are price increases occurring (private vs national), and what is elasticity so far?
  Response: Early stages; applying targeted buys—fewer units where tickets higher, mix shifts across brands/categories. Consumer resiliency observed; multi-price-point model provides flexibility.

• Question from Michael Binetti (Evercore ISI): Luxury pressures vs Bloomingdale’s comp; tariff impact in 2Q; outlook for credit revenue growth.
  Response: Bloomingdale’s taking share across categories; off-price and digital growing. 145% tariffs pressured 2Q GM but results beat expectations. Credit revenue +$28M; portfolio healthy; back-half growth moderated.

• Question from Paul Kearney (Barclays): How to think about tariff impact and mitigation into next year?
  Response: Too early without clarity on 2026 tariff levels; more time to mitigate. Updates will come with FY26 guidance on the Q4 call.

• Question from Jay Sole (UBS): Balancing SG&A investments vs leverage; could higher SG&A drive higher comps?
  Response: Invest in customer-facing staffing and digital while driving savings via an ‘always-on’ pipeline; test-and-learn to fund growth and still leverage margins.

• Question from Janet Kloppenburg (JJK Research): Did incremental markdowns boost comps; any pushback on pricing; tariff wrap into next year?
  Response: Markdowns were a minor comp driver; demand led by newness/back-to-school. Consumer remains resilient; tariff outlook for next year TBD with mitigation ongoing.