What Wall Street Is Betting On: Macy's Turnaround and the Numbers Behind the Stock

Wall Street's verdict on Macy's is a study in cautious optimism. The split among analysts captures the core tension in the story: they believe the company's painful store closures will eventually lead to a leaner, more profitable business, but they are deeply skeptical about whether that turnaround will show up in the near-term sales numbers.

The consensus is not a unified call. Benchmark Co. maintains a Buy rating without setting a price target, signaling a longer-term belief in the strategy. On the other side, Evercore ISI recently raised its price target from $14 to $21 but kept its Hold rating. That move is telling. It shows the firm sees significant upside from current levels but still doesn't think the stock is a buy right now. The upgrade in the price target, while keeping the Hold, is a vote of confidence in the ultimate destination, not the journey.

This split points directly to the key metric that analysts are watching: the company's profitability. Last quarter, Macy's delivered an adjusted EPS of $0.09, which topped estimates by a wide margin. That's the number that changed the narrative. It showed a clear turnaround from a loss and proved the new strategy is starting to work on the bottom line. For Wall Street, that's the essential piece of the puzzle. They are betting the company can squeeze more profit from fewer stores.

Yet, their caution is grounded in the top line. Evercore ISI expressed disappointment with Macy's own forecast for the current quarter, which calls for same-store sales to be flat or down 2.5%. The firm believes the company needs to show at least 2% to 3% growth as it rolls out its Reimagine 125 initiatives. In other words, analysts are waiting to see if the consumer will actually support the higher prices and more focused offerings that come with a smaller footprint. Until they do, the stock's path will likely be a slow climb, not a sprint.

The Turnaround in Action: Closing Stores to Build a Stronger Business

Wall Street's cautious bets are being tested against tangible actions on the ground. The core of Macy's plan is a simple but painful math: close the weakest stores to pour more resources into the strongest ones. This quarter, the company is executing that playbook, closing approximately 14 stores as part of a broader goal to shutter about 150 underperforming locations by year-end. The aim is clear: focus on its roughly 350 remaining Macy's locations to build a leaner, more profitable business.

This isn't just about cutting costs; it's about reinvesting for growth. The company is simultaneously pouring money into its 125 "Reimagine" stores, which are getting new designs, better staffing, and a refreshed product mix. Early results from these flagship locations are promising, showing sales at those stores rose 2.7% year over year. That success is the fuel behind management's confidence. It led them to raise its full-year EPS guidance to a range of $2.00 to $2.20, a direct vote of confidence in the strategy's momentum.

The numbers from last quarter prove the turnaround is starting to work. Macy's delivered an adjusted EPS of $0.09, which not only topped estimates but marked a dramatic shift from a loss. More importantly, it showed customers are responding. Comparable sales rose 3.2% for the quarter, led by a strong +9% gain at Bloomingdale's. This combination of a bottom-line beat and top-line growth is the essential story that Wall Street is betting on. It suggests that the strategy of closing stores to focus on quality is beginning to pay off, both in the register and in the stock price.

The Financial Health Check: Can the Plan Be Funded?

For a turnaround to succeed, a company needs more than a good strategy-it needs a strong financial foundation to fund the journey. The good news for Macy's is that its balance sheet is in solid shape, providing a crucial buffer as it executes its painful but necessary store closures.

The key metric here is the debt-to-equity ratio, which measures how much a company is financing its operations with borrowed money versus shareholder investment. Macy's stands at 0.61, which is below the company's own historical average and better than many of its retail peers. Think of it like a mortgage: a lower ratio means a smaller debt load relative to the equity cushion, reducing financial risk and giving management more room to maneuver.

The company is actively improving this position. Last quarter, total debt fell 7.3% year-over-year, a clear sign of disciplined financial management. This reduction, coupled with a rising equity base, has helped push the debt-to-equity ratio lower. A shrinking debt load is a direct boost to financial flexibility, allowing Macy's to reinvest in its Reimagine stores and weather any unexpected bumps without needing to take on more risk.

This financial strength is working in tandem with operational improvement. The company's core profit margin is getting healthier, as shown by the 3.2% rise in comparable sales last quarter. When customers spend more in the stores that remain open, it generates more cash flow. That cash can then be used to pay down debt, fund the turnaround initiatives, or be returned to shareholders-closing the loop between a stronger top line and a healthier balance sheet.

The bottom line is that Macy's financial health check is passing. With a manageable debt load, a clear plan to reduce it further, and a sales engine that is starting to fire, the company has the financial fuel to keep its turnaround plan on track. The path isn't without risk, but the balance sheet provides a solid rainy day fund for the journey ahead.

The Road Ahead: Catalysts, Risks, and What to Watch

The cautious bets from Wall Street now hinge on a few clear milestones. The path forward is defined by a major catalyst and a significant risk, with investors needing to watch for consistent progress on both the sales floor and the balance sheet.

The biggest catalyst is the completion of the store closure plan by the end of 2026. The company is already on track, having closed 66 stores last year and 55 the year before, with approximately 14 more slated for closure this quarter. This brings them to about 80% of their goal to shutter 150 underperforming locations. The payoff from this painful pruning is a streamlined operation focused on their roughly 350 remaining Macy's locations. Once the dust settles, the plan is to pour more resources into these stores, which should boost efficiency and profitability. It's the operational simplification that Wall Street is waiting for.

Yet, the major risk is squarely on the consumer. Management's own forecast for the crucial holiday quarter is for same-store sales to be flat or down 2.5%. That's the number that gave Evercore ISI pause, as the firm believes the company needs at least 2% to 3% growth to validate its Reimagine strategy. If shoppers continue to pull back, it will pressure margins and delay the financial benefits of the leaner footprint. The risk is that the strategy's promise is outpacing the consumer's willingness to pay.

So, what should investors watch? First, consistent sales growth in the remaining stores, especially at the flagship Reimagine locations. The early sign of a 2.7% year-over-year sales rise there is encouraging, but it needs to become the norm. Second, watch for further reductions in debt. The company has already reduced total debt 7.3% year-over-year, and a continued decline would confirm the financial health is improving, giving management more flexibility to fund the turnaround.

The bottom line is that the turnaround is a race between two timelines: the clock ticking on the store closure plan, and the consumer's spending power. Wall Street's cautious optimism assumes the closures will deliver their promised benefits before the sales headwinds become too severe. The coming quarters will show which force wins.