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    Macy's Inc (M)

    Q2 2025 Earnings Summary

    Reported on Mar 10, 2025 (Before Market Open)
    Pre-Earnings Price$17.74Last close (Aug 20, 2024)
    Post-Earnings Price$15.91Open (Aug 21, 2024)
    Price Change
    $-1.83(-10.32%)

    What went well

    • The First 50 store initiative has delivered positive comparable sales growth, outperforming the broader Macy's nameplate by 460 basis points, and Macy's plans to expand enhancements in handbags and shoes to an additional 100 stores this fall, potentially driving further sales growth. ,
    • Macy's is confident in its holiday season assortments, with more newness and exclusive partnerships at Macy's, Bloomingdale's, and Bluemercury, aiming to capture a larger share of wallet in the fourth quarter despite macroeconomic headwinds.
    • The company exceeded margin guidance for the second quarter due to improved inventory quality and pricing strategies, and expects to continue this positive trend into the fall season, which could lead to enhanced profitability.

    What went wrong

    • Macy's plans to close approximately 55 stores this year, up from the previously expected 50, indicating potential underperformance and challenges in certain markets.
    • Management's expectation of comparable sales acceleration in the back half may be optimistic, given the tougher year-over-year comparisons and a challenging consumer environment, which could lead to underperformance if not realized.
    • Customers are exhibiting lower payment rates on their credit card balances, choosing to revolve balances longer, which may signal increased financial stress and potential for higher future credit losses.

    Q&A Summary

    1. Gross Margin Outlook
      Q: How will you expand gross margins in the back half?
      A: We are confident in our gross margin outlook of 39% to 39.2% for the year. This reflects strong inventory control, with aged inventories well managed , lower shortage trends due to effective asset protection investments , and reduced delivery costs from diversifying carriers and minimizing split shipments.

    2. Sales Guidance and Consumer Outlook
      Q: What are your sales assumptions for the second half?
      A: Our sales range for Q3 and the year addresses uncertainty in discretionary spending. We expect our "First 50" Macy's locations to outperform the broader fleet. While cautious due to a more discriminating consumer, our guidance provides a conservative yet appropriate outlook.

    3. Inventory Management
      Q: How are you managing inventory levels?
      A: Inventories are under control, with aged inventories well managed. After softer Q2 sales, we adjusted inventory levels for Q3 and Q4. We're ensuring a healthy flow of newness and are intent on being in stock for the customer.

    4. First 50 Stores Performance
      Q: Can you update on the "First 50" stores initiative?
      A: The "First 50" stores have seen two consecutive quarters of comp store growth , with a 600 basis point improvement in NPS. All categories outperformed the rest of Macy's. We will expand this model—it's a question of when, not if.

    5. Promotional Environment Adjustments
      Q: How are you adjusting promotions and marketing?
      A: We're sharpening our value messaging to address a consumer focused on value. We're experimenting with our media mix and seeing positive results. We're clearer on value in promotional calendars and enhancing in-store experiences to amplify value.

    6. Credit Card Trends
      Q: What trends are you seeing in your credit card business?
      A: Net credit losses and delinquencies are in line with expectations. Customers are holding revolving balances slightly longer but are paying off, leading to slightly lower payment rates but higher balances. This resulted in revenue slightly better than expected.

    7. Capital Expenditures and Growth Initiatives
      Q: What are your growth initiatives driving increased CapEx?
      A: We're investing in high-return projects like visual enhancements and store maintenance. We're allocating capital to initiatives that improve customer experience and drive growth, including digital opportunities.

    8. Income Demographics Performance
      Q: Are you seeing differences by income demographic?
      A: The softer Q2 was consistent across all income cohorts and nameplates. However, we're pleased that our "First 50" stores, Bloomingdale's, and Bluemercury were essentially flat to positive.

    9. Asset Sales and Store Closures
      Q: Can you elaborate on increased asset sale gains guidance?
      A: We're now expecting approximately $115 million in asset sale gains, up from prior guidance of $90 million to $115 million. We realized $36 million in gains in Q2, forecast $30 million in Q3, and plan to close approximately 55 stores, up from our previous outlook of 50.

    10. Merchandise Margin and Denim Cycle
      Q: How was merchandise margin, and how are you capitalizing on the denim cycle?
      A: We beat our margin guidance for the quarter. We're providing compelling value without sacrificing margin, aided by the quality of our inventory. In denim, we're capitalizing on the new wide-leg and high-rise trends across Macy's and Bloomingdale's with strong assortments for the fall season.

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