Macy's, Inc. Q2 FY2026 earnings call

• Strategic Momentum: The 'Bold New Chapter' strategy is gaining significant traction, delivering six consecutive quarters of results beating guidance and five consecutive quarters of comparable sales growth.
• Macy's Nameplate: The 'Reimagined Store' program has expanded to 200 locations, which now account for nearly 60% of go-forward stores and 75% of store sales. These stores consistently outperform the rest of the fleet and have contributed to a 10-point increase in Net Promoter Score (NPS) for the entire fleet.
• Bloomingdale's Luxury Positioning: The brand is successfully differentiating itself as an omni-channel luxury leader. It has expanded high-end brand partnerships (e.g., Ulla Johnson, Dries Van Noten, Prada) and launched AI-powered digital assistants to enhance customer discovery.
• Brand Curation & Newness: Management emphasized a focus on 'newness' and fashion authority. Key initiatives include exclusive capsule collections with American designers (Tommy Hilfiger, Donna Karan, Michael Kors) at Macy's and the 'Hotel Bloomingdale's' campaign partnering with Ritz-Carlton.
• Operational Efficiency: End-to-end operations are being modernized with a focus on supply chain efficiencies, including automation improvements at the China Grove distribution center and AI-driven inventory replenishment forecasts.
• Consumer Engagement: Strong engagement through major events, including a record-breaking Macy’s 4th of July fireworks show (11 million viewers) and the launch of the 100-day countdown for the Thanksgiving Day Parade.
• AI Integration: AI is being deployed across three pillars: driving revenue (conversational shopping assistants like 'Ask Macy's'), improving colleague efficiency, and reducing costs through better inventory forecasting.

Macy's Inc. reported total net sales of $5.1 billion, a 1.2% increase year-over-year. On a go-forward basis (excluding closed stores), revenue rose 2.0% to $4.9 billion. Comparable sales growth was positive across all nameplates: Macy's nameplate achieved 1.1% comparable sales growth (its fifth consecutive quarter), with its 'Reimagined' locations growing 1.9%. Bloomingdale's delivered exceptional performance with 11.3% comparable sales growth, marking its highest second-quarter sales volume in history and double-digit growth for the second consecutive quarter. Blue Mercury reported solid comparable sales growth of 6.2%, driven by skincare and fragrance categories. In terms of category performance, Macy's saw outperformance in watches, dresses, handbags, fragrances, and footwear, while plus sizes, intimates, and sleepwear remained soft. Big-ticket items improved sequentially but remained down year-over-year.

• Full-Year Outlook Raised: Management raised full-year adjusted diluted EPS guidance to $2.15–$2.35 (previously lower), reflecting Q2 outperformance and a portion of tariff refund pass-throughs.
• Net Sales Guidance: Full-year net sales guidance was increased to $21.675–$21.825 billion. Q3 net sales are expected to be between $4.65–$4.70 billion.
• Comparable Sales: Full-year comparable sales are guided to grow 1.0%–1.5%. Q3 comparable sales are expected to range from -0.5% to +0.5%.
• Margin Expectations: Full-year gross margin is guided to be 38.5%–38.7% of net sales. Adjusted EBITDA margin is guided to be 7.8%–8.0% of total revenue.
• Tariff & Fuel Impact: For the second half of 2026, tariffs are expected to be a tailwind compared to the prior year. Full-year combined tariff and fuel gross margin headwind is forecast at 5–15 basis points.
• Reinvestment Strategy: A portion of tariff refunds is being reinvested into the 'Bold New Chapter' (brand building, reimagined store pilots) rather than fully flowing to the bottom line, which nets to approximately 18 cents of EPS benefit in H2.

• Macro-Economic Sensitivity: Consumer performance remains stronger among middle and upper-income demographics; lower-income consumers are showing more choicefulness.
• Big-Ticket Softness: While big-ticket categories showed sequential improvement, they remain down year-over-year, indicating persistent weakness in high-value discretionary spending.
• Tariff Uncertainty: Although current tariffs are favorable, management notes ongoing uncertainty regarding future tariff policies and their potential impact on margins.
• Fuel Costs: Rising fuel and transportation costs continue to pose a modest headwind to gross margins, though currently estimated at only 5–15 basis points annually.
• Conversion Trade-offs: As the company premiumizes assortments (increasing Average Unit Retail), there is a noted trade-off where conversion rates may decline due to longer customer deliberation times on higher-priced items.

Q: Blake Anderson (Jefferies) asked about Q3 comp guidance implying a step-down from Q2's strong performance and questioned the sustainability of Average Unit Retail (AUR) gains amidst industry price investments. / A: Tony Spring explained that Q3 faces a tough 3.2% prior-year comp base, but the underlying business is stable with no unusual macro factors. Tom Edwards confirmed that second-half sales expectations are unchanged from prior guidance, highlighting confidence in the 'Bold New Chapter.' Regarding AUR, management stated that premiumization via new brands and assortments will continue to drive AUR growth, even if the rate moderates. They clarified that some tariff refunds are being used to sharpen pricing in specific categories like furniture and fine jewelry to capture market share, balancing premiumization with competitive value.

Q: Alex Stratton (Morgan Stanley) inquired about the evolution of back-half margin outlooks excluding tariffs and the long-term performance of the oldest 'Reimagined' store cohorts. / A: Tom Edwards clarified that back-half margin expectations remain consistent with prior guidance, anticipating gross margin expansion weighted toward Q4 due to supply chain efficiencies and AI-driven inventory improvements. SG&A investments are front-loaded in Q3 and Q4 to support strategic initiatives. Tony Spring noted that all cohorts of Reimagined stores are growing, with sustained NPS improvements underscoring the success of staffing and assortment changes. He added that tariff funds are being used to pilot additional stores early, preparing for a broader 2027 expansion.

Q: Matthew Boss (JP Morgan) sought details on strategies driving momentum at Macy's and Bloomingdale's, specifically asking about the 'inning' of market share gains and multi-year margin drivers. / A: Tony Spring described the brand improvement efforts as being in the 'early innings,' focusing on product quality, inventory flow, and storytelling to drive relevance. He highlighted that newness in trends (e.g., suede, denim treatments) is selling well. Tom Edwards outlined a long-term model of low-single-digit top-line growth leading to mid-single-digit earnings growth, leveraging SG&A at low single-digit comp levels. He emphasized that healthy inventory positions and controlled SG&A below inflation rates support this profitability model.

Q: Oliver Chen (TD Cowan) asked about factors offsetting impressive AUR gains, younger customer targeting, and merchandise margin trends relative to last year. / A: Tony Spring attributed AUR growth to improved assortment quality (leather vs. faux, higher-price brands) and highlighted youth engagement through prom/graduation seasons and watch/gift businesses. He noted collaborations like Nikki Hilton’s Aqua line target younger demographics. Tom Edwards stated that promotional activity is expected to be in line with last year and that inventory is well-positioned for fall. He reiterated that the consumer base skews middle-to-upper income, performing consistently, while lower-income segments remain more choiceful.

Q: Michael Bonetti (Evercore ISI) questioned whether AUR gains eventually translate to higher gross margins or if they come with ongoing costs, and sought perspective on why peers aren't raising back-half sales guidance despite tariff reinvestments. / A: Tony Spring distinguished AUR from margin, noting that higher AUR leverages expenses rather than directly boosting margin rates, which are category-dependent. He argued that tariff reinvestments are focused on long-term brand health (marketing, store pilots) rather than short-term sales spikes, explaining the conservative sales guidance. Tom Edwards added that while AUR drives gross profit dollars, margin expansion requires assortment mix shifts and private brand growth. He affirmed that SG&A leverage at low single-digit comp levels remains key to delivering EPS growth alongside top-line expansion.