Department store chain Macy’s (NYSE: M) beat Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 1.9% year on year to $5.00 billion. The company’s full-year revenue guidance of $21.3 billion at the midpoint came in 0.6% above analysts’ estimates. Its non-GAAP profit of $0.31 per share was 66.2% above analysts’ consensus estimates.

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StockStory’s Take

Macy’s saw a positive market reaction to its Q2 2025 results, with management highlighting gains from store portfolio optimization and stronger luxury and digital performance. CEO Tony Spring credited “omnichannel experience improvements and localized merchandising” for driving growth, particularly in the GoForward Macy’s locations, while cost discipline and inventory management also contributed to results. Spring emphasized that the company’s “multi-brand, multi-category, and multi-channel model” allowed Macy’s to capture demand across a broad range of consumer segments, helping offset continued softness in unit demand and lingering macroeconomic uncertainty.

Looking ahead, Macy’s updated guidance is built on expectations of continued execution of its Bold New Chapter strategy, with a focus on expanding private brands, managing tariff headwinds, and sustaining performance in luxury banners. CFO Tom Edwards noted that tariff impacts remain a risk but outlined ongoing mitigation efforts such as cost negotiations and targeted price increases. Management emphasized a cautious approach, stating, “We want to be prudent in our guidance and make sure we see the full impact of tariffs,” while also pointing to potential margin improvements from greater private label penetration and operational efficiencies.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to the combined effects of store rationalization, luxury segment strength, and ongoing cost discipline, all while navigating a shifting consumer landscape and external pressures.

• Luxury banners outperformed: Both Bloomingdale’s and Bluemercury posted positive comparable sales, with Bloomingdale’s recording its highest second-quarter sales and notable market share gains. Spring described the luxury segment as “gaining momentum” despite broader market disruption and stressed the importance of exclusive capsule collections and expanded partnerships.

• GoForward Macy’s traction: The GoForward Macy’s locations, including the Reimagined 125 stores, delivered positive comparable sales. These stores benefited from localized merchandising, additional staffing, and improved customer experience, as reflected in the highest net promoter scores on record for the brand.

• Store closures and portfolio optimization: Macy’s continued to close underperforming stores while investing in higher-performing locations. Edwards noted these actions contributed to both sales growth in targeted areas and reduced SG&A expenses, supporting ongoing profitability initiatives.

• Private brand expansion underway: Management reported progress in refreshing private label assortments, such as recent launches and partnerships. Spring highlighted that private label penetration remains below historical highs, presenting an opportunity for margin improvement and increased brand differentiation.

• Tariff headwinds actively managed: The company faced increased tariff-related costs, prompting mitigation strategies including selective price increases and cost-sharing negotiations with vendors. Edwards cautioned that “the majority of incremental tariff impact” will be felt in the second half, with efforts underway to offset margin pressures through operational efficiencies.

Drivers of Future Performance

Macy’s outlook for the remainder of 2025 centers on mitigating tariff impacts, driving private brand growth, and expanding its luxury and digital presence.

• Tariff mitigation and price actions: Management is implementing targeted price increases and vendor negotiations to offset higher tariff costs, but expects continued gross margin pressure, particularly in the fourth quarter. The company is monitoring consumer response to these adjustments, noting early signs of resilience but maintaining a cautious stance.

• Private brand and margin expansion: Spring and Edwards outlined plans to increase the share of private label sales, which historically carry higher margins. Improved product curation and marketing for both new and existing private brands are expected to enhance differentiation and contribute to long-term profitability as penetration rises from current levels.

• Luxury and digital momentum: Continued investment in Bloomingdale’s and Bluemercury, including exclusive partnerships, store expansion, and digital initiatives, is expected to sustain growth in the luxury segment. Management views digital as a key lever for customer engagement and sales, supporting the multi-channel approach.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) Macy’s ability to sustain positive comparable sales in GoForward and luxury banners despite a more cautious consumer, (2) the effectiveness of tariff mitigation strategies and their impact on gross margin, and (3) the pace of private brand expansion and associated margin improvements. Execution on digital initiatives and continued store portfolio optimization will also be important markers for tracking the company’s progress.

Macy's currently trades at $16.32, up from $13.50 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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