Macy’s, Inc. (M Quick QuoteM - Free Report) reported first-quarter fiscal 2026 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Also, both metrics increased from the year-ago quarter.

The company delivered its strongest fiscal first-quarter comparable-sales performance in four years, supported by positive sales growth across all three nameplates — Macy’s, Bloomingdale’s and Bluemercury. Management highlighted that the company’s Bold New Chapter strategy continues to gain traction, driving broad-based operational and financial improvements.

Encouraged by the strong fiscal first-quarter performance and positive second-quarter trends, management raised its fiscal 2026 outlook for net sales, comparable sales and adjusted earnings per share, reflecting confidence in the momentum of its go-forward business.

More on Macy’s Q1 Results

The company reported adjusted earnings of 13 cents per share, comfortably surpassing the Zacks Consensus Estimate of 2 cents and improving from adjusted earnings of 11 cents in the year-ago quarter. Earnings per share were 23 cents compared with 13 cents in the prior-year period.

Net sales of $4,682 million surpassed the Zacks Consensus Estimate of $4,623 million. The top line increased 1.8% year over year, benefiting from positive comparable sales across all three nameplates. Comparable sales rose 3%, marking the company’s strongest fiscal first-quarter comparable-sales performance in four years. We expected comparable sales to increase 1% in the quarter under review.

M’s go-forward business comps, including go-forward locations and digital platforms across Macy’s, Bloomingdale’s and Bluemercury, increased 3.1% on an owned-plus-licensed-plus-marketplace basis.

Net credit card revenues were $172 million, up 11.7% year over year, driven by the company’s healthy credit portfolio and prudent management of net credit card losses. The metric represented 3.7% of net sales compared with 3.3% in the year-ago quarter.

Macy’s Media Network revenues were $38 million, down 5% year over year, indicating the timing of advertising spending on a year-over-year basis. The metric represented 0.8% of net sales compared with 0.9% in the prior-year quarter.

Update on M’s Brand Performance

Comps across the Macy’s brand increased 1.6% year over year on an owned-plus-licensed-plus-marketplace basis. Reimagine 200 locations continued to outperform, with comps rising 2.4%, marking positive comparable-sales growth in eight of the last nine quarters.

At the Bloomingdale’s brand, comps increased 10.2% on an owned-plus-licensed-plus-marketplace basis, marking its seventh consecutive quarter of growth and delivering the highest first-quarter sales volume in the brand’s 154-year history.

Comps at the Bluemercury brand rose 6.4% on an owned-plus-licensed-plus-marketplace basis, driven by strength in makeup, dermatological skincare and fragrance categories. New and remodeled stores continued to outperform during the first quarter.

Insight Into Macy’s Margins & Expenses

The gross margin in the fiscal first quarter was 38.9%, which beat our estimate of 38.6%. This represented a year-over-year decline of 30 basis points. Management indicated that tariffs negatively impacted the gross margin by approximately 30 basis points, and excluding this impact, the gross margin would have been flat with the prior-year period.

The Zacks Rank #4 (Sell) company reported selling, general and administrative (SG&A) expenses of $1.95 billion, up 2% year over year. The increase reflected continued investments in the Bold New Chapter strategy, including Reimagine 200 locations, Bloomingdale’s and digital capabilities across nameplates. These investments were partially offset by ongoing cost-management efforts. As a percentage of total revenues, SG&A expenses remained flat at 39.9% compared with the prior-year quarter. We estimated SG&A expenses to increase 2.4% year over year in the fiscal first quarter.

Macy’s reported adjusted EBITDA of $290 million, down from $304 million in the year-ago quarter. The adjusted EBITDA margin was 5.9% of the total revenues compared with 6.3% in the prior-year period, representing a year-over-year decline of 40 basis points.

M’s Financial Snapshot: Cash, Inventory & Equity Overview

The company ended the first quarter of fiscal 2026 with cash and cash equivalents of $1.29 billion, and total debt of $2.43 billion. Macy’s also had $2 billion of available borrowing capacity under its asset-based credit facility. The company does not face any material long-term debt maturities until 2030, underscoring its strong liquidity position.

Merchandise inventories increased 3.6% year over year. Management stated that both the composition and level of inventory are well-positioned heading into the summer season, supported by increased newness across price points and lower aged inventories relative to last year.

During the fiscal first quarter, the operating cash flow was an inflow of $292 million against an outflow of $64 million in the prior-year quarter. The free cash flow was an inflow of $140 million against an outflow of $203 million a year ago, reflecting significantly improved cash generation. Capital expenditure totaled $177 million, while monetization proceeds were $25 million.

Through its capital-return program, Macy’s returned $100 million to shareholders during the quarter, including $50 million in dividends and $50 million in share repurchases. The company repurchased 2.6 million shares for $50 million during the quarter. As of the end of the fiscal first quarter, $1.1 billion was available under its $2-billion share repurchase authorization.

Macy’s Q2’26 Outlook

For the second quarter of fiscal 2026, Macy’s expects net sales of $4.75-$4.80 billion. The outlook incorporates the impacts of fiscal 2025 store closures, which contributed roughly $35 million to sales during the comparable prior-year period. Comparable sales are projected to be flat to up 1% on an owned-plus-licensed-plus-marketplace basis.

The company expects the adjusted EBITDA margin between 6.9% and 7.2%, while adjusted earnings per share are forecast to be 29-34 cents. Management noted that tariffs and fuel costs are expected to remain a headwind in the fiscal second quarter, with the combined impacts anticipated to reduce earnings by 3-4 cents per share and pressure the gross margin by 20-40 basis points.

Sneak-Peek Into Macy’s FY26 Guidance

Following its better-than-expected fiscal first-quarter performance, Macy’s raised its fiscal 2026 outlook. Management noted that the updated guidance reflects stronger-than-anticipated fiscal first-quarter results and a modest increase in expected sales for the remainder of the year. 

The company continues to acknowledge macroeconomic and geopolitical uncertainties that could influence discretionary spending and has maintained flexibility within its business model to respond to changes in the competitive landscape and external environment. The outlook assumes a larger tariff impact in the first half of the year than in the second half and does not include any tariff refunds. The guidance also reflects continued investments in Reimagine 200 locations and the company’s luxury nameplates to support long-term growth.

Macy’s expects net sales of $21.5-$21.75 billion, up from the previously mentioned $21.4-$21.65 billion. The outlook continues to reflect the impacts of fiscal 2025 store closures, which reduced annual net sales by approximately $145 million. The company also expects other revenues of $920 million.

Comparable sales (owned-plus-licensed-plus-marketplace) are projected to increase 0.5-1.2% compared with the prior stated range of a decline of 0.5% to growth of 0.5%. The improved outlook reflects continued momentum across the company’s go-forward business and positive customer response to its strategic initiatives.

The gross margin is anticipated to be 38.4-38.6%, indicating a 20-30 basis-point headwind from tariffs and fuel costs. SG&A expenses are expected to increase 1-2% on a dollar basis compared with fiscal 2025, with the expense rate anticipated to be in line with the prior year in the fiscal second and fourth quarters, and higher in the third quarter due to the timing of growth investments.

M Stock Past 3-Month Performance

Image Source: Zacks Investment Research

The adjusted EBITDA margin is expected between 7.7% and 7.9%. Adjusted earnings per share are anticipated to be $2.00-$2.20, up from the previously mentioned $1.90-$2.10. This incorporates an estimated 10-20-cent combined impact of tariffs and fuel costs. The outlook does not include the impacts of any future share repurchases under the company's existing authorization.

M shares have gained 14.8% in the past three months compared with the industry’s 2.2% growth.

Stocks to Consider

We have highlighted three better-ranked stocks in the retail space, namely, Tapestry, Inc. (TPR Quick QuoteTPR - Free Report) , Dillard's Inc. (DDS Quick QuoteDDS - Free Report) and Ross Stores Inc. (ROST Quick QuoteROST - Free Report) .

Tapestry is the designer and marketer of fine accessories and gifts for women and men in the United States and internationally. The company flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tapestry’s current fiscal-year earnings and sales indicates growth of 36.3% and 13.8%, respectively, from the year-ago actuals. TPR delivered a trailing four-quarter average earnings surprise of 15.6%.

Dillard's is a large departmental store chain featuring fashion apparel and home furnishings. It currently sports a Zacks Rank of 1.

The Zacks Consensus Estimate for Dillard's current fiscal-year earnings and sales suggests growth of 6.3% and 2.1%, respectively, from the year-ago actuals. DDS delivered a trailing four-quarter average earnings surprise of 27.9%.

Ross Stores operates as an off-price retailer of apparel and home accessories, primarily in the United States. The company has a Zacks Rank #2 (Buy) at present. 

The Zacks Consensus Estimate for Ross Stores’ current fiscal-year earnings and sales indicates growth of 15.6% and 8.2%, respectively, from the year-ago actuals. ROST delivered a trailing four-quarter average earnings surprise of 10.2%.