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Is Macy's Stock a Buy Now or Just Fairly Valued After Its Rally?
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Key Takeaways
Macy's trades below its sub-industry earnings multiple despite a strong share-price rally.
Macy's Q1 other revenues rose 8.2%, led by higher credit card revenue and media network sales.
Macy's posted 3% comparable sales growth, but tariffs, closures and higher inventory pose risks.
Macy’s, Inc. (M - Free Report) has given investors more to consider after a sharp share-price move and better execution. The question is whether the improvement leaves enough upside.
The answer is not one-sided. Better sales, luxury strength and high-margin revenue streams support the bull case, while margins, closures and discretionary demand keep the valuation debate active.
Image Source: Zacks Investment Research
Macy’s Valuation Still Looks Undemanding
Macy’s trades at 10.90X forward 12-month earnings, below 13.46X for its Zacks sub-industry, 23.43X for the Zacks sector and 21.65X for the S&P 500.
That discount can still attract value-focused investors even after the stock gained 10.4% year to date and 123.9% over the trailing 12 months.
The $25 price target reflects 11.55X forward 12-month sales, keeping valuation central to whether the rally has already captured the turnaround.
Dillard’s, Inc. (DDS - Free Report) is a relevant department-store peer for execution comparisons in traditional retail. Ross Stores, Inc. (ROST - Free Report) offers a useful off-price comparison for shoppers’ value sensitivity.
M Earnings Quality Supports the M Case
Other revenues add an important layer to Macy’s earnings profile. First-quarter other revenues rose 8.2% year over year to $210 million.
Credit card revenues increased 11.7% to $172 million, while Macy’s Media Network generated $38 million despite timing-related advertising pressure.
These asset-light streams can support profitability when merchandise margins are uneven. That broadens the earnings story beyond store sales.
Macy’s delivered 3% enterprise comparable sales growth in the first quarter, with positive growth across all three nameplates. Go-forward comparable sales increased 3.1%.
Digital sales represented 34% of net sales, up from 33% a year earlier, showing that online demand is contributing to the recovery.
Luxury also matters. Bloomingdale’s comparable sales rose 10.2%, and Bluemercury comparable sales increased 6.4%, but investors need proof that those gains can persist through a less certain consumer backdrop.
M Costs and Closures Cloud the Upside
Gross margin fell 30 basis points to 38.9% in the first quarter, with tariffs reducing the rate by about 30 basis points. Second-quarter guidance assumes tariffs and fuel costs will pressure gross margin by 20-40 basis points.
Store closures are another constraint. The 14 non-go-forward stores closed at the end of fiscal 2025 reduced first-quarter sales by about $40 million.
Inventory also requires close monitoring. Merchandise inventories rose 3.6% to $4.8 billion, creating markdown risk if discretionary demand softens.
Why Macy’s Capital Position Matters
Macy’s balance sheet gives the company room to keep funding its Bold New Chapter strategy. It ended the first quarter with $1.3 billion in cash and nearly $2 billion of available borrowing capacity.
The company also has no material long-term debt maturities until 2030. That reduces near-term refinancing pressure while management invests in stores, digital and luxury.
Cash flow improved sharply, with operating cash flow of $292 million versus a $64-million outflow a year earlier. Macy’s returned $100 million to shareholders through $50 million in dividends and $50 million in buybacks.
How M Stacks Up for Stock Pickers
Macy’s looks like a stock with visible positives and visible limits. Valuation is not demanding and execution is improving, but earnings still depend on sustained comps, margin control and disciplined inventory management.
The stock currently carries a Zacks Rank #3 (Hold), which fits a middle-ground view rather than a high-conviction buy call. A #3 Rank generally signals expectations for market-aligned performance over the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
No Value Score, Growth Score, Momentum Score or VGM Score is provided. Without those additional style indicators, investors are left to judge Macy’s mainly through valuation, execution, earnings durability and risk balance.
View the Zacks #1 Rank List
Image: Bigstock
Is Macy's Stock a Buy Now or Just Fairly Valued After Its Rally?
Key Takeaways
Macy’s, Inc. (M - Free Report) has given investors more to consider after a sharp share-price move and better execution. The question is whether the improvement leaves enough upside.
The answer is not one-sided. Better sales, luxury strength and high-margin revenue streams support the bull case, while margins, closures and discretionary demand keep the valuation debate active.
Image Source: Zacks Investment Research
Macy’s Valuation Still Looks Undemanding
Macy’s trades at 10.90X forward 12-month earnings, below 13.46X for its Zacks sub-industry, 23.43X for the Zacks sector and 21.65X for the S&P 500.
That discount can still attract value-focused investors even after the stock gained 10.4% year to date and 123.9% over the trailing 12 months.
The $25 price target reflects 11.55X forward 12-month sales, keeping valuation central to whether the rally has already captured the turnaround.
Dillard’s, Inc. (DDS - Free Report) is a relevant department-store peer for execution comparisons in traditional retail. Ross Stores, Inc. (ROST - Free Report) offers a useful off-price comparison for shoppers’ value sensitivity.
M Earnings Quality Supports the M Case
Other revenues add an important layer to Macy’s earnings profile. First-quarter other revenues rose 8.2% year over year to $210 million.
Credit card revenues increased 11.7% to $172 million, while Macy’s Media Network generated $38 million despite timing-related advertising pressure.
These asset-light streams can support profitability when merchandise margins are uneven. That broadens the earnings story beyond store sales.
Macy's, Inc. Price, Consensus and EPS Surprise
Macy's, Inc. price-consensus-eps-surprise-chart | Macy's, Inc. Quote
Macy’s Better Sales Trends Need to Last
Macy’s delivered 3% enterprise comparable sales growth in the first quarter, with positive growth across all three nameplates. Go-forward comparable sales increased 3.1%.
Digital sales represented 34% of net sales, up from 33% a year earlier, showing that online demand is contributing to the recovery.
Luxury also matters. Bloomingdale’s comparable sales rose 10.2%, and Bluemercury comparable sales increased 6.4%, but investors need proof that those gains can persist through a less certain consumer backdrop.
M Costs and Closures Cloud the Upside
Gross margin fell 30 basis points to 38.9% in the first quarter, with tariffs reducing the rate by about 30 basis points. Second-quarter guidance assumes tariffs and fuel costs will pressure gross margin by 20-40 basis points.
Store closures are another constraint. The 14 non-go-forward stores closed at the end of fiscal 2025 reduced first-quarter sales by about $40 million.
Inventory also requires close monitoring. Merchandise inventories rose 3.6% to $4.8 billion, creating markdown risk if discretionary demand softens.
Why Macy’s Capital Position Matters
Macy’s balance sheet gives the company room to keep funding its Bold New Chapter strategy. It ended the first quarter with $1.3 billion in cash and nearly $2 billion of available borrowing capacity.
The company also has no material long-term debt maturities until 2030. That reduces near-term refinancing pressure while management invests in stores, digital and luxury.
Cash flow improved sharply, with operating cash flow of $292 million versus a $64-million outflow a year earlier. Macy’s returned $100 million to shareholders through $50 million in dividends and $50 million in buybacks.
How M Stacks Up for Stock Pickers
Macy’s looks like a stock with visible positives and visible limits. Valuation is not demanding and execution is improving, but earnings still depend on sustained comps, margin control and disciplined inventory management.
The stock currently carries a Zacks Rank #3 (Hold), which fits a middle-ground view rather than a high-conviction buy call. A #3 Rank generally signals expectations for market-aligned performance over the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
No Value Score, Growth Score, Momentum Score or VGM Score is provided. Without those additional style indicators, investors are left to judge Macy’s mainly through valuation, execution, earnings durability and risk balance.