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

The company’s Bold New Chapter strategy continued to gain traction, with positive comparable-sales growth across Macy’s, Bloomingdale’s and Bluemercury. Bloomingdale’s posted a second consecutive quarter of double-digit comparable-sales growth, while the Reimagine 200 Macy’s locations maintained their outperformance.

However, Macy’s shares fell 4.7% yesterday despite the quarterly earnings and revenue beat and the higher full-year outlook. The market reaction indicates that investors may have focused on the projected third-quarter loss, the expected sequential moderation in comparable sales and the company’s decision to reinvest most of the tariff-refund benefit to support longer-term growth.

More on Macy’s Q2 Results

Adjusted earnings, excluding the net tariff-refund benefit, were 40 cents per share, topping the Zacks Consensus Estimate of 37 cents and increasing from 35 cents in the year-ago quarter. Macy’s reported GAAP earnings of 62 cents per share and adjusted earnings of 63 cents per share, with both figures including a 23-cent net benefit from tariff refunds after reinvestment.

Net sales of $4,866 million surpassed the Zacks Consensus Estimate of $4,820 million and increased 1.1% year over year. Excluding the impact of fiscal 2025 store closures, net sales grew 1.9%. Total revenues advanced 1.2% to $5,059 million from $4,999 million in the prior-year quarter.

Comparable sales rose 2.7% on an owned-plus-licensed-plus-marketplace basis, marking the company’s fifth consecutive quarter of comparable-sales growth. Go-forward business comps, including go-forward locations and digital across the three nameplates, increased 2.8%. 

Other revenues increased 3.2% to $193 million. Credit card net revenues grew 2% to $156 million, aided by a healthy credit portfolio and stable net credit card losses. Macy’s Media Network revenues advanced 8.8% to $37 million, reflecting higher partner engagement on the advertising platform.

Update on M’s Brand Performance

Comparable sales at the Macy’s nameplate increased 1.1% year over year, representing the fifth consecutive quarterly gain. Reimagine 200 locations posted comparable-sales growth of 1.9%, with increases in nine of the past 10 quarters. These stores account for nearly 60% of the go-forward Macy’s fleet and about 75% of go-forward store sales.

At Macy’s, strength in watches, dresses, petites, career sportswear, kids, handbags, fragrances and men’s and women’s shoes was partly offset by softness in plus sizes, intimates and women’s sleepwear. Big-ticket trends improved sequentially but remained below the prior-year level. Digital comps were also positive, supported by improved assortments and marketplace growth.

Bloomingdale’s comparable sales jumped 11.3%, marking the brand’s second consecutive quarter of double-digit growth and its highest second-quarter sales volume in 154 years. Growth was broad-based across channels, markets and categories, with notable strength in ready-to-wear, men’s apparel, fine jewelry, fragrances and tabletop.

Bluemercury comps increased 6.2%, driven by its Summer Party marketing campaign and demand for dermatological skincare, makeup and fragrances. New and remodeled stores continued to perform well during the quarter.

Insight Into Macy’s Margins & Expenses

The gross margin rate expanded 180 basis points to 41.5%, which beat our estimate of 39.8%. The quarter included a 180-basis-point benefit from net tariff refunds, partly offset by a 10-basis-point headwind from ongoing tariff and fuel costs. Excluding both effects, the underlying gross margin rate improved about 10 basis points, reflecting favorable brand mix and benefits from the Reimagine expansion, partly offset by channel mix.

Selling, general and administrative (SG&A) expenses increased 0.8% to $1.96 billion. The rise reflected higher variable costs tied to sales growth and continued investments in Bold New Chapter initiatives, partly offset by cost-management efforts. As a percentage of total revenues, the SG&A rate improved 20 basis points to 38.7%. We estimated SG&A expenses to increase 1% year over year in the second quarter of fiscal 2026.

Adjusted EBITDA increased 22.5% to $457 million from $373 million in the prior-year period. The adjusted EBITDA margin expanded 150 basis points to 9% of total revenues.

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

Macy’s ended the quarter with cash and cash equivalents of $1.29 billion, up from $829 million a year ago, with total debt of $2.43 billion. The company had $2 billion of available borrowing capacity under its asset-based credit facility and no material long-term debt maturities until 2030.

Merchandise inventories increased 2.5% year over year, broadly in line with comparable-sales growth. Management said inventory was well-positioned for the fall season, with a balanced mix of newness and evergreen merchandise.

For the first half of fiscal 2026, operating cash flow was an inflow of $586 million compared with $255 million in the year-ago period. Free cash flow was $262 million versus an outflow of $88 million a year earlier. Capital expenditures totaled $324 million.

During the second quarter, Macy’s returned $101 million to shareholders through $51 million in dividends and $50 million in share repurchases. The company bought back 2.2 million shares during the quarter and had about $1 billion remaining under its $2-billion authorization.

Macy’s Q3’26 Outlook

For the third quarter of fiscal 2026, this Zacks Rank #2 (Buy) company expects net sales of $4.65-$4.70 billion. Fiscal 2025 store closures contributed approximately $30 million to sales in the comparable prior-year period. Comparable sales are projected to range from a 0.5% decline to a  0.5% growth on an owned-plus-licensed-plus-marketplace basis.

The adjusted EBITDA margin is expected to be between 3.7% and 4%. The adjusted loss per share is forecast between 19 cents and 23 cents. The outlook incorporates a portion of the planned second-half reinvestment of tariff refunds and a tougher comparable-sales comparison against 3.2% growth in the prior-year quarter.

Sneak-Peek Into Macy’s FY’26 Guidance

Following the second-quarter beat, Macy’s raised its fiscal 2026 outlook. The company expects net sales of $21.675-$21.825 billion, up from the previously stated $21.5-$21.75 billion. The guidance continues to reflect the impact of fiscal 2025 store closures, which contributed approximately $145 million to prior-year sales.

Comparable sales are projected to increase 1-1.5%, above the earlier forecast of 0.5-1.2% growth. Other revenues are still expected to be $920 million. The gross margin rate is anticipated to be between 38.5% and 38.7%, while SG&A expenses are expected to increase 1.5-2.25% on a dollar basis.

The adjusted EBITDA margin is forecast at 7.8-8%, up from 7.7-7.9%. Adjusted earnings are projected at $2.15-$2.35 per share compared with the prior range of $2-$2.20. The outlook does not incorporate the effect of potential future share repurchases.

Macy’s expects full-year capital expenditures of $800-$825 million. The company anticipates a combined tariff and fuel gross-margin headwind of 5-15 basis points, narrower than the previously expected 20-30 basis points. Of the $116 million in tariff refunds received, management expects roughly $20 million or about 5 cents per share, to flow to full-year earnings, with the balance supporting brand building, selective value investments and additional Reimagine pilots.

Macy's Stock Past Three-Month Performance

Image Source: Zacks Investment Research

Shares of this company have lost 19.2% over the past three months compared with the industry’s 4.7% decline.

Other Stocks to Consider

We have highlighted three other top-ranked stocks in the retail space, namely Kohl’s Corporation (KSS Quick QuoteKSS - Free Report) , Target Corporation (TGT Quick QuoteTGT - Free Report) and Ross Stores Inc. (ROST Quick QuoteROST - Free Report) .

Kohl’s is a United States based department store retailer. The company offers moderately priced apparel, footwear and accessories for women, men and children, along with beauty and home products. It 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 Kohl’s current fiscal-year earnings and sales indicates growth of 17.3% and decline of 0.8%, respectively, from the year-ago actuals. KSS delivered a trailing four-quarter average earnings surprise of 84.8%.

Target offers guests fashionable, differentiated merchandise and everyday essentials at discounted prices. It currently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for Target's current fiscal-year earnings and sales suggests growth of 37.8% and 4.7%, respectively, from the year-ago actuals. TGT delivered a trailing four-quarter average earnings surprise of 10.5%.

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

The Zacks Consensus Estimate for Ross Stores’ current fiscal-year earnings and sales indicates growth of 32.7% and 12.4%, respectively, from the year-ago actuals. ROST delivered a trailing four-quarter average earnings surprise of 11.2%.