Macy's Q2 Profit Plunges 42% Amidst Sales Decline

TL;DR

**Macy's is bleeding cash and losing market share; get out now before the holiday season disappoints.**

AI Summary

Macy's, Inc. reported a significant decline in financial performance for the 13 and 26 weeks ended August 2, 2025, compared to the prior year. Net sales decreased by 2.5% to $4,812 million for the 13 weeks and by 3.8% to $9,411 million for the 26 weeks. Total revenue also fell, from $5,096 million to $4,999 million for the quarter, and from $10,096 million to $9,791 million for the half-year. Net income saw a substantial drop, decreasing by 42% to $87 million for the 13 weeks and by 41.5% to $124 million for the 26 weeks. Diluted earnings per share followed suit, falling from $0.53 to $0.31 for the quarter and from $0.75 to $0.44 for the half-year. Operating income declined from $222 million to $149 million for the quarter, a 32.9% decrease. The company incurred a $13 million loss on extinguishment of debt for the 13 weeks and $17 million for the 26 weeks, which was not present in the prior year. Despite these declines, other revenue, primarily from credit card services and Macy's Media Network, increased from $159 million to $187 million for the quarter. Digital sales grew to 31% of net sales for the 13 weeks ended August 2, 2025, up from 29% in the prior year.

Why It Matters

Macy's significant decline in net income and sales signals ongoing challenges in the competitive retail landscape, impacting investor confidence and potentially leading to further strategic shifts. For employees, this could mean continued pressure on store performance and potential restructuring. Customers might see changes in product offerings or store experiences as Macy's adapts. In the broader market, this performance underscores the difficulties traditional department stores face against e-commerce giants and fast-fashion retailers, potentially accelerating industry consolidation or innovation in omnichannel strategies.

Risk Assessment

Risk Level: high — Macy's reported a 42% decrease in net income to $87 million for the 13 weeks ended August 2, 2025, and a 3.8% decline in net sales to $9,411 million for the 26 weeks. The company also incurred a $17 million loss on extinguishment of debt for the 26 weeks, indicating financial restructuring under pressure. These figures, coupled with a decrease in cash and cash equivalents from $1,306 million to $829 million since February 1, 2025, point to significant financial headwinds.

Analyst Insight

Investors should consider reducing their exposure to Macy's (M) given the substantial decline in net income and sales, coupled with increased debt extinguishment costs. Monitor upcoming holiday season guidance closely, as the current trends suggest continued underperformance in a challenging retail environment.

Financial Highlights

debt To Equity

1.14

revenue

$4,999M

operating Margin

3.0%

total Assets

$15,551M

total Debt

$2,626M

net Income

$87M

eps

$0.31

gross Margin

40.7%

cash Position

$829M

revenue Growth

-1.9%

Revenue Breakdown

Key Numbers

• $4.81B — Net sales for 13 weeks ended August 2, 2025 (Decreased from $4.937 billion in prior year, a 2.5% decline.)
• $87M — Net income for 13 weeks ended August 2, 2025 (Decreased from $150 million in prior year, a 42% decline.)
• $0.31 — Diluted EPS for 13 weeks ended August 2, 2025 (Decreased from $0.53 in prior year.)
• $9.41B — Net sales for 26 weeks ended August 2, 2025 (Decreased from $9.783 billion in prior year, a 3.8% decline.)
• $124M — Net income for 26 weeks ended August 2, 2025 (Decreased from $212 million in prior year, a 41.5% decline.)
• $13M — Loss on extinguishment of debt for 13 weeks (New expense not present in prior year, impacting profitability.)
• 31% — Digital sales percentage of net sales for 13 weeks (Increased from 29% in prior year, showing growth in online channels.)
• $829M — Cash and cash equivalents as of August 2, 2025 (Decreased from $1,306 million as of February 1, 2025.)
• 268,505,751 — Common Stock shares outstanding at August 30, 2025 (Reflects the total shares outstanding.)
• $149M — Operating income for 13 weeks ended August 2, 2025 (Decreased from $222 million in prior year, a 32.9% decline.)

Key Players & Entities

• Macy's, Inc. (company) — registrant
• New York Stock Exchange (regulator) — exchange where common stock is registered
• Al Tayer Insignia (company) — license agreement partner for Bloomingdale's in Dubai and Kuwait
• Financial Accounting Standards Board (regulator) — issuer of accounting standards updates
• United States (regulator) — enacted the One Big Beautiful Bill Act
• Macy's (company) — primary nameplate and segment
• Bloomingdale's (company) — nameplate and segment
• Bluemercury (company) — nameplate and segment
• Bloomberg (company) — publisher
• SEC (regulator) — filing authority

FAQ

Industry Context

Macy's operates in the highly competitive retail sector, facing pressure from both traditional department stores and the rapidly growing e-commerce giants. The industry is characterized by shifting consumer preferences, the need for strong digital capabilities, and sensitivity to economic conditions. While digital sales are growing, overall net sales have declined, indicating challenges in maintaining market share and driving traffic across all channels.

Regulatory Implications

Macy's is subject to various regulations, including those related to consumer protection, data privacy, and financial reporting. Changes in tax legislation, such as the 'One Big Beautiful Bill Act' (OBBBA), could impact tax liabilities and depreciation strategies, though the company does not expect a material impact on its effective tax rate for fiscal 2025.

What Investors Should Do

1. Monitor digital sales growth and its contribution to overall revenue.
2. Analyze the impact of the loss on extinguishment of debt.
3. Assess the effectiveness of cost management strategies.
4. Evaluate the company's ability to manage inventory levels.

Key Dates

• 2025-08-02: End of 13 and 26 week reporting period — Marks the end of the current reporting periods for the 10-Q filing, showing declines in net sales and net income compared to the prior year.
• 2025-02-01: End of prior fiscal year — Provides a comparison point for balance sheet items, showing a decrease in cash and cash equivalents from $1,306M to $829M.
• 2024-08-03: End of 13 and 26 week reporting period in prior year — Serves as the comparative period for the current quarter's financial performance, highlighting significant drops in revenue and profitability.

Glossary

LIFO

Last-In, First-Out. An inventory costing method where the last items added to inventory are assumed to be the first ones sold. (Macy's changed its inventory valuation method from LIFO RIM to LIFO cost, making direct year-over-year comparisons of inventory values potentially difficult.)

Omni-channel

A retail strategy that integrates different channels of shopping, such as physical stores, online stores, and mobile apps, to create a seamless customer experience. (Macy's operates as an omni-channel retailer, with its performance influenced by both its physical stores and digital platforms.)

Macy's Media Network

An in-house media platform that supports advertising for Macy's and Bloomingdale's customers on owned and operated platforms, as well as offsite. (This segment contributes to 'Other Revenue' and showed no growth in the current quarter, indicating a stable but not expanding revenue stream.)

Loss on extinguishment of debt

A loss incurred when a company repays or retires debt before its scheduled maturity date, often due to refinancing at a lower interest rate or other strategic financial decisions. (Macy's reported a $13 million loss on extinguishment of debt in the current quarter, which negatively impacted net income and was not present in the prior year.)

Diluted earnings per share (EPS)

A measure of a company's profit allocated to each outstanding share of common stock, assuming that all convertible securities and stock options were exercised. (Diluted EPS decreased from $0.53 to $0.31 for the quarter, reflecting the decline in net income and impacting shareholder value perception.)

Year-Over-Year Comparison

Compared to the prior year's comparable periods, Macy's reported a decline in both net sales and net income for the 13 and 26 weeks ended August 2, 2025. Net sales decreased by 2.5% and 3.8% respectively, while net income saw a substantial drop of 42% and 41.5%. Operating income also fell significantly. A new expense, a $13 million loss on extinguishment of debt, further impacted profitability in the current quarter. However, digital sales continued to grow as a percentage of net sales, and other revenue streams like credit card services showed an increase.

Filing Documents

• m-20250802.htm (10-Q) — 990KB
• m-20250802x10qxexx22.htm (EX-22) — 3KB
• m-20250802x10qxexx311.htm (EX-31.1) — 9KB
• m-20250802x10qxexx312.htm (EX-31.2) — 9KB
• m-20250802x10qxexx321.htm (EX-32.1) — 4KB
• m-20250802x10qxexx322.htm (EX-32.2) — 4KB
• m-20250802_g1.gif (GRAPHIC) — 24KB
• 0000794367-25-000145.txt ( ) — 4540KB
• m-20250802.xsd (EX-101.SCH) — 27KB
• m-20250802_cal.xml (EX-101.CAL) — 50KB
• m-20250802_def.xml (EX-101.DEF) — 96KB
• m-20250802_lab.xml (EX-101.LAB) — 412KB
• m-20250802_pre.xml (EX-101.PRE) — 258KB
• m-20250802_htm.xml (XML) — 520KB

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION Item 1.

Financial Statements (unaudited)

Financial Statements (unaudited) 3 Consolidated Statements of Income 3 Consolidated Statements of Comprehensive Income 4 Consolidated Balance Sheets 5 Consolidated Statements of Changes in Shareholders' Equity 6 Consolidated Statements of Cash Flows 8

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 9 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 18 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 29 Item 4.

Controls and Procedures

Controls and Procedures 29

– OTHER INFORMATION

PART II – OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 30 Item 1A.

Risk Factors

Risk Factors 30 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 31 Item 5. Other Information 31 Item 6. Exhibits 33

SIGNATURES

SIGNATURES 34 2 Table of Contents

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements MACY'S, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (millions, except per share figures) 13 Weeks Ended 26 Weeks Ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 Net sales $ 4,812 $ 4,937 $ 9,411 $ 9,783 Other revenue 187 159 380 313 Total revenue 4,999 5,096 9,791 10,096 Cost of sales ( 2,900 ) ( 2,938 ) ( 5,695 ) ( 5,884 ) Selling, general and administrative expenses ( 1,944 ) ( 1,973 ) ( 3,856 ) ( 3,884 ) Gains on sale of real estate 16 36 32 37 Impairment, restructuring and other (costs) benefits ( 22 ) 1 ( 30 ) ( 19 ) Operating income 149 222 242 346 Benefit plan income, net 4 4 8 8 Interest expense, net ( 25 ) ( 31 ) ( 51 ) ( 62 ) Loss on extinguishment of debt ( 13 ) — ( 17 ) — Income before income taxes 115 195 182 292 Federal, state and local income tax expense ( 28 ) ( 45 ) ( 58 ) ( 80 ) Net income $ 87 $ 150 $ 124 $ 212 Basic earnings per share $ 0.32 $ 0.54 $ 0.45 $ 0.77 Diluted earnings per share $ 0.31 $ 0.53 $ 0.44 $ 0.75 The accompanying notes are an integral part of these Consolidated Financial Statements. 3 Table of Contents MACY'S, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (millions) 13 Weeks Ended 26 Weeks Ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 Net income $ 87 $ 150 $ 124 $ 212 Reclassifications to net income: Amortization of net actuarial loss and prior service credit on post employment and postretirement benefit plans included in net income, before tax 1 — 1 1 Tax effect related to items of other comprehensive income ( 1 ) — ( 1 ) ( 1 ) Total other comprehensive income, net of tax effect — — — — Comprehensive income $ 87 $ 150 $ 124 $ 212 The accompanying notes are an integral part of these Consolidated Financial Statements. 4 Table of Contents MACY'S, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (millions) August 2, 2025 February 1, 2025 August 3, 2024 ASSETS Current Assets: Cash

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Organization and Summary of Significant Accounting Policies Nature of Operations Macy's, Inc., together with its subsidiaries (the "Company"), is an omni-channel retail organization operating stores, websites and mobile applications under three nameplates (Macy's, Bloomingdale's and Bluemercury) that sell a wide range of merchandise, including apparel and accessories (men's, women's and kids'), cosmetics, home furnishings and other consumer goods. The Company has stores in 43 states, the District of Columbia, Puerto Rico and Guam. As of August 2, 2025, the Company's operations and operating segments were conducted through Macy's, Macy's Backstage, Macy's small format, Bloomingdale's, Bloomingdale's The Outlet, Bloomie's, and Bluemercury. Bloomingdale's in Dubai, United Arab Emirates and Al Zahra, Kuwait are operated under a license agreement with Al Tayer Insignia, a company of Al Tayer Group, LLC. A description of the Company's significant accounting policies is included in the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2025 (the "2024 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 2024 10-K. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are subject to inherent uncertainties which may result in actual amounts differing from reported amounts. The Consolidated Financial Statements for the 13 and 26 weeks ended August 2, 2025 and August 3, 202

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Comprehensive Income Total comprehensive income represents the change in equity during a period from sources other than transactions with shareholders and, as such, includes net income. For the Company, the only other components of total comprehensive income for the 13 and 26 weeks ended August 2, 2025 and August 3, 2024 relate to post employment and postretirement plan items. Settlement charges incurred are included as a separate component of income before income taxes in the Consolidated Statements of Income. Amortization reclassifications out of accumulated other comprehensive income (loss) are included in the computation of net periodic benefit cost (income) and are included in benefit plan income, net on the Consolidated Statements of Income. See Note 5, "Retirement Plans," for further information. Income Taxes On July 4, 2025, the United States enacted the One Big Beautiful Bill Act (the "OBBBA"). Included in this legislation are provisions that allow for the option to claim 100% accelerated depreciation deductions on qualified property, with retroactive application beginning January 20, 2025, and immediate expensing of domestic research and development costs, with retroactive application beginning January 1, 2025. The Company does not expect the provisions of the OBBBA to have a material impact to its estimated fiscal 2025 effective tax rate and expects the provisions to ultimately decrease its fiscal 2025 cash tax payments. Recent Accounting Pronouncements In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"). The amendments in this update enhance the transparency and decision usefulness of income tax disclosures, primarily through improvements to the rate reconciliation and income taxes paid information, specifically requiring (1) consis

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 2. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share: 13 Weeks Ended August 2, 2025 August 3, 2024 Net Income Shares Net Income Shares (millions, except per share data) Net income and average number of shares outstanding $ 87 271.0 $ 150 276.7 Shares to be issued under deferred compensation and other plans 0.8 1.0 $ 87 271.8 $ 150 277.7 Basic earnings per share $ 0.32 $ 0.54 Effect of dilutive securities: Restricted stock units 4.1 3.9 $ 87 275.9 $ 150 281.6 Diluted earnings per share $ 0.31 $ 0.53 26 Weeks Ended August 2, 2025 August 3, 2024 Net Income Shares Net Income Shares (millions, except per share data) Net income and average number of shares outstanding $ 124 273.8 $ 212 276.0 Shares to be issued under deferred compensation and other plans 0.9 0.9 $ 124 274.7 $ 212 276.9 Basic earnings per share $ 0.45 $ 0.77 Effect of dilutive securities: Restricted stock units 3.6 4.4 $ 124 278.3 $ 212 281.3 Diluted earnings per share $ 0.44 $ 0.75 In addition to the restricted stock units reflected in the foregoing table, stock options to purchase 5.9 million and 8.0 million shares of common stock and restricted stock units relating to 1.0 million and 0.3 million shares of common stock were outstanding at August 2, 2025 and August 3, 2024, respectively, but were not included in the computation of diluted earnings per share because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met. 11 Table of Contents MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 3. Revenue Net sales, which mainly consist of retail sales but also include merchandise returns, gift cards and loyalty programs, represented 96 % of total revenue for both the 13 and 26 weeks ended August 2, 2025 and 97 % of total revenue for both the 13 and 26 weeks ended August 3, 2024. Other revenue generating activities consist of credit card revenues and Macy's Media Network revenue. 13 Weeks Ended 26 Weeks Ended Revenues August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 (millions) Women's Accessories, Shoes, Cosmetics and Fragrances $ 1,954 $ 1,990 $ 3,896 $ 4,060 Women's Apparel 1,094 1,120 2,192 2,265 Men's and Kids' 1,028 1,056 1,980 2,037 Home/Other (a) 736 771 1,343 1,421 Total Net Sales 4,812 4,937 $ 9,411 $ 9,783 Credit card revenues, net $ 153 $ 125 $ 306 $ 242 Macy's Media Network revenue, net (b) 34 34 74 71 Other Revenue 187 159 380 313 Total Revenue $ 4,999 $ 5,096 $ 9,791 $ 10,096 (a) Other primarily includes restaurant sales, allowance for merchandise returns adjustments and breakage income from unredeemed gift cards. (b) Macy's Media Network is an in-house media platform supporting both Macy's and Bloomingdale's customers through a broad variety of advertising formats running both on owned and operated platforms as well as offsite. Macy's accounted for 84 % and 83 % of the Company's net sales for the 13 and 26 weeks ended August 2, 2025, respectively, and 85 % of the Company's net sales for both the 13 and 26 weeks ended August 3, 2024. In addition, digital sales accounted for 31 % and 29 % of the Company's net sales fo r the 13 weeks ended August 2, 2025 and August 3, 2024, respectively, and 32 % and 31 % of the Company's net sales for the 26 weeks ended August 2, 2025 and August 3, 2024, respectively. Retail Sales Retail sales include merchandise sales, inclusive of delivery income, licensed department income, Marketplace income, sales of pri

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) Gift Cards and Customer Loyalty Programs The Company only offers no-fee, non-expiring gift cards to its customers. At the time gift cards are sold or issued, no revenue is recognized; rather, the Company records an accrued liability to customers. The liability is relieved, and revenue is recognized, equal to the amount redeemed for merchandise. The Company records revenue from unredeemed gift cards (breakage) in net sales on a pro-rata basis over the time period gift cards are actually redeemed. At least three years of historical data, updated annually, is used to determine actual redemption patterns. The Company maintains customer loyalty programs in which customers earn points based on their purchases. Under the Macy's Star Rewards loyalty program, points are earned based on customers' spending on Macy's private label and co-branded credit cards as well as non-proprietary cards and other forms of tender. The Company's Bloomingdale's Loyallist and Bluemercury BlueRewards programs provide tender neutral points-based programs to their customers. The Company recognizes the estimated net amount of the rewards that will be earned and redeemed as a reduction to net sales at the time of the initial transaction and as tender when the points are subsequently redeemed by a customer. The liability for unredeemed gift cards and customer loyalty programs is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was $ 301 million, $ 353 million and $ 334 million as of August 2, 2025, February 1, 2025 and August 3, 2024, respectively. Credit Card Revenues In 2005, in connection with the sale of most of the Company's credit card accounts and related receivable balances to Citibank, the Company and Citibank entered into a long-term marketing and servicing alliance pursuant to the terms of a Credit Card Program Agreement ("Credit Card Program"). Subsequent to thi

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Unaudited) 4. Financing Activities Q2 2025 Debt Financing Activities The following table details the Company's debt repayments during the 26 weeks ended August 2, 2025 and August 3, 2024: 26 and 13 weeks ended August 2, 2025 August 3, 2024 (millions) Short-term debt 7.60 % Debentures due 2025 $ 6 $ — 6 — Long-term debt 6.79 % Senior debentures due 2027 27 — 6.70 % Senior exchanged debentures due 2028 54 — 8.75 % Senior exchanged debentures due 2029 13 — 5.875 % Senior notes due 2029 326 — 5.875 % Senior notes due 2030 224 — 644 — Total debt $ 650 $ — On July 29, 2025, Macy's Retail Holdings, LLC ("MRH"), a wholly owned subsidiary of Macy's, Inc., completed an offering of $ 500 million in aggregate principal amount of 7.375 % senior notes due 2033 (the "2033 Notes"

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