Macy’s raises full-year outlook as luxury sales strengthen and tariff refunds lift Q2 profit

Macy’s raised its annual outlook on September 10 as another quarter of double-digit growth at Bloomingdale’s helped sustain sales gains across its brands. Tariff refunds supplied a substantial boost to second-quarter profit, but the retailer plans to spend most of that money during 2026, leaving a smaller benefit in its full-year earnings forecast.

Luxury growth outpaces the namesake chain

Companywide net sales rose 1.1% to $4.866 billion in the second quarter of fiscal 2026, against $4.812 billion a year earlier. The comparison covers the 13 weeks ended August 1, 2026, and August 2, 2025.

Comparable sales increased 2.7%, following 3.0% growth in the first quarter. That measure includes owned, licensed and marketplace sales. The company’s go-forward measure, covering continuing locations and digital operations across its three nameplates, increased 2.8%. Net sales grew 1.9% when the effect of fiscal 2025 store closures was excluded; those closed stores had contributed approximately $35 million in the prior-year second quarter.

Bloomingdale’s led with an 11.3% comparable-sales increase, accelerating from 10.2% in the first quarter. Macy’s said the luxury chain delivered its second consecutive quarter of double-digit growth and its highest second-quarter sales volume in brand history.

The namesake Macy’s chain recorded its fifth consecutive quarter of comparable-sales gains, though growth slowed to 1.1% from 1.6% in the first quarter. Its Reimagine 200 locations again outperformed the broader nameplate, rising 1.9%, compared with 2.4% in the first quarter. Bluemercury grew 6.2%, after 6.4%. All nameplate comparisons use the go-forward basis.

The pattern gives management evidence that its investment priorities are producing sales growth, while showing that momentum remains uneven. The 10-Q says Reimagine locations account for approximately 60% of Macy’s go-forward store fleet and 75% of its go-forward sales. Their performance reflects targeted spending on staffing, events and localized merchandising, the company said. Big-ticket categories continued to underperform their year-earlier results, though they improved from the first quarter.

Chairman and Chief Executive Officer Tony Spring attributed the performance to the company’s Bold New Chapter strategy and investments across its portfolio. For the second half, he said the focus would be on scaling what customers respond to, including “exciting brands and assortments and compelling events and experiences.”

Refunds explain most of the margin expansion

GAAP net income reached $169 million, compared with $87 million a year earlier, and diluted earnings per share doubled to $0.62 from $0.31. Adjusted net income was $170 million versus $98 million, with adjusted diluted EPS of $0.63 against $0.35.

Both current-quarter EPS measures included a $0.23 net tariff-refund benefit after investments back into the business. Excluding that after-tax benefit, adjusted EPS was $0.40, up from $0.35 last year. That is the basis for the company’s reported 14% earnings growth excluding refunds, and provides a more useful comparison of the quarter’s progress than the headline EPS increase alone.

Gross margin—the share of net sales remaining after cost of sales—rose 180 basis points to 41.5%. Macy’s identified a 180-basis-point benefit from net tariff refunds and a 10-basis-point headwind from ongoing tariff and fuel costs. Before those effects, the underlying improvement was 10 basis points. Refunds therefore accounted for overwhelmingly more of the reported expansion than underlying margin improvement.

Selling, general and administrative expenses increased $16 million to $1.96 billion, reflecting higher sales-related costs and strategic investments, partly offset by cost management. Those expenses nevertheless fell 20 basis points as a share of total revenue, to 38.7%, as revenue growth absorbed more of the expense base.

Adjusted EBITDA, an earnings measure before interest, taxes, depreciation and amortization and specified adjustments, increased to $457 million, or 9.0% of total revenue, from $373 million, or 7.5%.

Revenue beyond merchandise sales also contributed. Other revenue rose 3.2% to $193 million. Credit-card net revenue increased 2.0% to $156 million, supported, Macy’s said, by a healthy credit portfolio and stable net credit-card losses. Media Network net revenue grew 8.8% to $37 million, reflecting advertising-partner engagement.

Third-quarter loss forecast accompanies second-half investment

Macy’s forecasts third-quarter net sales of $4.65 billion–$4.70 billion and comparable-sales growth ranging from a 0.5% decline to a 0.5% increase. It expects an adjusted EBITDA margin of 3.7%–4.0% of total revenue and an adjusted diluted loss of $0.23–$0.19 per share.

That outlook allows for substantially slower comparable-sales growth than in the second quarter. It assumes a tax rate in the mid-30% range and reduced tariff headwinds relative to previous assumptions for the balance of the year. Stores closed in fiscal 2025 contributed approximately $30 million of sales in the prior-year third quarter, affecting the net-sales comparison.

Macy’s has received all expected refunds under the International Emergency Economic Powers Act: $98 million during the second quarter and $18 million afterward, totaling $116 million. The presentation identifies $95 million of second-quarter gross-margin benefit and $3 million of interest benefit, followed by $17 million and $1 million, respectively, in the third quarter.

The company plans $96 million of refund-funded reinvestment during 2026: $14 million in the second quarter and $82 million across the third and fourth quarters combined. The remaining $18 million of refunds, less that $82 million of spending, produces a net second-half earnings drag of $64 million before tax, or approximately $0.18 per share on an adjusted basis. That second-half effect is separate from the third-quarter adjusted loss forecast.

Across the full year, the deployment plan leaves $20 million of pretax benefit and approximately $0.05 per share in adjusted earnings, following the $0.23 second-quarter net benefit. The June outlook had excluded potential tariff refunds. Macy’s says the spending will support brand building, customer value, Reimagine store pilots for expansion in 2027 and protection against uncertain fuel costs.

Higher annual earnings alongside a larger spending plan

The September outlook raises both ends of the annual adjusted EPS range by $0.15. Higher sales and gross-margin forecasts sit alongside increased operating and capital spending, while lower expected net interest expense and a smaller diluted share count also support the earnings calculation.

Other revenue remains forecast at $920 million, and the adjusted tax-rate assumption is unchanged at 24.3%. The presentation’s broader assumptions describe a full-year tax rate in the mid-20% range, digital sales slightly above one-third of net sales and approximately $900 million of depreciation and amortization.

The annual sales comparison reflects roughly $145 million contributed in fiscal 2025 by stores subsequently closed, including about $40 million in the prior-year fourth quarter. Management expects Reimagine 200 and digital performance to be partly offset by continuing Macy’s locations that have yet to receive initiatives and stores planned for closure in 2026 and beyond. Guidance includes planned investment in Reimagine 200 and the luxury nameplates, all anticipated future cost savings and lower tariff headwinds for the remaining year. It excludes future share repurchases under the existing authorization.

The adjusted earnings definitions exclude real-estate sale gains and benefit-plan income, along with other specified items; the 10-Q confirms that the revised disclosures do not change GAAP results. Macy’s does not reconcile its forward-looking adjusted earnings measures to GAAP forecasts because it says the timing and size of excluded items cannot be estimated reliably.

Cash generation includes a substantial settlement receipt

First-half operating cash flow increased to $586 million from $255 million. The 10-Q attributes the improvement primarily to $328 million received in the first quarter from settlements of credit-card interchange-fee litigation. That receipt matters when assessing how much of the cash improvement reflects recurring operations.

Capital expenditures totaled $324 million, comprising $153 million of property and equipment purchases and $171 million of capitalized software, compared with $343 million in the prior-year first half. Macy’s reported first-half free cash flow of $262 million, against an $88 million outflow a year earlier, under its revised definition.

The presentation now excludes net proceeds from asset dispositions from free cash flow. Its calculation subtracts property and equipment purchases and capitalized software from operating cash flow, matching the underlying 10-Q figures. The $35 million of net asset-disposition proceeds received in the first half is therefore outside that measure.

Separately, Macy’s continues to expect approximately $650 million–$700 million of cash proceeds across its closure program, with $250 million–$300 million expected in fiscal 2026 and beyond. Those proceeds provide another source of cash, distinct from the revised free-cash-flow measure.

Quarter-end cash and equivalents totaled $1.294 billion, compared with $829 million a year earlier. Available borrowing capacity under the asset-based credit facility was $1.958 billion after outstanding letters of credit, with no borrowings under the facility. Total debt was about $2.4 billion; Macy’s reported no material long-term debt maturities until 2030.

Merchandise inventories rose 2.5% year over year, compared with 3.6% growth at the end of the first quarter. Management described the inventory composition and level as well positioned for the second half; subsequent sales and margins will help test that assessment.

Macy’s paid $51 million in quarterly dividends and repurchased 2.2 million shares for $50 million during the quarter. Approximately $1.0 billion remained under its $2.0 billion repurchase authorization. The next declared dividend, 19.15 cents per share, is payable October 1 to shareholders of record at the close of business September 15.

The next operating test is whether sales growth and investment returns hold through the second half as refund-funded spending reduces the earnings benefit. Macy’s cautioned that economic and geopolitical conditions could affect discretionary spending, while the holiday season remains central to its annual results.