Macy’s Earnings: Strategy Brings Holiday Results Above Expectations

Key Morningstar Metrics for Macy’s

• Fair Value Estimate

  : $24.00

• Morningstar Rating

  : ★★★★

• Morningstar Economic Moat Rating

  : None

• Morningstar Uncertainty Rating

  : High

What We Thought of Macy’s Earnings

Led by a 9.9% increase at Bloomingdale’s, Macy’s M total comparable sales grew 1.8% in 2025’s fourth quarter. The firm’s gross margin on net sales fell 0.5 percentage points to 35.2% due to higher tariff expense, while its selling, general, and administrative expense margin rose 0.1 percentage points to 29.8%.

Why it matters: Macy’s is now in the final year of its three-year “Bold New Chapter” strategy to expand its premium offerings, operate more quickly and efficiently, and close weak stores while improving the productivity of the rest. We see progress in each of these areas.

• Macy’s $1.67 in adjusted EPS beat our estimate by $0.15, as we had expected a small (0.7%) comparable sales decline. We think these results evidence that Macy’s has improved its appeal to consumers by investing in its stores and merchandise while cutting unnecessary costs.

The bottom line: Macy’s shares are undervalued relative to our $24 fair value estimate, which we do not expect to change materially. We rate it as no-moat, as competition has ravaged US department stores, but we think investors underestimate how its efforts will stabilize sales and margins.

• Long term, we forecast 1.0% comparable sales growth and 4.5% operating margins. These are not aggressive expectations, but Macy’s single-digit price/earnings ratio seemingly implies that it is in terminal decline, which we do not believe to be the case.
• Although Macy’s 2026 guidance for comparable sales (down 0.5% to up 0.5%) is slightly below our estimate (up 1%), we view the difference as minimal given that there are still about 65 underperforming stores to be closed and uncertainty around economic conditions is high.

Between the lines: We think Bloomingdale’s benefits from the recent Saks bankruptcy, as well as creative marketing and brand additions. Moreover, the Saks downsizing could open opportunities for more Bloomie’s and outlet locations, potentially offsetting some sales losses from closed Macy’s stores.