Macy's delivers 3.2% comp sales growth and $0.09 adjusted EPS, driven by bold new chapter strategy and robust customer engagement

Greetings and welcome to The Macy's Inc. Third quarter 2025 earnings conference call. At this time, all participants are on a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star 0 on your telephone keypad. As a reminder, this call is being recorded. I would now like to turn the call over to Pamela Quintigliano, Vice President of Investor Relations. Pamela, you may now begin.

Thank you Operator Good morning, everyone and thanks for joining us. With me on the call today are Tony Spring, our chairman and CEO, and Tom Edwards, our COO and CFO. Along with our third quarter 2025 press release, a Form 8K has been filed with the Securities and Exchange Commission and a presentation has been posted on the Investor section of our website, macysinc.com and is being displayed live during today's webcast. Unless otherwise noted, the comparisons we provide will be versus 2024. All references to our prior expectations, outlook or guidance refer to information provided on our September 3rd earnings call. On today's call we will refer to certain non GAAP financial measures. Reconciliations of these measures can be found in our earnings presentation and SEC Filings available at www.macysinc.com/investors. All references to comp sales throughout today's prepared remarks represent comparable Owned plus License plus Marketplace sales and the Owned plus Licensed sales for our store locations. Unless otherwise noted. Go Forward Macy's Inc. Comp sales include the approximately 350 Macy's Go Forward locations in digital and Bloomingdale's and Bluemercury nameplates inclusive of stores in digital. Go Forward Macy's comp sales include the approximately 350 Macy's go forward locations and Macy's Digital. All forward looking statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today. Detailed discussion of these factors and uncertainties is contained in our filings with the sec. Today's call is being webcast on our website. A replay will be available approximately two hours after the conclusion of this call. With that, I'll turn it over to Tony.

Good morning and thank you for joining us today. We're encouraged by recent results which reflect the accelerating momentum of our bold new chapter strategy. The fundamental enterprise wide changes we are making are resonating with our customers. Initiatives are gaining traction across all three pillars of our strategy and driving broad based operational and financial improvements for the third quarter we delivered growth across key metrics and results were meaningfully better than expected. Macy's Inc. Net sales, comparable sales core, adjusted EBITDA and adjusted diluted EPS all exceeded our guidance with positive contributions from each nameplate. Macy's had its strongest Comp growth in 13 quarters led by Go Forward Business which achieved another quarter of positive comps. Bloomingdale's posted its fifth consecutive quarter of growth and its best comp in 13 quarters and Bluemercury recorded another consecutive quarter of comparable sales growth. I want to thank our teams and our partners. You're an integral part of our success. Results reflect your diligent execution of the Boulder Chapter strategy. We have a shared ambition for Macy's Inc. And together we are making significant progress towards achieving our goal of sustainable, profitable growth. Turning to a more detailed view of the quarter, Macy's Inc. Delivered a positive 3.2% comp with go Forward Macy's Inc. Continuing to outperform, growing 3.4%. Adjusted EPS of $0.09 was well above our guidance range of a loss of 15 to $0.20 and above last year's third quarter result of $0.04. EPS was driven by better than expected net sales. Comparable sales gross margin and SGA end of quarter inventories were in line with our expectations and we have a compelling mix of newness across brands, categories and price points for the peak holiday season. Looking at the evolving retail landscape, consumers are more discerning about how and where they spend their dollars. They want curated product assortments, consistent service and a seamless Omni channel shopping experience. And that's exactly what we're striving to deliver through the three pillars of our bold new chapter. Strengthening and reimagining the Macy's nameplate, accelerating and differentiating luxury and simplifying and modernizing end to end operations. Let's discuss how each pillar contributed to our better than expected third quarter results beginning with strengthening and reimagining Macy's Macy's nameplate achieved 2% comparable sales growth its second quarter of positive results and a sequential improvement from the prior quarter. Performance was driven by Go Forward Macy's which rose 2.3% inclusive of reimagined 125 stores which were up 2.7%. Macy's nameplate also benefited from digital growth inclusive of Macy's marketplace as well as the ongoing outperformance of our off price concept. Backstage, we believe Macy's results reflect a positive response to improvements in our omnichannel customer experience, brand curation and category offerings. We are seeing this drive momentum in our Reimagine125 locations and in the broader Macy's business. Turning to the customer experience, one of the best ways to measure progress is through our Net Promoter scores. We view this as an important measure of customer sentiment and a leading indicator of future sales. Notably, Macy's delivered its highest third quarter Net Promoter score on record. Customer emails serve as another valuable form of feedback and I read every one I receive. Recently a customer visited our Clearwater, Florida store to buy a suit for a wedding. He wrote, quote, your colleague Andrew had me outfitted not just with clothes but with confidence. He treated me with patience, kindness and professionalism. As he was helping me, he assisted a young man shopping for his very first interview suit. He took the time to show him how to wear it, carry himself and even shared some encouraging words. Employees like him remind me that Macy's is a place where people can walk out feeling seen, valued and better than when they walked in. Andrew is a great example of how customer relationships are strengthened when our colleagues demonstrate hospitality and care. As part of our bold new chapter strategy, we are enhancing our selling education to improve colleague engagement and provide our customers with a seamless shopping experience. In addition to a better experience, we are elevating our product curation to deliver a more inspiring mix of newness and fashion. Our merchants continue to be focused on the clarity of our offering, enhancing variety and reducing redundancies. Our strong balance sheet, large addressable market and and loyal customer base are attractive. Differentiators and brands are eager to work with us. Recently we introduced Rod and Gun, Reiss and Prada Beauty and expanded Barber, MacKenzie, Childs and mfk. Looking at category performance, we delivered year over year improvements across all lines of business. Fine jewelry, watches, handbags, men's career and readywear outperformed the total Macy's comp while active categories were softer. The variety of brands and categories we offer speak to our fashion authority and the relevancy in a way we haven't for years and we are not done. We're committed to bringing Macy's to the consideration set of even more shoppers and our Reimagine125 locations are providing a roadmap for that future. When I walk these locations, I'm inspired. We are methodically working to improve the experience in each area of the store. They are now better organized, easier to shop and have a more compelling visual presentation. Within each category. We're driving higher interest and engagement through increased differentiation. We're carving out floor space to leverage new trends and maintaining a presence in categories and brands that we're known for. Now I'd like to provide a perspective on how we're approaching the fourth quarter at Macy's. Holiday is core to who we are. It's where our brand heritage and customer relationships are strongest and where we consistently deliver differentiated experiences. This year over 34 million people tuned in to watch the Macy's Thanksgiving Day Parade, setting a new all time record. The parade was the most watched live Entertainment event in seven years and the second most watched event of 2025 behind only the Super Bowl. We continued our tradition of blending beloved classics with contemporary culture, debuting Buzz Lightyear, Pac Man, Mario and characters from the smash hit K Pop Demon Hunters, including a live performance by Huntrix. In addition, Pop Mart, the makers of labubu, had a Friendsgiving and Pop City Float. These floats and balloons nicely complement our Herald Square in store experiences with Pac Man, Disney, Marvel and Pop Mart, just to name a few. Congratulations to our entire team. I knew you're already hard at work on next year's 100th parade celebration. Our Holiday campaign, the Most Wonderful Stories Start Here is in full swing. It serves as a storytelling platform for holiday emotion and nostalgia across channels and touch points, messaging highlights a mix of new brands, key items, exclusive products and incorporates a more personalized approach to customer communication. We have built on last year's success with our 25 days of gifting campaign, featuring new curated gift lists each day and holiday markets in Herald Square and our Chicago State street locations. In addition, Alison Brie is back as our personified Gift guide, appearing across broadcast and our digital platforms. And we're leveraging our iconic Santaland IP with Santa visiting 11 markets this year. Our campaigns and events are supported by a comprehensive 360 degree media mix that features social influencers and celebrities, including a partnership with Jennifer Hudson and our first ever Chief Ornament Officer Hannah Strickland. The nine year old who has won the hearts and minds of so many with her exuberant reaction to shopping Macy's Holiday Lane. Summing up the Macy's nameplate, I'm encouraged by recent results which reinforce our belief that we have the initiatives in place to deliver long term growth. Turning to our second pillar of the bold new chapter strategy Accelerating and Differentiating Luxury in the third quarter, momentum built at Bloomingdale's. Yblue Mercury had another quarter of positive comparable sales at Bloomingdale's. We're making great progress on our ambition of being the Omnichannel local leader in the markets we serve. We've cultivated a unique multi generational customer base that's incredibly loyal, including the luxury customer of the future, and are taking share across categories, regions and brands. Bloomingdale's delivered another impressive quarter, achieving a positive 9% comp which was its best in 13 quarters as well as a sequential improvement in its Net Promoter score. This speaks to the differentiated, aspirational positioning which continues to resonate with consumers. Our success is built on strong brand partnerships. We're deeply focused on nurturing those and on being the most reliable and innovative partner in the market. During the third quarter, we continue to expand the breadth of the brands we offer, introducing a number of important designer brands including Toteme, Twp, Zimmerman, Victoria Beckham, Christian Louboutin and Roger Vivier. Just to give a few examples. From a category perspective, ready to wear men's apparel, fine jewelry, shoes and tabletop all outperformed. Bloomingdale's is truly unique in the marketplace. We serve as a house of discovery, providing an experience that's vibrant, inviting, original and anchored on exceptional customer service. In the fourth quarter, we're building on our recent success. Our holiday campaign Happy Together leverages Bloomingdale's appeal as a destination shopping experience that brings loved ones together. The campaign is wide ranging, spanning window displays in store experiences, a curated gift guide and compelling digital messaging. In addition, we have several exclusive collaborations including our Aqua and Salvador Rizza collection. A core component of Bloomingdale's holiday campaign is our unique partnership with Burberry. This season we're offering an exclusive Omni Channel collection for the whole family including a custom designed carousel, pop up shop and Windows as well as our famous Holiday Bear. We invite those of you in New York City to visit our 59th street flagship store to see an illuminated Burberry plaid scarf that wraps the entire building. Looking ahead, there are a number of opportunities to further strengthen Bloomingdale's position. We have significant opportunities to grow in markets we serve as well as expand existing distribution, increase our digital penetration and open additional small format blumies and outlet locations. By staying nimble and personalizing all elements of the customer experience from access to special products and customer activations to digital elevation, we will further differentiate Bloomingdale's as the leading modern luxury destination. Rounding out the conversation on luxury, Bluemercury achieved a 1.1% comparable sales growth representing another quarter of gains. Results continue to be driven by dermatological skin care and expanded brand partnerships including Perfume De Marly, Byredo and Sicily of Paris. We remain confident in the long term growth profile of our luxury category and are excited about the strategies we have in place. The final pillar of the Bouldry Chapter strategy is simplifying and modernizing end to end operations. In the third quarter, we achieved a key milestone on our end to end journey with the opening of our new China Grove Distribution Center. This state of the art facility incorporates automation, robotics and AI into our delivery ecosystem. It propels us into the future and ensures we're able to exceed customer expectations for accuracy and timeliness of deliveries and further reduce our delivery costs. Now let's discuss our thoughts on the consumer and the early read on holiday. Starting with the consumer health, our customer base, which is predominantly middle to upper income, remained resilient and engaged in the third quarter. We have strong visibility on the factors that are in our control. These include inventory discipline, composition and the level of newness as well as improved experiences and messaging. We're pleased with the start of the fourth quarter. However, the majority of the sales volume is still ahead of us and we believe it's prudent continue to incorporate a more trustful consumer into into our guidance for the remainder of the quarter. The assumption is consistent with our prior view. To conclude, I remain excited by our customer response to the meaningful changes we're making under the bold new chapter strategy. We now have achieved three consecutive quarters of better than expected top and bottom line results and two consecutive quarters of comparable sales growth. These results further illustrate the benefits of being multi brand, multi category and multi channel. Our unique positioning provides sourcing, optionality, economies of scale and brand, product and price diversification and our off price to luxury offerings combined with our strong financial position enable us to continue to expand existing relationships, attract new partners and lean into other areas of opportunity. With that, let me turn it over to Tom.

Thank you Tony and good morning everyone. In the third quarter customers responded well to the substantive enterprise wide enhancements we are making under our bold new chapter strategy. We are encouraged by recent performance. Macy's Inc.. Comparable sales of 3.2% were our strongest in 13 quarters. Go forward comps were up 3.4% with growth across all nameplates. An adjusted EPS of $0.09 was well above the high end of our guidance on better than expected sales, gross margin and sga. Looking at a detailed view of the quarter, Macy's Inc.. Net sales of 4.7 billion were down 0.6% or about 29 million to last year. The sales decline was entirely attributable to the 64 non go forward stores that closed at the end of last year. These contributed roughly 160 million to sales in the year ago period. Excluding the impact of these planned closures, Macy's Inc.. Sales grew 2.9%. This represents an acceleration from second quarter sales growth of 0.9%. When similarly adjusted for closed stores by nameplate, Macy's net sales were down 2.3%. Macy's comparable sales were up 2%. While Go Forward comparable sales continued to outperform rising 2.3%. Reimagine 125 comparable sales rose 2.7%. Both the first 50 and the next 75 locations achieved another quarter of positive comparable sales results. Net promoter scores at these locations continued to exceed the broader fleet. In luxury, Bloomingdale's net sales rose 8.6% and comparable sales were up 9% and Blue Mercury net sales were up 3.8% and comparable sales were up 1.1%. Turning to revenue, total revenue was 4.9 billion. Other revenue which is comprised of credit card and Macy's media Network was 200 million. Within that credit card revenue was 158 million or 38 million higher than prior year. Credit card revenue continued to be driven by our healthy credit portfolio and the prudent management of net credit card losses as as well as growth in new applications. Macy's Media Network revenue was 42 million, roughly flat with the prior year gross margin was 1.9 billion or 39.4% of net sales compared to 39.6% last year. Excluding a 50 basis point tariff impact, gross margin rate would have expanded approximately 30 basis points. The third quarter tariff impact was lower than anticipated as mitigation actions performed well. This led to a better than expected gross margin rate. Traffic was positive and AUR continued to increase primarily due to a favorable mix shift and positive customer response to newness across classifications. SGA expense of 2 billion declined 40 million from last year reflecting the net benefit from our closed Macy's locations and and continued cost containment efforts. This was partially offset by ongoing investments in our go forward business which we view as imperative to driving healthy and sustainable top line growth. As a percent of total revenue we levered SGA expense by 90 basis points to 41.2% compared to 42.1% in the prior year. Benefiting from revenue growth, diligent expense management and a modest shift in timing of expenses during the quarter we recognized 12 million in asset sale gains. This compares to our expectation of 20 million and 66 million last year. We remain committed to closing underproductive stores and are being disciplined with our approach to transactions. The strength of Our balance sheet provides us with the patience and flexibility to ensure we are achieving the best value. Core adjusted EBITDA, which is adjusted EBITDA excluding asset sale gains was $273 million or 5.6% of total revenue. This was above our guidance of 3.3 to 3.7% and last year's result of 4.2%. Adjusted EBITDA was 285 million or 5.8% of total revenue compared to 5.6% last year. Third quarter adjusted EPS of $0.09 was also well above our guidance of a loss of 15 to $0.20 and compared favorably to $0.04 last year. Inventory dollars were up 0.7% to last year in line with our expectations reflecting tariff related cost increases on a unit basis. Inventories were down and we are well positioned for holiday we continue to take a disciplined approach to our cash flow and balance sheet. Year to date, operating cash flow was 247 million versus an outflow of 30 million last year and free cash flow was an outflow of 183 million versus an outflow of 492 million last year. Capital expenditures were 525 million down from 649 million spent last year and monetization proceeds were 95 million compared to 187 million last year. We returned 350 million to shareholders through 149 million of consistent quarterly cash dividends and 201 million of share repurchases, including 50 million of buybacks in the third quarter. This leaves approximately 1.2 billion remaining on our buyback authorization and we ended the quarter with $447 million of cash on our balance sheet compared to $315 million last year. Turning to end to end operations, we continue to improve our network and make strategic investments to increase speed of delivery and reduce costs. We believe further opportunity remains with the recent opening of our new Customer Fulfillment and Store Replenishment center in China Grove, North Carolina. Outfitted with the latest automation solutions, it is the company's largest and most technologically advanced distribution center. I want to thank our supply chain and broader teams for this tremendous accomplishment. Positioned in the southeast, the 2.5 million square foot facility expands our reach, enabling faster, more efficient service for millions of customers by supporting all product categories from apparel and beauty to home and toys. More orders can be shipped from a single location, helping customers receive everything they need faster and in fewer boxes. The China Grove facility is initially supporting customer fulfillment and store replenishment for the Macy's nameplate, with plans to expand to additional nameplates. Now I would like to turn to guidance. We entered the fourth quarter well positioned. We are confident we have a compelling mix of categories and brands across a variety of price points to satisfy our customers holiday needs and these are supported by exciting marketing campaigns, events and experiences designed to activate and engage customers. As Tony mentioned, we are pleased with the start of the fourth quarter with the majority of our sales volume still ahead. Our guidance continues to incorporate a more choiceful consumer assumes that the current tariffs remain in place and provides flexibility to respond to changes in consumer demand and the competitive landscape. For the fourth quarter we expect net sales of approximately $7.35 billion to $7.5 billion. As a reminder, last year's store closures contributed about $200 million to sales in the comparable period. Comparable sales to be down approximately 2.5% to flat with go forward comparable sales down 2% to flat. Core adjusted EBITDA is a percent of total revenue of 9.4% to 10.1% and adjusted EPS of $1.35 to $1.55. We are now expecting fourth quarter asset sale gains of roughly 15 to 20 million compared to our prior expectation of 38 million. This impacts fourth quarter adjusted EPS by approximately 5 to 6 cents relative to our prior expectation. Based on fourth quarter guidance, our revised full year 2025 guidance assumes net sales of approximately $21.475 billion to $21.625 billion. As a reminder, fiscal 2024 store closures contributed roughly $700 million to net sales. Comparable sales to be flat to up 0.5% with Macy's Inc.. Go forward comparable sales to be flat to up roughly 1%. Other revenue of approximately 830 to 840 million with credit card revenues expected to be roughly 635 to 645 million and Macy's Media Network to be approximately 195 million. Gross margin as a percent of net sales to be 37.7% to 37.9%. This is better than our prior expectation. Reflecting effective tariff mitigation efforts including shared cost negotiations, vendor discounts and strategically raising tickets. We now estimate a 40 to 50 basis point tariff impact to gross margin which equates to roughly 25 to 35 cents of EPS. This is below our prior expectation of 40 to 60 basis points and 25 to 40 cents of EPS SGA to be down low single digits on a dollar basis to last year with fourth quarter dollars also down low single digits. As we maintain our disciplined approach to expenses, we will continue to invest in areas that are contributing to our growth profile Asset sale gains of about 60 to 65 million compared to our prior expectation of 90 million and 144 million last year. Core adjusted EBITDA as a percent of total revenue of 7.5 to 7.7% adjusted EBITDA of 7.8 to 8% interest expense of roughly 100 million reflecting our recent financing transactions. And finally, we have raised our expected adjusted EPS to $2 to $2.20. The previously mentioned change in asset sale expectations has a roughly 7 to 8 cent impact on annual EPS relative to our prior guidance. Our guidance does not include additional share buybacks. In conclusion, we are encouraged by recent results. We have a healthy balance sheet including ample liquidity and a disciplined capital allocation strategy. We remain committed to thoughtfully navigating the near term as we execute against our long term goals. Now let me turn the call back.

To Tony Thanks Tom. Change has come to Macy's Inc. We are giving our customers even more reasons to shop with us. I encourage you to visit our stores, our website or the apps. The difference from when we first embarked on the bold new chapter 20 months ago are palpable. The strategy is gaining traction and our teams across nameplates are energized and fully committed to delivering long term growth. And with that Operator we're now ready for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please limit yourself to one question and one follow up question. One moment please. While we poll for questions, our first question is coming from Matthew Boss of JP Morgan. Please go ahead.

Great. Thanks and congrats on the improvement.

Thanks Matt.

So Tony: With two straight quarters of positive comps, could you speak to traction that you're seeing with your reimagined store initiatives as it relates to traffic versus basket? And could you elaborate on November comp trends and customer behaviors that you're seeing maybe relative to the third quarter?

Sure Matt. Thanks for the question. We're definitely seeing traction in the Reimagine 125. That's positive growth in both the first 50 and the next 75. That sequential improvement at 2.7% comp. It's a reaction I think of customers to new brands to better Presentation to more colleagues in the right place at the right time. We've seen consistent traffic in our stores and in the digital business, frankly, and continued improvement in AUR. So we come out of the third quarter and as we said, the fourth quarter pleased so far, but we obviously have a very big part of the fourth quarter in front of us. So we're taking that choiceful approach to this aspirational customer that shows up in force the latter part of the fourth quarter. So we just had an echo here. Apologies. So just wanted to make sure that the guidance obviously is not a ceiling. It's intended to show the guardrails of how we're thinking about the business. And we come out of the month of November as we came out of the third quarter confident in our strategy.

Thank you. Next question is coming from Brooke Roach of Goldman Sachs. Please go ahead.

Good morning and thank you for taking our question. Tony: What are the most important drivers in the business that you think can sustain the momentum as you look ahead into 2026, as you continue to execute the bold new chapter strategy? How are you thinking about the opportunity for core adjusted EBITDA margin delivery? Do you see the recent tariff margin pressure as recaptureable into 2026? Thank you.

Thanks, Brooke. Appreciate the question. The drivers of the business are not unlike what we've been talking about. It's having the right product assortment that is less redundant and more variety. It's having the right balance of good, better, best across the entire matrix of our assortment. It's having the right balance as an omnichannel retailer of having a good physical business and a good digital business, which by the way, we had a good digital business and a good physical business across all three nameplates. It's making sure that we shed underproductive stores which again, when you look at the third quarter comp, you don't have $170 million of closed store volume in that number. Which is why the go forward comp is so important to measuring our performance quarter to date, year to date, and what we've guided for the fourth quarter in terms of core ebitda. I'm really pleased with the core EBITDA result because if you look at the shortfall in asset sale gains, our performance is better than a year ago and better than our guidance and it's better than a year ago with $170 million less in sales. Same is true for the fourth quarter. So I look at the opportunities being navigate the tariffs. They don't go away. So they are a part of how we have to operate in 2026, unless something changes with the courts. And we have the ability as a multi channel, multi category, multi brand, multi price point retailer to offer the customer what and where and how the way they want to shop. I think this is a perfect opportunity for a department store to lean into what we're very best at, which is offer a broad range of assortment and not let the tariff impact get in the way of our comp performance.

And Brooke, I'll add in here, when we look at our full year guide, which we were really pleased to raise as we beat Q3, we're now in a range where we're equal to where we were at the beginning of the year, and that's with a tariff impact of 25 to 35 cents built in and a slightly lower ASG around that 7 to 8 cents. So it's.