Macy's reported second-quarter 2025 net sales of $4.8 billion, surpassing analyst estimates, and subsequently raised its full-year guidance for both net sales and adjusted diluted earnings per share. This performance, despite a year-over-year sales decline, reflects the retailer's strategic initiatives and has garnered a cautiously bullish market response.

Macy's, Inc. (NYSE: M) reported net sales of $4.8 billion for the second quarter of 2025, exceeding both company and analyst expectations. This performance, coupled with an upward revision of its full-year guidance for net sales and adjusted diluted earnings per share (EPS), has led to a positive reaction in the market, signaling investor confidence in the retailer's strategic direction. Despite a 2.5% decrease in net sales year-over-year, largely attributed to planned store closures, comparable sales demonstrated growth, with an increase of 0.8% on an owned basis and 1.9% on an owned-plus-licensed-plus-marketplace (O+L+M) basis.

Second Quarter Financial Highlights

For the second quarter, Macy's delivered adjusted diluted EPS of $0.41, significantly surpassing the company's own guidance and analyst forecasts. This contrasts with a GAAP diluted EPS of $0.31. Net income for the quarter stood at $87 million, a decrease from $150 million in the second quarter of 2024, partly due to proactive markdowns and ongoing tariff impacts. Adjusted net income was $113 million, down from $149 million in the prior year.

The company's luxury segments, Bloomingdale's and Bluemercury, continued to exhibit robust growth. Bloomingdale's posted its fourth consecutive quarter of growth with comparable sales up 3.6% on an owned basis and 5.7% on an O+L+M basis. Bluemercury recorded its 18th consecutive quarter of gains, with comparable sales rising by 1.2%.

Merchandise inventories decreased by 0.8% year-over-year, indicating effective inventory management. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter was $393 million, representing 7.9% of total revenue.

Market Reaction and Strategic Context

The market responded favorably to Macy's Q2 results, with the stock experiencing a notable increase in pre-market trading following the announcement. This positive movement for M underscores investor optimism stemming from the better-than-expected earnings and the raised full-year outlook, even as the broader Department Store Retailers segment faces ongoing challenges.

The company's "Bold New Chapter" strategy appears to be yielding tangible results. Initiatives such as the "Reimagine 125" locations, which focus on enhanced staffing, visual merchandising, and exclusive product offerings, achieved comparable sales growth of 1.1% on an owned basis and 1.4% on an owned-plus-licensed basis, outperforming the broader Macy's nameplate. This strategy also involves optimizing the store portfolio, with plans to close 66 underperforming stores in 2025 and a total of 150 by 2026, reallocating resources to 350 "go-forward" locations.

Broader Implications and Balance Sheet Strength

The gross margin rate for the quarter declined by 80 basis points to 39.7%, primarily due to strategic markdowns aimed at managing inventory levels and the impact of goods purchased at previously higher tariff rates. The company anticipates that tariffs will continue to affect gross margins, projecting a reduction of 40 to 60 basis points for the full fiscal year 2025, which could translate to an estimated $0.25 to $0.40 impact on EPS.

Macy's concluded the second quarter with a strong financial position, reporting cash and cash equivalents of $829 million and $2.0 billion in available borrowing capacity. The company also strengthened its balance sheet by reducing long-term debt by approximately $340 million through recent financing transactions. Furthermore, Macy's returned $100 million to shareholders through dividends and share repurchases during the quarter.

Leadership Commentary

Tony Spring, chairman and chief executive officer of Macy's, Inc., highlighted the operational success:

"Our teams achieved better than expected top- and bottom-line results during the second quarter, driven by our strongest comparable sales growth in 12 quarters, reflecting the strong performance in Macy's Reimagine 125 locations, Bloomingdale's and Bluemercury."

Outlook

Looking ahead, Macy's has raised its full-year 2025 net sales guidance to a range of $21.15 billion to $21.45 billion. The adjusted diluted EPS projection for the full fiscal year has also been increased to a range of $1.70 to $2.05. The company expects comparable sales to decline between 1.5% and 0.5% for the full year. Investors will continue to monitor the effectiveness of the "Bold New Chapter" initiatives, the impact of tariffs on profitability, and broader consumer spending trends within the Retail Sector as the year progresses.