Macy’s Q1 2025 results: Store closures grow, margins fall, EPS forecast lowered

How Did Macy’s, Inc. Perform in Q1 FY25?

Macy’s, Inc. (NYSE: M) reported its Q1 FY25 results on May 28, 2025, exceeding top-line expectations but lowering its full-year earnings forecast amid persistent margin headwinds and escalating tariff burdens. Net sales came in at $4.6 billion, surpassing the company’s own guidance range despite representing a 5.1% decline year-over-year. Comparable sales on an owned basis fell 2.0%, while owned-plus-licensed-plus-marketplace (O+L+M) sales declined 1.2%. Adjusted diluted earnings per share (EPS) was $0.16, topping analyst expectations but down 40.7% from the $0.27 posted in Q1 FY24. Core Adjusted EBITDA fell to $308 million from $363 million a year earlier, as margin compression and tariff impacts intensified.

This performance comes at a time when legacy department stores are navigating the twin forces of softening discretionary consumer demand and rising sourcing costs. While Macy’s continues to emphasize its Bold New Chapter transformation plan, Q1’s results suggest that execution challenges and macroeconomic headwinds remain elevated.

Why Did Macy’s Lower Its Full-Year EPS Forecast Despite a Sales Beat?

Macy’s downward revision of its full-year adjusted EPS guidance—from $2.05–$2.25 previously to $1.60–$2.00—was the most notable takeaway from the earnings report. The company maintained its FY25 net sales forecast of $21.0 to $21.4 billion but trimmed profitability expectations, citing a more aggressive promotional environment, moderating consumer spending, and anticipated gross margin pressure from increased import tariffs. Executives estimated that tariffs on Chinese imports would reduce FY25 gross margin by 20 to 40 basis points, translating into a $0.10 to $0.25 EPS impact.

Approximately 20% of Macy’s total merchandise in FY24 was sourced from China, with private brands accounting for 27% of that exposure. Though down from over 50% pre-pandemic, the current dependency remains significant. Mitigation efforts include vendor renegotiations, geographic sourcing diversification, and selective ticket price increases. However, given that some impacted inventory has already entered the pipeline, Q2 and Q3 margins are expected to reflect the full burden of these tariffs.

What Do the Segment-Wise Results Reveal?

Macy’s results continue to demonstrate strong divergence between its three banners—Macy’s, Bloomingdale’s, and Bluemercury. The Macy’s brand, which continues to be the largest in the portfolio by revenue, saw net sales decline 6.5% in Q1. Comparable sales dropped 2.9% on an owned basis and 2.1% on an O+L+M basis. The company’s go-forward Macy’s locations, which include 350 prioritized stores, reported a more modest 1.9% decline, while the Reimagine 125 cohort—flagship remodeled stores—saw only a 0.8% dip in O+L sales. These results signal that Macy’s modernization efforts are starting to create performance differentiation across its physical fleet.

Bloomingdale’s remains Macy’s strongest growth driver, with net sales increasing 2.6% and O+L+M comparable sales up 3.8%. Growth was fueled by luxury categories and exclusive launches such as Prada footwear and Burberry RTW, in addition to expanded omni partnerships. The Bloomie’s and Bloomingdale’s Outlet formats have also enabled geographic expansion without heavy capital deployment.

Bluemercury reported a 0.8% increase in net sales and a 1.5% gain in comparable sales, marking its 17th consecutive quarter of comp growth. The banner benefited from recent dermatology-forward skincare brand launches, a more targeted loyalty strategy, and the opening or remodeling of 24 new locations during FY24. Macy’s is increasingly positioning Bluemercury as a high-margin, specialty retail growth engine that can thrive independently of department store traffic.

What Was the Profitability and Expense Profile in the Quarter?

Gross margin for Q1 FY25 was flat at 39.2% versus the same period last year. Macy’s attributed the margin stability to improvements in merchandise mix, lower liquidation costs, and reduced shortage, offset by higher delivery expenses linked to increased digital penetration. The cost of online fulfillment continues to weigh on profitability, with shipping expense growing as a share of net sales.

SG&A expenses rose to $1.913 billion, up slightly from $1.911 billion in Q1 FY24. As a percentage of total revenue, SG&A increased by 170 basis points to 39.9%. This reflects continued investment in Macy’s go-forward store base, digital platforms, and marketing—partially offset by savings from store closures and operational restructuring. Real estate gains contributed $16 million to EBITDA, but even after excluding these, Macy’s Core Adjusted EBITDA margin declined to 6.4% from 7.3% a year ago.

GAAP net income was $38 million for the quarter, down from $62 million in Q1 FY24. The company’s adjusted net income, which excludes $10 million in restructuring and debt extinguishment costs, came in at $46 million, representing a 40.3% year-over-year decline.

What Is the Investor and Market Sentiment Around Macy’s Stock?

Investor response to the earnings was guarded. While the company beat revenue and adjusted EPS estimates, the full-year EPS guidance cut and rising tariff exposure have cast uncertainty over the near-term margin trajectory. Institutional investors appear to be taking a wait-and-see approach, with some buy-side desks viewing the quarter’s strong digital and Bloomingdale’s performance as a validation of Macy’s strategic pivot, while others flagged the accelerating store closures and margin dilution as cautionary signals.

During Q1 FY25, Macy’s repurchased 8.7 million shares for $101 million and distributed $51 million in dividends. The company still has $1.3 billion remaining under its $2.0 billion repurchase authorization. These actions may help support the stock price in the short term but don’t fully address the structural questions around foot traffic and cost leverage in the post-pandemic retail cycle.

How Has Macy’s Managed Its Balance Sheet and Liquidity?

As of May 3, 2025, Macy’s held $932 million in cash and cash equivalents. Inventory levels were tightly managed, decreasing by 0.5% compared to Q1 FY24, demonstrating disciplined receipt controls and SKU optimization. The company’s working capital remained strong, even as operating cash flow for the quarter was negative $64 million, reflecting seasonal trends and reinvestment flows.

Macy’s amended its asset-based credit facility in April 2025, extending the maturity from 2027 to 2030 and reducing the borrowing limit from $3.0 billion to $2.1 billion. This move improves flexibility and reduces undrawn commitments, consistent with a smaller store fleet and leaner working capital requirements. The company has no material debt maturities until 2027, and long-term debt remains stable at $2.8 billion.

What Guidance Has Macy’s Issued for Q2 FY25?

For the second quarter of FY25, Macy’s expects net sales between $4.65 billion and $4.75 billion and adjusted diluted EPS between $0.15 and $0.20. Management warned that Q2 will likely absorb the brunt of the current round of tariffs, particularly as inventory purchased under the elevated 145% duty regime flows through. In addition, Macy’s is taking aggressive markdowns on late-arriving Spring product to position inventory for Fall and Holiday seasons.

Analysts expect continued margin volatility but are watching for stabilization in the company’s core metrics—especially comparable sales at go-forward stores and Marketplace GMV expansion. Macy’s digital penetration currently stands at 33%, and its third-party seller platform remains a strategic priority in offsetting store-related revenue losses.

What Is the Longer-Term Outlook for Macy’s?

Despite the near-term challenges, Macy’s reiterated its commitment to the Bold New Chapter strategy, which includes store rationalization, luxury expansion, digital growth, and monetization of underutilized assets. Approximately 86 additional store closures are planned over the next 24 months, complementing the 66 closures already underway. Executives remain confident that investments in Reimagine 125, Marketplace, Backstage, Bloomingdale’s, and Bluemercury can deliver more profitable, experience-driven engagement and sustainable long-term growth.

However, the stock’s medium-term trajectory will likely hinge on Macy’s ability to preserve margins in a promotional retail environment while protecting its customer base from pricing fatigue. Investors and analysts will closely monitor Q2 and Q3 for signs of tariff mitigation effectiveness, margin stabilization, and customer re-engagement ahead of peak season.