Macy's, Inc. Q1 2026 10-Q Summary
Business Context and Reporting Period
This report covers the 13-week fiscal period ended May 2, 2026. Macy's, Inc. operates as an omni-channel retailer under the Macy's, Bloomingdale's, and Bluemercury nameplates. The company is in the third year of its "Bold New Chapter" strategy, focusing on store reimagining, assortment revitalization, and operational modernization.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenue | $4,892 million | $4,793 million |
| Net Sales | $4,682 million | $4,599 million |
| Operating Income | $112 million | $94 million |
| Net Income | $63 million | $38 million |
| Diluted EPS | $0.23 | $0.13 |
| Gross Margin | 38.9% | 39.2% |
| Operating Cash Flow | $292 million | ($64 million) |
| Cash and Equivalents | $1,294 million | $932 million |
| Long-Term Debt | $2,432 million | $2,774 million |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 1.8% year-over-year, driven by growth across all three nameplates. Comparable sales rose 3.0%, the highest in four years.
- Profitability: Net income increased 66% to $63 million, aided by a lower effective tax rate (32.3% vs. 44.1%) and a $17 million benefit from lease modifications.
- Cash Flow: Operating cash flow swung from a $64 million outflow in Q1 2025 to a $292 million inflow in Q1 2026. This improvement was primarily driven by a $328 million cash settlement from credit card interchange fee litigation.
- Margin Pressure: Gross margin declined 30 basis points to 38.9%, attributed to an approximate 30 basis point tariff impact.
- Debt Reduction: Long-term debt decreased by $342 million compared to the prior year due to debt transactions executed in the second quarter of 2025.
Outlook, Commentary, and Risks
- Strategy Execution: Management highlighted the success of the "Reimagine 200" initiative, with these locations outperforming the rest of the fleet. Bloomingdale's achieved its highest first-quarter sales in 154 years.
- Digital Growth: Digital sales accounted for 34% of net sales, up from 33% in the prior year.
- Capital Allocation: The company repurchased approximately 2.6 million shares for $50 million. As of May 2, 2026, $1.074 billion remained available under the share repurchase program. A quarterly dividend of $0.1915 per share was declared.
- Liquidity: The company maintains a $2.1 billion asset-based credit facility with $1.958 billion available. Management believes liquidity is sufficient for the next 12 months.
- Risks: Key risks include the ability to successfully implement the "Bold New Chapter" strategy, competitive pressures from digital-native retailers, tariff impacts on margins, and general consumer spending levels.
Investor Verification Checklist
- Verify the sustainability of the $328 million litigation settlement cash inflow, as this was a one-time item significantly boosting operating cash flow.
- Monitor the impact of tariffs on gross margins, which compressed margins by 30 basis points in Q1 2026.
- Assess the performance of the "Reimagine 200" store locations versus the broader fleet to validate the store closure and reinvestment strategy.
- Review the pace of inventory build-up, as merchandise inventories increased by $421 million during the quarter.
- Confirm the trajectory of comparable sales growth, specifically the 10.2% increase at Bloomingdale's and 6.4% at Bluemercury.