Business Context and Reporting Period
Company: Macy's, Inc.
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal Year 2025 (ended January 31, 2026)
Business Overview: Macy's operates 665 stores across three brands: Macy's, Bloomingdale's, and Bluemercury. The company is executing its "Bold New Chapter" strategy, focusing on reimagining store locations, accelerating luxury growth, and modernizing operations. As of January 31, 2026, the company employed approximately 90,134 people.
Key Financial Metrics
| Metric (in millions, except per share) | Fiscal 2025 | Fiscal 2024 | Fiscal 2023 |
|---|---|---|---|
| Net Sales | $21,764 | $22,293 | $23,092 |
| Total Revenue | $22,621 | $23,006 | $23,866 |
| Gross Margin | $8,267 (38.0%) | $8,553 (38.4%) | $8,868 (38.4%) |
| Operating Income | $1,030 (4.6%) | $909 (4.0%) | $301 (1.3%) |
| Net Income | $642 | $582 | $45 |
| Diluted EPS | $2.32 | $2.07 | $0.16 |
| Adjusted Diluted EPS | $2.32 | $2.64 | $3.28 |
| EBITDA | $1,873 | $1,760 | $1,075 |
| Adjusted EBITDA | $1,842 | $1,977 | $2,236 |
| Cash from Operations | $1,430 | $1,278 | $1,305 |
| Capital Expenditures | $740 | $882 | $993 |
| Total Debt Outstanding | $2,432 | $2,779 | N/A |
| Cash and Equivalents | $1,246 | $1,306 | N/A |
Material Changes vs. Prior Period
- Revenue Decline: Net sales decreased 2.4% to $21.76 billion, primarily due to the closure of approximately 64 Macy's locations in the prior year, which removed roughly $700 million in annual sales. However, comparable sales increased 1.5% on an owned-plus-licensed-plus-marketplace basis.
- Profitability Improvement: Operating income rose 13.3% to $1.03 billion, driven by a $328 million gain from the settlement of credit card interchange fee litigation and reduced SG&A expenses ($90 million decrease) due to store closures and efficiency initiatives.
- Margin Pressure: Gross margin rate declined 40 basis points to 38.0%, attributed to the impact of tariffs despite mitigation efforts.
- Debt Reduction: Total long-term debt decreased by approximately $340 million to $2.43 billion following the issuance of $500 million in new notes and the redemption/tender of approximately $587 million in older debt.
- Digital Growth: Digital sales as a percentage of net sales increased to 35% from 33% in the prior year.
Guidance, Outlook, and Risks
Management Commentary & Strategy: Management highlighted progress on the "Bold New Chapter" strategy, specifically the "Reimagine 125" initiative where 125 Macy's locations were upgraded, outperforming the rest of the fleet. Bloomingdale's achieved its highest comparable sales growth in 14 quarters, and Bluemercury recorded its 20th consecutive quarter of growth. Capital expenditures for 2026 are expected to be approximately $800 million, focused on digital, technology, and go-forward locations.
Key Risks & Contingencies:
- Tariffs and Trade Policy: New tariffs imposed by the U.S. Administration on imports from over 90 countries are expected to negatively impact gross margins and may lead to selective price increases.
- Consumer Spending: The business remains sensitive to discretionary spending levels, inflation, and economic uncertainty.
- Real Estate Strategy: The company continues to monetize non-strategic real estate, but the cyclical nature of real estate markets introduces volatility.
- Cybersecurity: While no material incidents occurred in 2025, the company faces evolving threats including ransomware and AI-enhanced attacks.
- Asset Impairment: The company recorded $160 million in non-cash asset impairment charges in 2025 related to store closures; future impairments remain a risk if macroeconomic conditions deteriorate.
Investor Verification Checklist
- Tariff Impact: Verify the specific cost pass-through mechanisms and margin erosion risks associated with the new 10% (potentially 15%) tariffs on imported goods.
- Comparable Sales Quality: Analyze the sustainability of the 1.5% comparable sales growth, particularly the contribution from the "Reimagine 125" stores versus the broader fleet.
- Debt Covenant Compliance: Confirm the company's ability to maintain the fixed charge coverage ratio required by its $2.1 billion Asset-Based Lending (ABL) facility.
- Interchange Fee Settlement: Note that the $328 million gain in 2025 was a one-time litigation settlement; future earnings should be evaluated excluding this non-recurring item.
- Store Closure Execution: Monitor the pace of store closures and the associated restructuring costs to ensure alignment with the "Bold New Chapter" cost-saving targets.