Macy's Raises Full-Year Outlook After Q2 Beat; Shares Slide on Weak Q3 Guidance, Tariff Refund Reliance

Shares of Macy's (NYSE: M) gapped down to $20.25 before Thursday's open, after closing at $21.51 the prior session, according to MarketBeat. The stock last traded at $20.9070 on volume of 4.4 million shares.

The decline followed the retailer's quarterly earnings report released earlier Thursday, which beat Wall Street estimates on both profit and revenue. Macy's also raised its full-year guidance. However, the weaker near-term outlook and reliance on tariff refunds to boost earnings tempered optimism.

Macy's reported earnings of $0.63 per share for its fiscal second quarter, surpassing the $0.37 consensus estimate. Revenue came in at approximately $5.06 billion, above the $4.81 billion expected, and up 1.1% year-over-year. Comparable sales, including owned, licensed and marketplace sales, rose 2.7% on a reported basis, following 1.9% growth in the prior-year period.

The company guided for a fiscal third-quarter loss of $0.23 to $0.19 per share, well below the consensus estimate of a loss of $0.12, MarketBeat reported. That weaker near-term outlook appeared to be the primary reason the stock declined after the report.

**Profit Boost from Tariff Refunds**

The second-quarter profit performance included a significant one-time benefit. Macy's received $98 million of tariff-refund proceeds during the quarter and another $18 million after quarter-end, totaling $116 million, according to the company's earnings call transcript.

The refunds provided a net benefit of approximately $0.23 per share to adjusted earnings. Excluding that benefit, adjusted earnings per share still rose 14% from $0.35 in the prior-year quarter, the company said. The remaining impact on the full year is expected to be about $20 million, or $0.05 per share, flowing to the bottom line.

Macy's plans to reinvest the rest of the refund proceeds in brand building, new store pilots, its value proposition and mitigation of potential fuel headwinds. The company now expects combined tariff and fuel costs to create a full-year gross-margin headwind of only 5 to 15 basis points, an improvement from prior guidance for a 20- to 30-basis-point headwind.

**Strategy Gains Across Nameplates**

CEO Tony Spring said the retailer delivered revenue growth, comparable-sales gains across each nameplate and channel, and better-than-expected results on key financial measures. "These results reflect the substantive enterprise-wide improvements we are making in our business that are resonating with our customers," Spring said.

Macy's nameplate comparable sales rose 1.1%. Bloomingdale's comparable sales jumped 11.3%, marking the highest second-quarter sales volume in its 154-year history. Bluemercury comparable sales grew 6.2%. The company's 200 reimagined Macy's stores generated 1.9% comparable-sales growth, and now represent nearly 60% of go-forward Macy's stores and 75% of go-forward Macy's store sales.

Gross margin improved to 41.5% of net sales from 39.7% a year earlier, helped by favorable brand mix and the Reimagine 200 store program. Adjusted EBITDA rose to $457 million, or 9% of total revenue, from $373 million, or 7.5%, in the prior-year quarter.

**Raised Full-Year Outlook**

Macy's raised its fiscal 2026 outlook, now calling for earnings per share of $2.15 to $2.35, above the roughly $2.11 analyst consensus. Revenue guidance was increased to approximately $21.7 billion to $21.8 billion, above expectations near $21.1 billion.

First-half operating cash flow was $586 million, compared with $255 million a year earlier. Free cash flow swung to an inflow of $262 million from an $88 million outflow. The company returned $201 million to shareholders in the first half through $101 million in dividends and $100 million in share repurchases.

**Analyst Reaction**

Several analysts updated their ratings on Macy's shares, according to MarketBeat. Citigroup raised its price target to $24.00 with a "neutral" rating. Morgan Stanley reissued an "overweight" rating with a $30.00 target. TD Cowen increased its target to $25.00 with a "hold" rating. Zacks Research raised the stock to "strong-buy". The consensus rating among analysts is "Hold" with an average price target of $22.78.