Macy's Stock Falls on Weak Q3 Outlook Despite Q2 Beat and Raised Guidance Fueled by Tariff Refunds

Shares of Macy's (NYSE:M) opened at $20.25 Thursday, down from the prior close of $21.51, after the department-store chain reported quarterly results that topped Wall Street expectations but guided third-quarter earnings below consensus. The stock last traded at $20.9070 on heavy volume of 4.43 million shares.

For the fiscal second quarter ended Aug. 2, Macy's posted adjusted earnings per share of $0.63, handily beating the $0.37 analyst estimate. Total revenue rose 1.2% to $5.1 billion, while net sales increased 1.1% to $4.9 billion. Comparable sales, including owned, licensed and marketplace channels, rose 2.7% on a reported basis and 2.8% on a go-forward basis.

Growth was broad across nameplates. Macy's comparable sales rose 1.1%, Bloomingdale's surged 11.3% and Bluemercury grew 6.2%. Bloomingdale's reported its highest second-quarter sales volume in its 154-year history, according to Macy's executives. Gross margin improved to 41.5% of net sales from 39.7% a year earlier, helped by favorable brand mix and benefits from the Reimagine 200 store program.

Tariff Refunds Drive Profit Lift

The quarter included a net benefit of approximately $0.23 per share from tariff refunds, Macy's chief operating and financial officer Tom Edwards said on the company's earnings call. Macy's received $98 million in refund proceeds during the quarter and an additional $18 million after quarter-end, for a total of $116 million. Edwards said the company has received all expected refunds.

Excluding the tariff refund benefit, adjusted EPS still rose 14% year over year. Macy's plans to reinvest the bulk of the proceeds into brand building, Reimagine 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 5 to 15 basis points, an improvement from prior guidance for a 20- to 30-basis-point headwind. Executives said tariffs are expected to be a year-over-year tailwind in the second half.

Raised Full-Year Outlook, Weak Q3 View

Macy's raised its fiscal 2026 earnings forecast to $2.15 to $2.35 per share from prior guidance, above the $2.11 consensus estimate. Revenue guidance was increased to approximately $21.7 billion to $21.8 billion, exceeding expectations near $21.1 billion.

But the third-quarter outlook disappointed. Macy's guided for adjusted EPS in a range of negative $0.23 to negative $0.19, well below the consensus estimate of negative $0.12. Revenue projections for the quarter were broadly in line with analysts' expectations.

MarketBeat reported that the weaker near-term outlook appeared to be the primary reason for the stock's decline, and that investors may be discounting the quality of the full-year profit increase because tariff refunds contributed to the quarter and may not be recurring. Unusually heavy call-option activity before the report indicated elevated speculative interest, but does not establish a lasting fundamental trend, according to MarketBeat.

Analyst Ratings and Consumer Signals

According to MarketBeat, analysts have an average rating of "Hold" on Macy's with an average price target of $22.78. Among 13 analysts, one rates the stock "Strong Buy," three rate it "Buy," seven rate it "Hold" and two rate it "Sell."

The results signal relatively steady consumer spending and suggest Macy's turnaround is gaining traction, the company said. Chairman and 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.

First-half operating cash flow was $586 million, compared with $255 million a year earlier. Free cash flow was an inflow of $262 million versus an $88 million outflow in the same period last year. Inventory rose 2.5% at quarter-end, in line with sales growth, executives said.

Macy's also declared a quarterly dividend of $0.1915 per share, payable Oct. 1 to shareholders of record Sept. 15, representing a 3.7% annualized yield.