Here's a retail riddle: What happens when you beat Wall Street's estimates, raise your guidance, and show momentum in your premium brands? If you're Macy's (M), your stock still falls. Welcome to the complicated world of department store investing, where even good news comes with a side of caution.
Macy's reported third-quarter sales of $4.713 billion on Wednesday, down just 0.6% year over year but comfortably ahead of the $4.621 billion analysts were expecting. More importantly, comparable sales rose 2.5% on an owned basis and 3.2% when you factor in licensed departments and marketplace sales. For a legacy department store fighting off the internet and changing shopping habits, that's actually pretty respectable.
The Bright Spots Keep Getting Brighter
The real story here is what's working. Bloomingdale's just posted its strongest performance in over three years, with comparable sales jumping 8.8% on an owned basis and 9.0% including licensed and marketplace sales. Bluemercury, the beauty chain that's become Macy's secret weapon, notched another quarter of growth with comparable sales up 1.1%.
Even within the main Macy's nameplate, there's a clear winner emerging. The company's "Reimagine 125" locations—a curated group of stores getting extra investment and attention—delivered comparable sales growth of 2.3% on an owned basis and 2.7% including licensed departments. Once again, these stores are outperforming the broader Macy's fleet, validating management's strategy of focusing resources on the best locations.
"As we enter the holiday season, we are well-positioned with compelling new merchandise and an omni-channel customer experience that delivers both inspiration and value," said Tony Spring, chairman and CEO of Macy's.
The Numbers Behind The Performance
Macy's reported adjusted earnings of 9 cents per share for the quarter. The gross margin rate came in at 39.4%, down 20 basis points from last year. About half of that decline—50 basis points—came from tariff impacts, a preview of the headwinds Spring would emphasize later in the day.
Adjusted EBITDA totaled $285 million, representing 5.8% of total revenue. The company returned about $99 million to shareholders through $49 million in dividends and $50 million in share buybacks, signaling confidence despite the cautious outlook.
The balance sheet looks manageable. Macy's ended the quarter with $447 million in cash and $2 billion available under its credit facility. Total debt stood at $2.4 billion, with no meaningful maturities until 2030. On October 24, the board declared a regular quarterly dividend of 18.24 cents per share, payable on January 2, 2026, to shareholders of record as of December 15.
Raising The Bar, But Carefully
Based on the third-quarter performance, Macy's raised its fiscal 2025 adjusted earnings outlook to $2.00–$2.20 per share, up from the previous range of $1.70–$2.05 and above the $1.96 consensus estimate. The company also lifted its sales forecast to $21.475 billion–$21.625 billion from $21.150 billion–$21.450 billion, compared with the $21.501 billion analyst estimate.
Those are solid upgrades. So why did the stock fall?
The 'Choiceful' Customer Problem
Spring's commentary on the company's CNBC interview explains the market's hesitation. Despite the beat-and-raise quarter, Macy's struck a decidedly cautious tone about the holiday season ahead. The company is dealing with customers who remain "choiceful"—retail speak for price-conscious and selective—while tariffs continue to pressure margins.
Spring told CNBC the company is taking a "prudent view" of the fourth quarter as it faces tough year-over-year comparisons. The real uncertainty centers on what Spring calls "aspirational customers"—shoppers who prefer the in-store experience but are financially stretched. How these customers spend during the holidays remains unclear, and they're a crucial part of Macy's base.
"We're pleased with the fourth quarter to date, but we have a big holiday in front of us," Spring reportedly said.
That cautious commentary resonates across the entire retail sector right now. Everyone's watching how price-sensitive shoppers allocate their budgets amid rising costs and shifting preferences. Department stores occupy an awkward middle ground—not discount enough for the budget-conscious, not premium enough for the truly affluent.
Macy's shares were down 1.28% at $22.42 at the time of publication on Wednesday. Sometimes beating expectations just isn't enough when the road ahead looks uncertain.
