Macy's Inc. (NYSE: M) stock fell Thursday after the department store operator issued a weaker-than-expected third-quarter earnings outlook.

Macy's Earnings Beat Estimates

Macy's reported adjusted earnings of 40 cents per share, excluding a 23-cent benefit from tariff refunds. That topped the 37-cent consensus estimate.

Sales rose 1.1% year over year to $4.866 billion, beating the $4.826 billion estimate. Sales increased 1.9% excluding the impact of fiscal 2025 store closures.

The company received $98 million in tariff refunds during the quarter and another $18 million after quarter-end, bringing the total to $116 million.

Average unit retail, or AUR, rose about 9% in the second quarter. Macy's cited stronger brands, improved assortments and larger baskets.

Profit Outlook Falls Short

Macy's expects the third quarter to face a 3.2% comparable-sales comparison, its toughest of the year. The retailer guided for third-quarter comparable sales to range from a 0.5% decline to a 0.5% increase, signaling a sharp slowdown from the 2.7% growth reported in the second quarter.

Management said there were no unusual quarter-to-date developments behind the cautious outlook.

The company expects a third-quarter adjusted loss of 19 cents to 23 cents per share. Analysts expect a loss of 6 cents. Sales are projected at $4.65 billion to $4.70 billion, compared with the $4.68 billion estimate.

Macy's expects AUR to continue rising, although at a slower pace. It also plans to use tariff refunds to sharpen pricing selectively in furniture and fine jewelry.

The retailer plans more store pilots in the fourth quarter and further expansion in 2027. Its long-term goal is to reimagine its roughly 350-store go-forward fleet.

Macy's Price Action

M Price Action: Macy's shares were down 4.07% at $20.29 at the time of publication on Thursday, according to market data.