Macy’s stock fell as much as 8% on Thursday after the retailer posted Q2 results that beat Wall Street estimates on both the top and bottom line. The stock was trading around $20.66 in premarket, down from a previous close of $21.51.
The earnings beat was clear on paper. Adjusted EPS came in at $0.63, up from $0.35 a year ago, and well above the $0.35 consensus estimate. Revenue reached $4.9 billion against expectations of $4.78 billion.
But there was a catch. Management flagged that the quarter included a $0.23-per-share net benefit from tariff refunds. Strip that out, and adjusted EPS was $0.40, a more modest 14% year-over-year gain, though still above the $0.37 estimate.
The market’s reaction suggests investors focused more on that detail than the headline number.
Comparable sales rose 2.7%, marking the fifth straight quarter of positive comps. Bloomingdale’s was the standout, posting 11.3% comparable sales growth, its highest second-quarter sales volume in 154 years. Bluemercury grew 6.2%, and Macy’s nameplate delivered 1.9% comp growth at its Reimagine 200 locations.
Adjusted EBITDA climbed to $457 million from $373 million, with the margin improving to 9% from 7.5%. Operating cash flow in the first half hit $586 million, more than double the $255 million from the same period last year.
Cash on the balance sheet rose to $1.3 billion from $829 million a year earlier. The company has no major long-term debt maturities until 2030.
CEO Tony Spring pointed to momentum across all three brands. “We delivered revenue growth, comparable sales increases across all nameplates and channels, and better-than-expected performance across all key financial metrics,” he said.
Macy’s raised its full-year outlook. The company now expects net sales of $21.68-$21.83 billion and adjusted EPS of $2.15-$2.35, compared to prior guidance of $2.00-$2.20.
The problem is Q3. Macy’s guided to net sales of $4.65-$4.70 billion and comparable sales ranging from down 0.5% to up 0.5%. The company also guided to an adjusted loss of $0.19-$0.23 per share for the quarter, its toughest comparison period of the year.
For income investors, the dividend picture looks relatively stable. Macy’s declared a quarterly dividend of $0.1915 per share, equating to roughly $0.77 annually. That represents about 34% of the midpoint of full-year EPS guidance, leaving decent room if conditions soften.
The stock trades at around 9x forward earnings and less than 1x forward sales. Macy’s has now beaten earnings estimates for seven straight quarters and exceeded sales estimates for six consecutive quarters.
CFO Tom Edwards noted that even excluding tariff refunds, the underlying earnings trend was positive. “Adjusted EPS would have been up 14% versus prior year and above the high end of our guidance,” he said.
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