Macy’s Stock Down 20% YTD Ahead of Earnings – What To Expect

Macy's Inc. (NYSE: M) finds itself at a critical juncture as it heads into its next earnings report, with the stock already down 20% year-to-date. The iconic retailer is grappling with a complex interplay of strategic shifts, evolving consumer behaviour, and macroeconomic headwinds that are collectively shaping its financial trajectory.

For the current quarter, analysts project an EPS of $0.19, a significant 69% decrease compared to the same quarter last year. This projected decline underscores the challenges Macy's faces in maintaining profitability amid rising costs and cautious consumer spending.

Macy's strategic response to these challenges involves a multi-pronged approach. A significant component of this strategy is the planned closure of up to 150 underperforming stores by the end of 2026, with 50 closures scheduled for 2024. This move aims to consolidate resources and optimize the company's physical footprint, focusing on locations with higher profitability.

Simultaneously, Macy's is investing in growth areas, planning to open 45 Bloomingdale's and 30 Bluemercury stores, while also remodeling 30 existing Bluemercury locations. This dual strategy of contraction and expansion reflects Macy's attempt to adapt to the evolving retail landscape by focusing on higher-growth segments and streamlining less profitable operations.

In the first quarter of fiscal year 2026, Macy's reported revenues of $5 billion, exceeding analyst expectations. However, earnings per share (EPS) came in at $0.15, slightly below the anticipated $0.19. While the revenue beat offered a glimmer of hope, the EPS miss highlighted the continued pressure on profitability.

One of the key factors impacting Macy's financial performance is the ongoing trade tensions and tariffs. These tariffs have led to increased costs, prompting Macy's to renegotiate supplier contracts, cancel or delay orders, and reduce its reliance on Chinese imports.

Currently, approximately 20% of Macy's goods and 27% of its private label items are sourced from China. The company's efforts to diversify its supply chain and mitigate the impact of tariffs are crucial for protecting its bottom line.

Recent analyst ratings reflect a cautious outlook on Macy's stock. Morgan Stanley lowered its target price from $17.00 to $16.00, maintaining an “equal weight” rating. The consensus among analysts is a “Hold” rating, indicating that while there may be some potential upside, significant risks remain.

While the prevailing sentiment surrounding Macy's is one of cautious optimism at best, a closer look reveals potential for a more significant turnaround. The market may be underestimating the value of Macy's brand equity and its loyal customer base. The strategic store closures, while initially perceived negatively, could be a bold move to streamline operations and focus on creating a more compelling in-store experience at key locations.

Moreover, the expansion of Bloomingdale's and Bluemercury demonstrates Macy's ability to identify and capitalize on growth opportunities within the luxury and beauty segments. The company's investments in e-commerce and omnichannel capabilities may also be gaining traction, allowing it to better compete with online retailers.

While challenges undoubtedly remain, Macy's has the potential to surprise the market with stronger-than-expected results if it can effectively execute its strategic initiatives and leverage its brand assets.

As Macy's prepares to release its next earnings report, investors will be closely scrutinizing the company's performance across several key areas. Revenue growth, profitability, progress on strategic initiatives, and management's outlook for the remainder of the year will all be critical factors in determining the future direction of Macy's stock.

The upcoming earnings report will provide crucial insights into whether Macy's is successfully navigating the challenges it faces and positioning itself for long-term success in the evolving retail landscape.