Macy's, Inc.: Form 10-Q for the period ended Aug 1, 2026

For purposes of the following discussion, all references to "second quarter of 2026" and "second quarter of 2025" are to the Company's 13-week fiscal periods ended August 1, 2026 and August 2, 2025, respectively. References to the "first half of 2026" or "2026" and the "first half of 2025" or "2025" are to the Company's 26-week fiscal periods ended August 1, 2026 and August 2, 2025, respectively.

The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes included elsewhere in this report, as well as the financial and other information included in the 2025 10-K. The following discussion contains forward-looking statements that reflect the Company's plans, estimates and beliefs. The Company's actual results could materially differ from those discussed in these forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this report (particularly in "Risk Factors" and in "Forward-Looking Statements") and in the 2025 10-K (particularly in "Risk Factors" and in "Forward-Looking Statements"). This discussion includes Non-GAAP financial measures. For information about these measures, see the disclosure under the caption "Important Information Regarding Non-GAAP Financial Measures".

On February 18, 2026, the Company announced an update to its non-GAAP financial disclosures. These changes do not impact its historical or future GAAP metrics and disclosures. The updated disclosures, which encompass comparable sales, owned-plus-licensed-plus-marketplace dollar sales, revenues and non-GAAP earnings metrics, are intended to both simplify disclosures and provide increased clarity on the key metrics that support our growth profile and go-forward operating performance. Beginning with the first quarter of 2026, adjusted earnings metrics reflect our new non-GAAP metrics.

Quarterly Overview and Company Strategy

In the second quarter of 2026, the Company delivered comparable sales growth across all nameplates and channels, revenue growth, and better-than-expected performance on all key financial metrics, reflecting progress on each pillar of the strategy. Highlights include:

Strengthen and Reimagine the Macy's nameplate

• .Reimagine 200 Locations:

The Reimagine locations represent approximately 60% of the Macy's go-forward store fleet and approximately 75% of Macy's go-forward sales. The second quarter of 2026 marked the fifth consecutive quarter of growth for these locations, with positive comparable sales in nine of the last ten quarters. Reimagine locations also consistently generate higher Net Promoter Scores ("NPS"), contributing to continued improvement in NPS for the entire Macy's fleet. Performance reflects targeted investments in staffing, events and localized merchandising, and we plan to continue expanding these initiatives.

• .Revitalize Assortment:

We continued to enhance our merchandise offering through disciplined brand curation, including the addition of brands such as Kiko Milano and Happy Camp3r's junior apparel line, and expanded distribution of brands including Reiss, Rodd & Gunn and BOSS.

• .Customer Experience:

Following the launch of Ask Macy's, our artificial intelligence ("AI") powered conversational shopping assistant, we are expanding the tool to support in-store colleagues and enhance customer engagement across channels. We also continued to strengthen customer connections through Macy's Year of Celebrations campaign, including hosting the largest Macy's 4th of July Fireworks event in the brand's history.

Accelerate and differentiate luxury growth

• .Bloomingdale's:

Bloomingdale's achieved the highest second-quarter sales in its 154-year history, driven by growth across channels, markets and merchandise categories. During the second quarter of 2026, Bloomingdale's expanded its luxury assortment through the introduction of brands such as Ulla Johnson, Proenza Schouler and Dries Van Noten, while broadening distribution of brands including James Perse, Chanel Fine Jewelry and Watches, Christian Louboutin and Prada shoes. We also expanded Bloomingdale's Very Important Client program and launched a Bloomingdale's AI-powered conversational shopping assistant for digital customers, designed to enhance how customers engage with the brand and discover products.

• .Bluemercury:

Bluemercury delivered another quarter of comparable sales growth, driven by continued strength in makeup, dermatological skincare and fragrance categories, including brands such as Skinceuticals, Victoria Beckham Beauty, La Mer and Jo Malone. Performance also benefited from continued success of both new and remodeled stores.

Simplify and modernize end-to-end operations

• .The Company expanded this pillar to encompass enterprise-wide organizational excellence, harnessing the reach and capabilities of Macy's, Inc. to support revenue growth, enhance the customer experience, and effectively execute its strategy. The Company is advancing AI and automation across the customer journey, inventory management and localization, while keeping human connection central to its customers and colleagues. As part of its ongoing efforts to improve supply chain efficiency and enhance service levels, the Company continued to advance initiatives focused on order processing and fulfillment productivity. Compared to the second quarter of 2025, the Company increased its units processed per hour by 7.0%1 and reduced the average number of days between order placement and shipment by 6.7%.

Comparable sales2 highlights for the second quarter of 2026 versus the second quarter of 2025 are as follows:

• Macy's, Inc. comparable sales increased 2.7%.
• Macy's, Inc. go-forward business, inclusive of go-forward locations and digital across nameplates, total revenue increased 1.9% to $4.9 billion and comparable sales increased 2.8%. The Company's go-forward nameplate highlights include:
• Macy's comparable sales increased 1.1%.
• Reimagine 200 locations comparable sales, included within Macy's comparable sales, increased 1.9%.
• Bloomingdale's comparable sales increased 11.3%.
• Bluemercury comparable sales increased 6.2%.

Tariff Refunds and Investments

Macy’s, Inc. has received all expected International Emergency Economic Powers Act (“IEEPA”) tariff refunds including $98 million in the second quarter of 2026 and $18 million following the quarter end, for a total of $116 million3. The company is taking a balanced approach to deploying benefits.

1 Specific to direct-to-consumer and store replenishment network and excludes furniture bedding and reverse logistics.

2 Comparable sales refers to owned-plus-licensed-plus-marketplace sales. All reported nameplate comparable sales results are on a go-forward basis.

3 Inclusive of a $95 million gross margin benefit and $3 million interest benefit in the second quarter of 2026, and a $17 million gross margin benefit and $1 million interest benefit in the third quarter of 2026.

Results of Operations

Comparison of the Second Quarter of 2026 and the Second Quarter of 2025

(dollars in millions, except per share figures)

See pages 26 to 27 for reconciliations of the supplemental non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.

Net sales for the second quarter of 2026 increased $54 million, or 1.1%, compared to the second quarter of 2025. Excluding the $35 million impact of the 14 non-go-forward locations closed at the end of fiscal 2025, net sales grew 1.9%. The increase in net sales was driven by comparable sales growth at all three nameplates. Macy's outperformed in many categories including watches, dresses, petites, career sportswear, kids, handbags, fragrances and men's and women's shoes. Big-ticket categories underperformed compared to the second quarter of 2025 but improved compared to the first quarter of 2026.

MACY'S, INC.

Other revenues increased 3.2% compared to the second quarter of 2025. Credit card revenue increased 2.0% driven by a healthy credit portfolio and stable net credit card losses. Macy's Media Network revenues were 8.8% above the second quarter of 2025, reflecting partner engagement on our advertising platform.

Gross margin rate increased 180 basis points in the second quarter of 2026 compared to the second quarter of 2025 mainly driven by gross tariff refunds of approximately $95 million.

Selling, general and administrative ("SG&A") expenses increased $16 million, or 0.8%, in the second quarter of 2026 compared to the second quarter of 2025 due to higher variable costs driven by sales growth as well as investments in Bold New Chapter initiatives. These investments were partially offset by ongoing cost containment efforts. The decrease in SG&A expenses as a percent of total revenue in the second quarter of 2026 compared to the second quarter of 2025 was primarily driven by improved operating leverage from a higher total revenue base, together with disciplined expense management.

Asset sale gains in both the second quarter of 2026 and 2025 primarily reflect the monetization of store locations.

The $16 million and $22 million of impairment, restructuring and other costs recognized in the second quarter of 2026 and the second quarter of 2025, respectively, primarily relate to store closure costs.

The decrease in net interest expense in the second quarter of 2026 compared to the second quarter of 2025 was primarily driven by an increase in interest income as the Company received $3 million in interest from tariff refunds in the second quarter of 2026.

MACY'S, INC.

Income tax expense of $58 million, or 25.6% of pretax income, for the second quarter of 2026 and expense of $28 million, or 24.3% of pretax income, for the second quarter of 2025, reflect a different effective tax rate compared to the Company’s federal income tax statutory rate of 21%. The income tax effective rates for both the second quarter of 2026 and 2025 were impacted primarily by the effect of state and local taxes.

Comparison of the 26 Weeks Ended August 1, 2026 and August 2, 2025

(dollars in millions, except per share figures)

See pages 26 to 27 for reconciliations of the supplemental non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.

Net sales for 2026 increased $137 million, or 1.5%, compared to 2025. Excluding the $75 million impact of the 14 non-go-forward locations closed at the end of fiscal 2025, net sales grew 2.3%. The increase in net sales was driven by comparable sales growth at all three nameplates. Macy's outperformed in many categories including watches, dresses, petites, career sportswear, kids, handbags, fragrances and men's and women's shoes. Big ticket and plus size categories underperformed compared to 2025.

MACY'S, INC.

The increase in other revenues included a $22 million increase in credit card revenues, reflecting the continued strength of the credit portfolio and prudent management of net credit losses. Macy's Media Network revenues were roughly flat compared to 2025.

Gross margin rate increased 70 basis points in 2026 compared to 2025. The increase in gross margin was primarily driven by the benefit of approximately $95 million received in gross tariff refunds in the second quarter of 2026.

SG&A expenses increased $55 million, or 1.4%, in 2026 compared to 2025 due to higher variable costs driven by sales growth as well as continuing investments in Bold New Chapter initiatives. The decrease in SG&A expenses as a percent of total revenue in 2026 compared to 2025 was primarily driven by improved operating leverage from a higher total revenue base, together with disciplined expense management.

Asset sale gains in both 2026 and 2025 primarily reflect the monetization of store locations.

The $1 million of impairment, restructuring and other benefits recognized in 2026 primarily relate to the benefit recognized from lease modifications offset by store closure costs. The $30 million of impairment, restructuring and other costs recognized in 2025 primarily related to store closure costs.

The decrease in net interest expense, excluding loss on extinguishment of debt, in 2026 compared to 2025 was primarily driven by an increase in interest income as the Company received $3 million in interest from tariff refunds in the second quarter of 2026.

Income tax expense of $88 million and $58 million, or 27.5% and 31.9% of pretax income, for 2026 and 2025, respectively, reflect a different effective tax rate as compared to the Company’s federal income tax statutory rate of 21%. The income tax effective rates for the 26 weeks ended August 1, 2026 and August 2, 2025 were impacted primarily by the effect of state and local taxes and the tax impact related to the vesting and cancellation of certain stock-based compensation awards.

Liquidity and Capital Resources

The Company's principal sources of liquidity are cash from operations, cash on hand and the Amended & Extended ABL Credit Facility. Material contractual obligations arising in the normal course of business primarily consist of long-term debt and related interest payments, lease obligations, merchandise purchase obligations, retirement plan benefits and self-insurance reserves. Merchandise purchase obligations represent future merchandise payables for inventory purchased from various suppliers through contractual arrangements and are expected to be funded through cash from operations.

The Company believes that, assuming no change in its current business plan, its available cash, together with expected future cash generated from operations, the amount available under the Amended & Extended ABL Credit Facility and credit available in the market, will be sufficient to satisfy its anticipated needs for working capital, capital expenditures and cash dividends for at least the next twelve months and the foreseeable future thereafter.

Capital Allocation

The Company's capital allocation goals include maintaining a healthy balance sheet and investment-grade credit metrics to be best-positioned for access to bank and capital market funding under all economic scenarios, followed by investing in the business through initiatives to drive long-term profitable growth and returning capital to shareholders through dividends and share repurchases.

The Company ended the second quarter of 2026 with a cash and cash equivalents balance of $1,294 million, an increase of $465 million from $829 million at the end of the second quarter of 2025. The Company is party to the Amended & Extended ABL Credit Facility with certain financial institutions providing for a $2,100 million asset-based credit facility. As of August 1, 2026, borrowing availability was $1,958 million, which reflects a $142 million reduction due to standby letters of credit outstanding.

Operating Activities

The net cash provided by operating activities in the current year versus the prior year was primarily driven by $328 million cash received in the first quarter of 2026 from the settlement agreements to resolve credit card interchange fee litigation matters in which the Company was a plaintiff.

Investing Activities

The Company's capital expenditures were $324 million in 2026 compared to $343 million in 2025. Capital expenditures in the current year are primarily focused on digital and technology investments as well as omni-channel capabilities related to the Bold New Chapter strategy.

Financing Activities

Dividends

The Company paid dividends totaling $101 million and $100 million in 2026 and 2025, respectively.

On August 28, 2026, the Company announced that its Board of Directors declared a regular quarterly dividend of 19.15 cents per share on its common stock, which will be paid on October 1, 2026, to shareholders of record at the close of business on September 15, 2026. Subsequent dividends will be subject to approval of the Board of Directors, which will depend on market and other conditions.

Stock Repurchases

On February 22, 2022, the Board of Directors authorized a $2,000 million share repurchase program, which does not have an expiration date. During the first half of 2026, the Company repurchased approximately 4.9 million shares of its common stock at an average cost of $20.48 per share on the open market under its share repurchase program. During the first half of 2025, the Company repurchased approximately 12.6 million shares of its common stock at an average cost of $11.96 per share on the open market under its share repurchase program. As of August 1, 2026, $1,024 million remained available under the authorization. Repurchases may be made from time to time in the open market or through privately negotiated transactions in accordance with applicable securities laws, including Rule 10b-18 under the Securities Exchange Act of 1934, on terms determined by the Company.

Debt Transactions

The Company completed the following debt transactions in the first half of 2025:

• On July 29, 2025, the Company completed three debt transactions which resulted in the recognition of $13 million of losses related to the extinguishment of debt on the Consolidated Statements of Income:
• Issuance by MRH of $500 million aggregate principal amount of 7.375%% senior unsecured notes due August 1, 2033 in a private offering. The Company used the net proceeds from the notes offering, together with cash on hand, to fund the tender offer and redemption described below,
• Redemption of $393 million aggregate principal amount of senior notes and debentures due in 2028 and 2029 and issuance of an irrevocable notice of redemption to redeem $194 million aggregate principal amount of senior debentures due in 2028 and 2029, which debentures were redeemed after the end of the second quarter of 2025, and
• Completion of a tender offer in which $251 million aggregate principal amount of senior notes and debentures were tendered for early settlement and purchased by MRH for a total cash cost of $255 million.
• On April 9, 2025 the Company, entered into an amendment to its Existing ABL Credit Facility which reduced the asset-based credit facility from $3,000 million to $2,100 million, extended the maturity date to April 2030 and maintained similar collateral support, but reduced commercial letter of credit fees and unused facility fees.

The Company had no outstanding borrowings under the Amended & Extended ABL Credit Facility as of August 1, 2026 and August 2, 2025.

Contractual Obligations

As of August 1, 2026, there were no material changes to the Company's contractual obligations and commitments outside the ordinary course of business since January 31, 2026, as reported in the Company's 2025 Form 10-K.

Guarantor Summarized Financial Information

The Company had $2,441 million aggregate principal amount of senior unsecured notes and senior unsecured debentures (collectively the "Unsecured Notes") outstanding as of both August 1, 2026 and January 31, 2026 with maturities ranging from 2027 to 2043. The Unsecured Notes constitute debt obligations of Macy's Retail Holdings, LLC ("MRH" or "Subsidiary Issuer"), a 100%-owned subsidiary of Macy's, Inc. ("Parent" and together with the "Subsidiary Issuer," the "Obligor Group"), and are fully and unconditionally guaranteed on a senior unsecured basis by Parent. The Unsecured Notes rank equally in right of payment with all of the Company's existing and future senior unsecured obligations, senior to any of the Company's future subordinated indebtedness and are structurally subordinated to all existing and future obligations of each of the Company's subsidiaries that do not guarantee the Unsecured Notes. Holders of the Company's secured indebtedness, including any borrowings under the Amended & Extended ABL Credit Facility, will have a priority claim on the assets that secure such secured indebtedness; therefore, the Unsecured Notes and the related guarantees are effectively subordinated to all of the Subsidiary Issuer's and Parent and their subsidiaries’ existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness.

The following tables include combined financial information of the Obligor Group. Investments in subsidiaries of $11,539 million and $7,016 million as of August 1, 2026 and January 31, 2026, respectively, have been excluded from the Summarized Balance Sheets. Equity in earnings of non-Guarantor subsidiaries of $255 million and $786 million for the 13 and 26 weeks ended August 1, 2026, respectively, have been excluded from the Summarized Statement of Operations. The combined financial information of the Obligor Group is presented on a combined basis with intercompany balances and transactions within the Obligor Group eliminated.

Summarized Balance Sheets

(in millions)

ASSETS

(a) Includes net amounts due to non-Guarantor subsidiaries of $7 million and $2 million as of August 1, 2026 and January 31, 2026, respectively.

Summarized Statement of Operations

(in millions)

(a) Income pertains to transactions with ABL Borrower, a non-Guarantor subsidiary.

(b) Includes $29 million and $308 million of dividend income from non-Guarantor subsidiaries for the 13 and 26 weeks ended August 1, 2026, respectively.

Important Information Regarding Non-GAAP Financial Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). However, management believes that certain non-GAAP financial measures provide users of the Company's financial information with additional useful information in evaluating operating performance. Management believes that providing earnings before interest and taxes ("EBIT") and earnings before interest, taxes, depreciation and amortization ("EBITDA"), which are non-GAAP financial measures, provides meaningful information about its operational efficiency by excluding the impact of changes in tax law and structure, debt levels and capital investment. In addition, management believes that excluding certain items from EBIT, EBITDA, net income and diluted earnings per share that are not associated with the Company’s core operations and that may vary substantially in frequency and magnitude from period-to-period provides useful supplemental measures that assist in evaluating the Company's ability to generate earnings and to more readily compare these metrics between past and future periods. Management also believes that Adjusted EBIT and Adjusted EBITDA are frequently used by investors and securities analysts in their evaluations of companies, and that such supplemental measures facilitate comparisons between companies that have different capital and financing structures and/or tax rates. The Company uses certain non-GAAP financial measures as performance measures for components of executive compensation.

Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the Company's financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the Company's financial position, results of operations or cash flows and should therefore be considered in assessing the Company's actual and future financial condition and performance. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies.

Adjusted EBIT and Adjusted EBITDA

The following is a tabular reconciliation of the non-GAAP financial measures adjusted EBIT and adjusted EBITDA to GAAP net income, which the Company believes to be the most directly comparable GAAP measure.

Adjusted Net Income and Adjusted Diluted Earnings Per Share

The following is a tabular reconciliation of the non-GAAP financial measures adjusted net income to GAAP net income and adjusted diluted earnings per share to GAAP diluted earnings per share, which the Company believes to be the most directly comparable GAAP measures.

(millions, except per share figures)

27

There have been no material changes to the Company's market risk as described in the Company's 2025 10-K. For a discussion of the Company's exposure to market risk, refer to the Company's market risk disclosures set forth in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" of the 2025 10-K.

The Company's Chief Executive Officer and Chief Financial Officer have carried out, as of August 1, 2026, with the participation of the Company's management, an evaluation of the effectiveness of the Company's disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of August 1, 2026, the Company's disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports the Company files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission (the "SEC") rules and forms, and that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

From time to time, adoption of new accounting pronouncements, major organizational restructuring and realignment occurs for which the Company reviews its internal control over financial reporting. As a result of this review, there were no changes in the Company's internal control over financial reporting that occurred during the Company's most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

There have been no material changes to the Risk Factors described in Part I, Item 1A."Risk Factors" in the Company's 2025 Form 10-K.