Macy’s turns tariff refunds into retail rebound

Macy’s Inc. reported stronger-than-expected results on Thursday, signaling that its ongoing turnaround is gaining real traction. The department store’s overall net sales increased by 1.1% year over year to reach $4.9 billion. Meanwhile, comparable sales rose 2.7%, a figure that highlights the resilience of the core business. This performance marks a distinct shift from the previous years of decline that have defined the company’s recent history. For the first time in a while, the numbers suggest the strategy is working.

Quiet Strength Across the Portfolio

The strength was visible across the entire corporate structure, not just in the flagship brand. At the namesake Macy’s stores, comparable sales grew by 1.1%. The 200 stores that have already undergone revamping saw comps rise by nearly 2%. Smaller banners showed even more impressive momentum. Bluemercury comps increased by over 6%, while Bloomingdale’s comps soared by more than 11%.

Profitability also improved significantly. Gross margin expanded by 180 basis points to reach 41.5%. This expansion included the impact of tariff refunds as well as the headwinds from rising fuel costs. Without those refunds, the margin would have grown by just 10 basis points. Net income nearly doubled, reaching $169 million. These figures indicate that operational discipline is finally translating into bottom-line results.

Neil Saunders, Managing Director at GlobalData, noted the change in tone surrounding the company’s earnings reports. “In the past, every single Macy’s earnings day was a tale of gloom and decline,” he said in emailed comments. “That now isn’t the case. And that, in itself, is a major win and a sign of the work that is being done.”

Refunds Fueling Long-Term Growth

CEO Tony Spring told analysts that the company has now posted better-than-expected results for six straight quarters. Comparable sales have grown for five consecutive periods, while net sales have increased for two straight quarters. Executives attribute this to a sharper assortment of relevant brands, which has helped lift average prices. The company is now taking advantage of $116 million in tariff refunds to bolster its turnaround efforts. Rather than using the cash for immediate price cuts, as some other retailers have done, Macy’s is directing the funds toward long-term investments.

Approximately $20 million of the refund will directly boost earnings. The remainder is being allocated to brand-building, speeding up store overhauls, and managing fuel volatility. A small portion will also go toward reducing prices on specific items like furniture and fine jewelry. This approach seems prudent given the current retail environment, where aggressive discounting can erode brand value. By reinvesting in the customer experience rather than just cutting prices, the company aims to build lasting loyalty. It is a measured move that prioritizes structural health over short-term volume.

Momentum Ahead of the Holidays

Michael Binetti, an analyst at Evercore ISI, supported this strategy in a research note. “Reinvesting tariff refunds into price has become a concern about a ‘race to the bottom’ on price competition across Softlines space this fall/holiday,” Binetti said. “We prefer Macy’s approach, especially pulling forward its Reimagine agenda.”

The quarter sets the stage for the upcoming holiday season, which is critical for department stores. Spring noted that the 100th Thanksgiving Day parade is less than 77 days away. The company enters this period with a stronger foundation than it has had in years. Suzy Davidkhanian, Vice President at Emarketer, emphasized the sustained progress. “The namesake banner remains a work in progress, but five consecutive quarters of comp growth show Macy’s is building momentum beyond the strength of Bloomingdale’s and Bluemercury,” she said.

Davidkhanian added that today’s intentional shopper needs a clear reason to buy. Macy’s mix of sought-after national brands, newness, and private label is helping drive demand. Operational discipline is showing up in the results. That momentum bodes well for the holiday season, when department stores traditionally shine as gift destinations. The work isn’t finished, but the direction is finally clear.