Macy's, Inc. (M)

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

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MACY'S, INC.

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.

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MACY'S, INC.

Results of Operations

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

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.

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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

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to promote understanding of the results of operations and financial condition of the Company. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying Notes to Financial Statements (Part II, Item 8 of this Form 10-K). This section generally discusses the results of operations for 2025 compared to 2024 and 2023. The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the fiscal years ended January 31, 2026 to February 1, 2025 and February 3, 2024. For a full discussion of changes from the fiscal year ended February 1, 2025 to the fiscal year ended February 3, 2024, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2025 (filed March 21, 2025). This section also 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 "Forward-Looking Statements."

Fiscal 2025 Overview and Company Strategy

The Company completed its second year of the execution of its Bold New Chapter strategy, which is focused on the needs of our customer and is centered on an enhanced omni-channel shopping experience across all three of our nameplates. This strategy prioritizes improving the shopping environment and elevating the customer experience, while closing underproductive Macy's stores to focus resources and investments on its go-forward enterprise. During fiscal 2025, the Company continued to make progress on the three pillars within the Bold New Chapter strategy, as follows:

•Strengthen and Reimagine Macy's nameplate

◦Reimagine 125 Locations: In early February 2025, we overlaid successful initiatives from the First 50 locations to an additional 75 stores for a total of 125 reimagined Macy's locations. The investments in the additional 75 stores have continued emphasis on customer experience, and build on learnings from the first year of our Bold New Chapter strategy. The Reimagine 125 locations outperformed the rest of the Macy's fleet in 2025. These locations are now better organized, easier to shop and have a more compelling visual presentation. Within each category we are driving higher interest and engagement through increased differentiation. We are carving out floor space to leverage new trends while maintaining a presence in existing categories and brands.

◦Revitalize assortment: Our assortment matrix evolution continues to gain traction as we elevate our product curation to deliver a more compelling mix of newness and fashion. Our merchants continue to be focused on clarity of offering, enhanced variety and reduced redundancies. Our strong balance sheet, large addressable market and loyal customer base are attractive differentiators to brands and partners. Our off-price concept, Backstage, and digital Macy's Marketplace remained strong. Backstage and Marketplace fill white space in our assortments and help us maintain loyal customers seeking more price and brand variety.

◦Customer Experience: We are supporting our omnichannel customer experience by investing in colleagues that includes rolling out enhanced education, a tiered approach to staffing and events and dedicated colleagues for specific merchandise areas. In addition, we are taking a more localized approach to enable store-level empowerment and deliver against distinct customer preferences in each of the markets we serve.Through these efforts, in 2025, Macy's delivered its best net promoter score on record.

•Accelerate luxury growth

◦Bloomingdale's: Bloomingdale's achieved its highest owned-plus-licensed-plus-marketplace comparable sales growth in 14 quarters, sequential improvement in its net promoter score and its best holiday on record. From a category perspective, fragrance, women’s contemporary, designer apparel and fine jewelry were standout contributors to this performance. We introduced several new brands that are already driving results including Totem, Christian Louboutin, Victoria Beckham Beauty, Skims, Messika and Vuori. These brands are inspiring existing customers, attracting new ones and further strengthening Bloomingdale’s relevancy.

◦Bluemercury: Bluemercury achieved its 20th consecutive quarter and sixth consecutive year of comparable sales growth. Results continued to be driven by expanded brand partnerships in dermatological skincare, color and fragrance including Skinceuticals, Dr Diamonds Metacine, Sisley Paris and Parfums De Marley.

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•Simplify and modernize end-to-end operations

◦Efforts to drive meaningful change for our customers, and operational and financial performance, continue to progress. We opened our new state-of-the-art fulfillment and store replenishment center, China Grove, which incorporates automation, robotics and artificial intelligence into our delivery ecosystem. The facility helps modernize and strengthen our supply chain and provides us the opportunity to increase accuracy and timeliness of deliveries and further reduce our delivery costs. Our end-to-end work gives us the ability to invest in our growth ambitions, while simplifying our business model.

Comparable sales highlights for 2025 versus 2024 related to components of the Bold New Chapter strategy are as follows:

•Macy's, Inc. comparable sales were up 1.5% on an owned-plus-licensed-plus-marketplace basis.

◦Macy's, Inc. go-forward business comparable sales, inclusive of go-forward locations and digital across nameplates, were up 1.7% on an owned-plus-licensed-plus-marketplace basis.

•Company's nameplate highlights include:

◦Macy's comparable sales were up 0.4% on an owned-plus-licensed-plus-marketplace basis. Macy's go-forward business comparable sales, inclusive of Macy’s go-forward locations and digital, were up 0.6% on an owned-plus-licensed-plus-marketplace basis.

•Reimagine 125 locations comparable sales, included within Macy's go-forward business comparable sales, were up 1.0% on an owned-plus-licensed-plus-marketplace basis.

◦Bloomingdale's comparable sales were up 7.4% on an owned-plus-licensed-plus-marketplace basis.

◦Bluemercury comparable sales were up 1.6%.

See pages 30 to 31 for reconciliations of non-GAAP financial measures to the most comparable U.S. generally accepted accounting principles ("GAAP") financial measures and other important information.

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Analysis of Results of Operations

See pages 30 to 31 for reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measure and for other important information.

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Comparison of 2025 and 2024

Net sales for 2025 were down $529 million, or 2.4%, compared to 2024. The decline was mainly due to store closures at the end of fiscal year 2024, which contributed approximately $700 million of annual net sales in the prior year. Comparable sales on an owned-plus-licensed-plus-marketplace basis increased 1.5%.

The increase in other revenues from 2024 to 2025 was driven by a $132 million, or 25% increase, in credit card revenues which continued to be driven by a strong credit portfolio. Macy Media Network grew $12 million, or 7% from 2024, driven by benefits from our Amazon ad partnership which started this year.

Gross margin rate decreased by 40 basis points from 2024 to 2025. The decline was driven by the impact of tariffs, net of the Company's tariff mitigation efforts.

SG&A expenses decreased $90 million, or 1%, from 2024 to 2025 due to the net impact of the benefit of the 64 closed Macy's locations and ongoing expense savings initiatives, partially offset by investments in its go-forward business.

Asset sale gains in both 2025 and 2024 primarily reflect the monetization of non-go-fo

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