Overview
Macy's Inc (NYSE:M) is entering a period of heightened uncertainty as it prepares to deliver fiscal 2026 guidance. In a preview note, Jefferies signaled that the retailer should report a fourth-quarter result ahead of expectations, but emphasized that the longer-term outlook is clouded by weak consumer sentiment and a lack of clear visibility into a sustained recovery.
Preview and expectations
Jefferies raised its fourth-quarter "owned" comparable sales forecast to -0.5%, up from a prior estimate of -2.2%, reflecting better-than-expected execution in the quarter. The firm still views this outcome as a sequential slowdown and models adjusted earnings per share of $1.55, slightly above the $1.53 consensus.
Analysts led by Ashley Helgans called attention to Macy's promotional trade-offs across the quarter - a balancing act between discounting to drive traffic and attempting to preserve price realization. Jefferies highlighted what it described as an "80bps slowdown in AUR to 4.1%" as the company leaned into seasonal discounting to manage inventory and demand.
Volume and weather headwinds
The note also flagged pressure on unit volumes, which Jefferies estimated experienced a "200bps slowdown". The brokerage attributed this to tougher year-over-year comparisons and adverse weather conditions that hampered store traffic and purchasing patterns in the period.
Guidance positioning for fiscal 2026
Looking ahead to fiscal 2026, Jefferies expects Macy's to issue a wide guidance range. The brokerage anticipates management will explicitly build in macro uncertainty as the momentum from the prior "revenge spending" cycle dissipates. Jefferies emphasized that visibility into a durable recovery remains low, suggesting management will take a conservative tone when outlining forward expectations.
Internal levers and strategic offsets
With external demand uncertain, Macy's is relying increasingly on internal levers to stabilize performance. Jefferies points to the higher-margin Bloomingdale's brand as an important offset to potential softness in the company's core Macy's business. The firm also highlighted store remodels as an "underappreciated upside path" that could support results if execution and consumer response exceed current expectations.
Management's ability to generate leverage in selling, general and administrative expenses will be pivotal. Jefferies framed SG&A discipline as the key determinant of whether the 2026 outlook will operate as a conservative baseline or signal a deeper structural slowdown.
Market reaction and investor framing
Jefferies noted that a recent sell-off has improved the risk-reward profile for investors, characterizing it as more "constructive." Despite that, the prevailing negative tone across the retail sector continues to weigh on the stock, and the firm expects management to communicate cautiously when discussing forward guidance.
Key points
- Jefferies expects Macy's to report a Q4 beat and raised its owned comparable sales estimate to -0.5% from -2.2%.
- The firm models EPS of $1.55 for the quarter versus a $1.53 consensus and highlights promotional pressure with an 80bps slowdown in AUR to 4.1% and a 200bps slowdown in unit volumes.
- Macy's is likely to issue a wide fiscal 2026 guidance range, relying on higher-margin Bloomingdale's performance, store remodels, and SG&A leverage to offset core weakness.
Risks and uncertainties
- Poor visibility into consumer demand and macro conditions could cause management to set conservative guidance, affecting retail sector outlooks tied to discretionary spending.
- Continuing pressure on AUR and unit volumes from promotions, adverse weather, and difficult year-over-year comparisons may further compress margins and earnings in the department store segment.
- If SG&A savings and store remodel benefits do not materialize as expected, Macy's may struggle to offset weakness in its core business, increasing downside risk for investors focused on retail and consumer discretionary sectors.