Tariff refunds flatter an already-real beat — but the whole sector is holding the same winning ticket.
M · Earnings Call · 2026-09-10
Macy's: The $0.23 Ghost in a Good Quarter
The beat was real — read the fine print
On the surface, Macy's Q2 2026 was the clean kind of quarter: net sales +1.1% to $4.9B, comps +2.7% (a fifth straight quarter of growth), all three nameplates positive, and full-year guidance raised for a second consecutive quarter. Tony Spring's framing was plain: “Adjusted EPS of $0.63 reflects both higher sales as well as the net benefit of tariff refunds received in the quarter.” — Antony Spring, Chairman and CEO · 2026-09-10 That qualifier is worth roughly $0.23 of the $0.63. Strip it out and adjusted EPS still grew 14% year over year — but the optics matter, and management knows it.
Tom Edwards gave the plumbing: “In the second quarter, we received $98 million of proceeds and $18 million following quarter end for a total of $116 million. We have now received all of our expected refunds.” — Thomas J. Edwards Jr., COO and CFO · 2026-09-10 Of that, only about $20M (~$0.05) flows to the bottom line. The rest is deliberately put back to work — brand marketing, Reimagine pilots, sharpening price in furniture and fine jewelry, and hedging fuel. This is tariff refund, Macy's number-one ranked keyword for the quarter — a phrase absent from its top-30 a quarter ago.
A crowded, sector-wide tailwind
Here is the crucial context: none of this is unique. Globally, Tariff Refund was the single top market keyword last quarter, and the latest market list is littered with variants — net tariff refunds, IEEPA refund, benefit of tariff refunds. Among companies reporting in just the last five days, at least ten flagged it: AEO, ASO, CULP, DBI, JILL, LAKE, LOVE, SIG, VNCE — and Macy's. Macy's is not a pioneer; it's a passenger. When every apparel retailer gets the same cash back and announces the same "reinvest and sharpen price" playbook, the benefit is competitively neutral by construction.
there is generally a lack of increasing same store sales guidance. Into the back half despite more investment or even slowing multiyear stacks I would love your perspective on that.
Michael Binetti's question is the sharpest version of the problem: if everyone pours refunds into price, nobody gains share — and the reinvested dollars dilute this quarter's optics into next year's compares.
What is actually Macy's
The company-unique thread is high AUR, up roughly 9% in the quarter, a multiyear run Macy's now treats as the spine of its model. Tony pushed back hard on the reflexive link to margin: “I would love to separate AUR from gross margin because I think it is a false narrative to kind of say higher AURs lead to higher margin ... higher AUR really just gives you more of an opportunity to lever on the expense side than it does to deliver more on the margin side.” — Antony Spring, Chairman and CEO · 2026-09-10 Note the offset — traffic steady, conversion a touch lower, basket higher. That is a recurring, not fresh, tune; on the prior call he described “balancing the improvements in AUR with a slight reduction in conversion, but still an overall basket size increase.” — Antony Spring · 2026-06-03
The other genuine asset is the Reimagined stores program — Q2 up 1.9%, now spanning Reimagine 200 at roughly 60% of the go-forward fleet and 75% of go-forward sales, positive in 9 of the last 10 quarters, with a 10-point NPS lift. Management is openly funding fourth-quarter pilots from the refund dollars to get a head start on a 2027 expansion toward the whole fleet. That reinvestment is the defensible long-term use of the windfall.
The tape and the prudence problem
The stock has run +6.2% over the last 90 days but sits -21.8% below its August 4 peak of $26.21 — the market handed Macy's the run into the print and has since taken some back. Zoom out and the full-history line is unforgiving: -71.8% from the 2015 peak of $72.80. A fresh report into a fading tape is a show-me setup.
The numbers underneath support the "better business" story but expose how thin the economics remain. Operating income of $112M on $4.9B of revenue is a ~2.3% operating margin, with a ~1.3% net margin. Free cash flow of $190M, up 207% year over year, is the more encouraging signal, and a net cash position of -$1.1B, improved 38% year over year, shows the balance sheet is genuinely healing.
But the guide is where prudence bites — Q3 comps of -0.5% to +0.5% and an adjusted EPS loss of $0.19-0.23, with ~$0.18 of refund reinvestment hitting the back half. Asked about the step-down, Tony shrugged: “there is actually a slight acceleration on a on a stack basis. That being said, there is nothing unusual unfolding about the quarter.” — Antony Spring, Chairman and CEO · 2026-09-10 He is also lapping the year's toughest compare (+3.2%).
The real swing is in costs. Back in March, Tom framed the tariff as a drag: “we're guiding down flat to 20 basis points and tariffs are 20 to 30 basis points.” — Thomas Edwards, COO and CFO · 2026-03-18 Today combined tariff-and-fuel is a net 5-15bp headwind, and tariffs flip to a second-half tailwind. Add the AI customer assistant rolling from Ask Macy digital into stores and out to Bloomingdale's — a conversational shopping assistant that management says converts better — and the operating story is quietly improving even as the refund-dollar noise fades.
The bottom line: Macy's is riding a crowded sector wave in tariff refunds, but the durable signal is sharper — a self-help AUR and Reimagine engine that is finally producing sequential comps, a healing balance sheet, and a guide that lets the refunds do their work without pretending they are recurring earnings.