The Macy's story

What drives the business

• Macy’s Bold New Chapter strategy prioritizes investment in retained Macy’s stores, expansion of Bloomingdale’s and Bluemercury, and operating efficiencies intended to fund improvements for customers.
• Its business spans 665 stores, websites and mobile applications serving nearly 40 million active consumers annually, with merchandise ranging from apparel and home furnishings to cosmetics and premium skincare.
• In the quarter to August 2026, net sales rose 1.1% to $4.9 billion and comparable sales increased 2.7%, with Bloomingdale’s achieving its highest second-quarter sales volume and Bluemercury comparable sales rising 6.2%.
• Beyond merchandise, the credit card profit sharing program generated $156 million in net revenue and Macy’s Media Network generated $37 million in the quarter to August 2026, linking customer loyalty and advertising to the retail business.

What the price assumes

At $22.79, the reverse DCF implies annual growth of -17.9% in free cash flow after stock pay for ten years, using a 10.3% discount rate.

Macy’s delivered annual growth of -7.2% on that measure over the last 10 years, while the TenQ check sets a -1.6% bar by moving the historical rate halfway toward 4%.

The price therefore embeds a steeper cash flow contraction than either the historical record or the TenQ check, rather than requiring the retail recovery to produce cash flow growth.

Value M on your own assumptions

What could change the story

• The recovery follows a prolonged contraction: revenue growth was 0.3% over the last twelve months against an annual pace of -3.9% over the last three years, failing both TenQ peer growth checks.
• Return on capital employed of 9.8% falls below the TenQ bar of 10.0%, leaving the productivity of store and luxury investments an important test.
• Tariff refunds materially lifted reported earnings in the quarter to August 2026, so the underlying improvement is smaller than the headline EPS increase suggests.
• Merchandise inventories rose 2.5% against net sales growth of 1.1% in the quarter to August 2026, making inventory management important ahead of the holiday period that contributes a significant portion of annual sales and earnings.
• Trade policy changes and pressure on discretionary spending could affect merchandise costs and demand, although Macy’s has no material long-term debt maturities until 2030.

What to watch next

• For fiscal 2026, Macy’s raised guidance to net sales of $21.675 billion to $21.825 billion and comparable sales growth of 1.0% to 1.5%, making continued Reimagine 200 outperformance and luxury growth central measures of progress.
• The earnings outlook calls for adjusted EBITDA of 7.8% to 8.0% of total revenue and adjusted diluted EPS of $2.15 to $2.35.
• Guidance incorporates approximately $0.18 per share of tariff refund reinvestment in the second half of 2026, leaving approximately $0.05 per share of benefit for the full year.
• Subsequent releases will show whether comparable sales gains translate into net sales growth and cash generation as Macy’s funds those investments.

Sources

• Macy's's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The M stock report, for every figure and check