Macy’s Earnings: Some Progress, but Holiday Season and 2025 Outlook Disappoint; Shares Undervalued

No-moat Macy’s met the fourth-quarter sales forecast that we revised downward after its Jan. 14 holiday sales update (see our note), but this result was overshadowed by uninspiring 2025 guidance. Specifically, the firm projects adjusted earnings per share of $2.05-$2.25 on an owned comparable sales decline of 0.5%-2% versus our respective estimates of $2.63 and flat. As such, we expect to lower our $25 per share fair value estimate by a low-single-digit percentage. Even so, we see opportunity in Macy’s shares and believe that positive sales trends at its “First 50,” Bloomingdale’s, and Bluemercury stores provide confidence in its “Bold New Chapter” strategy.