Macy's Q3 2025 10-Q: Flat Revenue, Squeezed Profit Margins

Retail giant Macy's, Inc. recently released its financial results for the third quarter of its fiscal year, offering a detailed look into its performance. Let's unpack the numbers from their latest 10-Q filing to see how the company is navigating the current economic landscape.

For the three months ending November 1, 2025, Macy's reported total revenue of $4.91 billion, a figure that remained nearly flat compared to the $4.90 billion from the same period last year. While net sales from merchandise saw a slight dip, a notable increase in "Other revenue" helped keep the top line steady. This secondary revenue stream, which grew to $200 million from $161 million last year, primarily consists of income from their credit card program ($158 million) and the Macy's Media Network ($42 million).

The following flow diagram provides a visual breakdown of how Macy's quarterly revenue was transformed into net income, illustrating the major costs and expenses along the way.

In the diagram, you'll notice two significant "Unallocated" streams. The Unallocated Revenue of $200 million represents the credit card and media network income just mentioned, which the company does not assign to specific product divisions. Similarly, the Unallocated Cost of Revenue of $2.86 billion is the total cost of all goods sold, which Macy's reports on a consolidated basis rather than breaking it down by merchandise category.

A Breakdown of Sales and Profitability

Diving into the sales mix, the largest category continues to be Women's Accessories, Shoes, Cosmetics, and Fragrances, which brought in $1.95 billion in revenue. This was followed by Women's Apparel ($1.10 billion), Men's and Kids' ($1.02 billion), and Home/Other ($0.64 billion).

While revenue held steady, profitability felt a squeeze. The company's gross profit stood at $2.06 billion, resulting in a healthy gross margin of 41.9%. However, after accounting for substantial operating expenses of $2.02 billion—mostly Selling, General, and Administrative (SG&A) costs—the operating income dwindled to just $42 million. This is a decline from the $64 million operating income reported in the same quarter of the previous year, signaling tighter operational margins.

After factoring in interest expenses and a small tax benefit, Macy's ended the quarter with a net income of $11 million. This translates to a very slim net profit margin of 0.2% and diluted earnings per share of $0.04.

Navigating a Changing Retail World

The results reflect the challenging environment for traditional department stores. Macy's is actively working on its "A Bold New Chapter" strategy, which aims to strengthen the Macy's brand, accelerate luxury growth, and modernize its operations. The filing notes that its luxury brand, Bloomingdale's, saw comparable sales increase by a strong 9.0%, suggesting this part of the strategy may be gaining traction.

However, the thin profit margin underscores the operational hurdles. Macy's is battling to manage its extensive physical store footprint and associated costs while investing in its digital presence. The company's reliance on credit card revenue to bolster its top line is a key part of its business model, but it also represents a risk if consumer spending habits shift. In a competitive market, maintaining profitability while executing a large-scale strategic pivot remains Macy's central challenge.