Market Discounts Persist for Macy’s Despite Strong Year-to-Date Gain

Shares of Macy’s Inc. have advanced sharply in 2025, yet the department store chain continues to trade at valuation levels well below those of its closest publicly listed competitors. The disparity remains even after factoring in consensus profit projections through fiscal year 2027, signaling that Wall Street maintains a cautious stance toward the New York–based retailer.

Data compiled through 31 December show Macy’s stock up roughly 33 percent since the start of the year. Over the same period, the benchmark S&P 500 Index has gained about 15 percent, highlighting Macy’s relative strength in 2025. Still, that performance has not translated into a pricing multiple comparable with peers such as Kohl’s Corp. and Dillard’s Inc.

Forward earnings multiples remain far apart

At recent quotations, Macy’s changes hands for approximately 12.5 times forward earnings. By contrast, Kohl’s trades at more than 20 times forward earnings, while Dillard’s commands nearly 34 times. The forward figures reflect analyst expectations for each company’s next reported fiscal year and therefore can differ in the mix of one-off items, cost-saving initiatives or share-repurchase effects. Nonetheless, the gap widens when the lens is expanded to estimated earnings two years out.

Sell-side forecasts for the fiscal year ending January 2027 call for Macy’s to earn about $2.21 per share. Using that projection, the stock is valued at roughly 10.1 times its anticipated 2027 profit. Kohl’s, expected to post $1.23 per share in the same period, trades at around 17.5 times that estimate. Dillard’s, forecast to earn $27.92 per share, carries a multiple near 22.5 times its projected 2027 earnings.

Although comparing department stores can be complicated by variations in revenue mix, real-estate ownership and loyalty-program accounting, the figures suggest investors are applying a noticeably steeper discount to Macy’s future cash flows than to those of its rivals. That discount persists despite Macy’s stronger share-price appreciation year to date.

Guidance indicates softer holiday-season profits

The primary explanation for the discrepancy lies in management guidance issued with fiscal third-quarter results in early December. For the final quarter of fiscal 2026, which captures the critical holiday shopping period, Macy’s projected revenue between $7.35 billion and $7.5 billion. The midpoint of that range modestly exceeded the Wall Street consensus of approximately $7.3 billion.

Earnings guidance, however, disappointed. The company forecast fourth-quarter earnings per share of $1.35 to $1.55, below the analyst consensus of around $1.58. Investors interpreted the lower figure as evidence that margin pressure from promotions, higher labor costs or inventory management could offset volume gains during the holidays. As a result, the valuation gap that had developed earlier in the year showed little sign of closing.

Possible catalysts in early 2026

Despite the muted profit outlook for the 2025 holiday season, the embedded discount offers scope for price appreciation if actual results surpass the conservative guidance. An upside surprise during the reporting period could lead to multiple expansion, particularly if management demonstrates progress in boosting store productivity or accelerating digital sales.

A longer-term rerating may rely on sustained earnings growth, balance-sheet improvements or evidence that cost initiatives are translating into higher operating leverage. Investors will monitor additional data points, including updated sales trends from the National Retail Federation and consumer-spending indicators released by the U.S. Bureau of Labor Statistics, to gauge whether discretionary spending can support higher revenue trajectories for department stores overall.

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Peer performance context

Kohl’s and Dillard’s have attracted higher multiples partly on expectations of sharper earnings rebounds in their respective fiscal years ahead. Analysts covering Kohl’s project improved merchandise margins as the company refines its private-label mix, while Dillard’s continues to benefit from tight inventory controls and elevated full-price selling. Even so, the magnitude of the multiple differential suggests that any positive surprise from Macy’s could narrow the gap quickly.

Investors also weigh capital-allocation policies. Macy’s announced a targeted share-repurchase authorization and maintains a dividend, but its payout ratio remains constrained by debt-reduction priorities. Competitors with lighter leverage or more aggressive buyback plans can attract premium valuations, reinforcing the discount applied to Macy’s shares.

Valuation snapshot

• Macy’s: 12.5× forward earnings; 10.1× estimated FY 2027 EPS
• Kohl’s: 20× forward earnings; 17.5× estimated FY 2027 EPS
• Dillard’s: 34× forward earnings; 22.5× estimated FY 2027 EPS

The figures underscore the breadth of the divergence in how the market prices future profitability for legacy department-store chains.

Outlook

While Macy’s stock has already outpaced the broader market in 2025, its current valuation still reflects skepticism that the retailer can sustain growth or expand margins. Management will have an opportunity to challenge that view with the release of holiday-quarter results early next year. Until then, the shares remain positioned as a lower-priced alternative within the department-store segment, carrying both potential upside from any operational beat and downside if near-term earnings miss already tempered expectations.

Crédito da imagem: Getty Images