Macy’s (NYSE: M) is placing its bet with consumers and remains confident that they will continue shopping as interest rates are likely to continue declining.
The department store reported that revenue during the third quarter rose to $4.7 billion, surpassing the analysts’ estimates of $4.55 billion.
While consumer confidence has slumped in recent months, Macy’s has benefited from falling interest rates this year. The Federal Reserve has lowered interest rates twice in 2025.
Central bankers are expected to lower rates again at their December meeting next week, in hopes of boosting the economy and encouraging spending. Wall Street has estimated additional interest rate cuts that could spur more spending among consumers, especially among the lower and middle classes that Macy’s caters to in its clothing and household items.
The Federal Reserve is likely to decrease rates again by 0.25% next week and continue its path of cutting rates in 2026 with two additional 0.25% cuts, wrote BofA Global Research in a research note.
“Our forecast of additional cuts next year is due to the change in leadership, not our read on the economy,” analysts at BofA said in a note.
White House economic adviser Kevin Hassett could be nominated as the future Federal Reserve chairman, replacing Jerome Powell, the current Fed chair.
“By cutting rates next week, we think the Fed would increase the risk of pushing policy into accommodative territory, just as fiscal stimulus kicks in,” BofA said in its research note.
Lower interest rates benefit shoppers
While Macy’s raised its fiscal year net sales guidance to a range of $21.475 billion to $21.625 billion, the retailer made a more conservative estimate of its holiday sales, falling below what Wall Street analysts had predicted.
But CEO Tony Spring said the company is taking a “prudent view” of the quarter. The retailer’s third-quarter revenue produced the strongest amount in 13 quarters.
“By prudent, I mean, sensible, thoughtful, well-informed— I’m not cautious or careful,” he said, according to a Barron’s article, “We are excited about the holidays.”
The stock has surged in the past year, increasing by 34% and a whopping 96% in the past six months, as consumers have continued to take advantage of deals and other sales designed to attract shoppers.
Shoppers have proved to be resilient in some categories, willing to spend money on deals offered by retailers. Sales from Black Friday, a massive sale conducted the day after Thanksgiving in the U.S., spur many deals from retailers.
Online shopping surges
Consumers shelled out $30 billion from online shopping, according to data from Adobe. Cyber Monday, which takes place on the Monday after Thanksgiving and Black Friday, will likely generate $14.2 billion alone, totaling over $40 billion from both Black Friday and Cyber Monday.
Shoppers are increasingly turning to their phones and laptops to hunt down deals and make purchases, which has led to an increase of 9.1% in online shopping compared to 2024’s Black Friday total.
Macy’s was prepared and offered its shoppers several in-store discounts on Black Friday.
“Consumers want to celebrate the holidays despite economic and macro concerns, and they continue to seek value and respond to key events, like Black Friday and Cyber Monday,” wrote Dana Telsey, CEO of Telsey Advisory Group, in a research note.
Shoppers have been concerned about the outlook of the economy as layoffs persist, and the labor market is weaker.
“The company is striking an appropriately cautious tone on 4Q, given the impact of tariffs on prices and somewhat waning consumer sentiment on spending,” wrote David Silverman, senior director of Fitch Ratings. “The holiday shopping season has just begun, and the trajectories of sales and promotional cadence over the coming weeks are uncertain.”
But Macy’s has been cutting costs and closing stores that are underperforming, which should boost its profit margin. The company reported that comparable sales at stores open for more than a year rose by 2.5% year over year, which is higher than the 0.6% drop forecast by analysts.
As consumers continue to express their resilience and sales continue to rise at Macy’s as the department store expands its merchandise offerings, investors can feel confident that their investment is likely to pay off in the future.
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