Macy’s eyes investment-grade rating as S&P revises outlook to positive
Investing.com -- S&P Global Ratings has revised its outlook on Macy’s Inc (NYSE: M) to positive from stable while affirming its ‘BB+’ issuer credit rating, signaling that the department store operator could regain an investment-grade credit rating over the next 12 to 18 months. The rating agency attributed the revised outlook to five consecutive quarters of positive comparable-store sales growth, gross margin stability, and successful execution of the retailer’s turnaround strategy, known as “A Bold New Chapter.”
Central to Macy’s operational momentum has been its strategic shift toward higher-income consumers by integrating premium brands and expanding its luxury footprint. Growth was largely propelled by its Bloomingdale’s banner, which posted an 11.3% jump in second-quarter comparable sales, capitalizing on shifts in the luxury landscape following the bankruptcy filing of competitor Saks Global.
Against that backdrop, Macy’s has continued to optimize its physical store footprint while investing heavily in digital capabilities and store refurbishments. The company plans to close approximately 40 underperforming locations in fiscal 2026, aiming for a streamlined fleet of roughly 350 stores situated primarily in high-traffic A- and B-level malls, while allocating $820 million to $850 million annually toward capital expenditures.
Financially, S&P expects Macy’s to generate healthy free operating cash flow of $675 million in fiscal 2026 and $450 million in fiscal 2027, supported by an estimated $130 million in asset sale proceeds from closed locations. The agency forecasts adjusted debt-to-EBITDA leverage to settle in the high-1x range, backed by over $1 billion in balance-sheet cash, moderate share repurchases, and annual dividend commitments.
S&P noted it could upgrade Macy’s to investment grade if the company maintains positive comparable sales growth, expands EBITDA margins, and keeps leverage comfortably below 2x. Conversely, the outlook could revert to stable if macroeconomic weakness, operational missteps, or aggressive share repurchases push leverage above 2.5x.