Macy's, Inc. (M): 5 FORCES Analysis [Nov-2025 Updated]

You're looking at Macy's, Inc. right now, and honestly, it's a fascinating moment as the company pushes hard on its 'Bold New Chapter' strategy, betting big on digital and luxury growth. As a former head analyst, I see a business fighting to control its destiny in a market where customer power is high and rivalry is intense-just look at that FY 2025 net sales forecast landing between $21.15 billion and $21.45 billion. We need to see if their plan to hit 25% private brand sales by year-end gives them the leverage they need against powerful suppliers and aggressive competitors like Target and off-price chains. Below, I've mapped out the full five forces analysis, giving you the precise breakdown of the risks and opportunities you need to know before making your next move.

Macy's, Inc. (M) - Porter's Five Forces: Bargaining power of suppliers

When you look at the supplier landscape for Macy's, Inc. (M), you see a dynamic tension. On one side, Macy's, Inc.'s sheer scale-projected to generate net sales between $21.0 billion and $21.4 billion for the full fiscal year 2025-gives it substantial leverage over many vendors. For instance, in the second quarter of 2025, selling, general and administrative (SG&A) expense was $1.9 billion, showing the massive operational footprint that drives purchasing volume. This scale allows Macy's, Inc. to demand favorable terms and pricing, which is critical as the company navigates margin pressure, with gross margin guidance for 2025 anticipating an impact of 30 to 70 basis points.

However, this power is not absolute, especially with certain vendors. The bargaining power of suppliers is best described as moderate overall, but it is definitely increasing for exclusive national brands and high-demand luxury suppliers. When a supplier offers a truly differentiated, high-demand luxury product, Macy's, Inc. has fewer alternatives, allowing those suppliers to command better pricing and terms. You see evidence of this pressure in the company's active management of the tariff environment; CEO Tony Spring noted in May 2025 that Macy's, Inc. had to 'renegotiate orders with suppliers' and 'cancel or delay orders where the value proposition is just not where it needs to be'. This surgical approach suggests that suppliers who are less flexible on pricing due to external costs or product uniqueness hold more sway.

Macy's, Inc.'s primary counter-strategy to mitigate supplier power is aggressively building its internal portfolio. The long-standing goal, set back in 2020, was for private brands to account for 25% of annual sales by 2025. While the last reported figure was 16% of fiscal 2022 sales, the commitment to this goal increases internal leverage significantly. By controlling the design, production, and distribution of its own brands-like the recently launched On 34th and State of Day-Macy's, Inc. captures a greater portion of the profit margin and reduces reliance on national brand partners for core offerings.

To further limit risk and enhance negotiation flexibility, Macy's, Inc. is actively diversifying its sourcing footprint away from single-country concentration. This is a direct response to geopolitical risks, including U.S. tariffs. The company has made measurable progress in this area:

• Total product origin from China decreased to approximately 20% at the end of the last fiscal year (FY24).
• Private brands, where Macy's, Inc. has more control, sourced about 27% from China in the last fiscal year.
• This 27% figure is a clear reduction from the 32% sourced from China in FY24 and is well below the pre-pandemic rate of over 50%.

This diversification strategy, moving sourcing to other regions, inherently weakens the bargaining power of any single country's supplier base, including China's, by providing viable alternatives for production.

The power dynamic is best summarized by looking at the product mix. Suppliers of undifferentiated, commodity-like goods face strong pushback from Macy's, Inc.'s volume purchasing. Conversely, suppliers providing unique, high-value products maintain a stronger position. Here is a quick comparison of the sourcing shift:

The difference in sourcing concentration between private and national brands highlights where Macy's, Inc. has successfully exerted its will to diversify and where it remains more beholden to external brand partners.

Macy's, Inc. (M) - Porter's Five Forces: Bargaining power of customers

The bargaining power of customers for Macy's, Inc. is definitely high. You are operating in a market where customers have near-instant access to alternatives, which keeps pricing pressure on. Honestly, switching from Macy's to a competitor is usually just a few clicks away.

Power is high due to low switching costs and immense retail choice. The sheer volume of competing retailers, both physical and digital, means customers face minimal friction when choosing where to spend their next dollar. If Macy's, Inc. doesn't meet a price or assortment expectation, the customer simply moves on to the next option.

Customers are highly price-sensitive, demanding frequent promotions and discounts. This is a constant reality in the department store space. We see this reflected in Macy's, Inc.'s own strategy, as management noted they are being 'incredibly surgical' about implementing price increases due to tariffs, absorbing some costs to maintain the value equation. Furthermore, consumer caution persists due to economic pressures like food and housing prices, pushing shoppers toward more affordable options.

The Star Rewards loyalty program is key, aiming to retain 70% of high-value members. This program is central to mitigating customer power by locking in repeat business. As of late 2025, the program boasts nearly 30 million members. The penetration is deep; for instance, in the third quarter of 2023, Star Rewards members accounted for approximately 72% of total owned-plus-licensed sales. The program's high ranking, scoring 7.79 in Newsweek's America's Best Loyalty Programs 2025, shows its perceived value to the consumer base.

E-commerce platforms provide instant price and feature comparison with competitors. This digital transparency amplifies buyer power significantly. Looking at October 2025 data, Macy's online platform generated revenue of approximately $458.3 million across over 73.8 million sessions. The Average Order Value (AOV) was in the $200 to $225 range, with a conversion rate between 2.50% and 3.00%. You can see the comparison pressure when you note that a competitor like Kohl's had a lower AOV range of $150 to $175 and a conversion rate between 2.00% and 2.50% in the same month. For the full fiscal year 2025, Digital Commerce 360 projects Macy's total web sales will reach $7.21 billion.

Here's a quick look at the digital battlefield metrics:

The pressure from price comparison is evident in the need for constant promotional activity. The company's overall fiscal year 2025 guidance reflects this challenging environment, with expected net sales between $21.0 billion and $21.4 billion, and comparable sales expected to decline between 2% and 0.5% versus FY2024.

The leverage customers hold is further demonstrated by the need for Macy's, Inc. to constantly refine its value proposition:

• Tariff impact on gross margin is estimated to be about 20 to 40 basis points for the fiscal year.
• The company is actively managing inventory by canceling or delaying orders where the 'value proposition is just not where it needs to be'.
• The Platinum tier of Star Rewards offers the highest benefit: 5 points per $1 spent when using the Macy's Card.
• The Q2 2025 net sales figure was $4.8 billion, a 2.5% decrease year-over-year.

You need to keep the Star Rewards program compelling, because if the perceived value drops, those millions of members will easily shop elsewhere.

Finance: draft the Q3 2025 cash flow projection incorporating the latest guidance by next Tuesday.

Macy's, Inc. (M) - Porter's Five Forces: Competitive rivalry

Macy's, Inc. operates within a highly contested retail landscape, facing pressure from department stores like Nordstrom, mass merchants such as Target, and the off-price segment represented by T.J. Maxx.

The Fiscal Year 2025 net sales forecast for Macy's, Inc. is set in the range of $21.15 billion to $21.45 billion, reflecting the ongoing market contest.

Macy's, Inc. is executing a significant footprint reduction as part of its fight for efficiency, planning to close approximately 150 underperforming stores by the end of fiscal 2026.

The intensity of rivalry is evident in the company's strategic shifts, detailed below:

• Last year, Macy's, Inc. shuttered 50 locations.
• In 2025, the company is planning to close 66 stores.
• The goal is to maintain a fleet of 350+ profitable locations.
• The company is investing in its luxury divisions, Bloomingdale's and Bluemercury.

The competitive environment demands aggressive investment in digital capabilities, with Macy's, Inc. projecting total web sales for 2025 to reach $7.21 billion.

The company's performance in the second quarter of 2025 showed mixed results across its portfolio amid this rivalry:

Macy's, Inc. is actively deploying technology to counter competitive threats, focusing on AI for personalization and operational improvements.

The strategic response to competitive pressure includes a focus on core store revitalization and digital integration:

• Macy's, Inc. ranks No. 17 in Digital Commerce 360's Top 2000 Database.
• The company is embracing the power of AI and generative AI to take cost out of the network.
• Selling, general and administrative expenses declined by $29 million in Q2 2025 due to closed locations and cost-saving measures.
• The company reported $829 million in cash and cash equivalents at the end of Q2 2025.
• Total debt stood at $2.6 billion as of the end of Q2 2025.

The FY 2025 adjusted diluted earnings per share guidance is set between $1.70 and $2.05.

Macy's, Inc. (M) - Porter's Five Forces: Threat of substitutes

Off-price retailers present a clear and present danger to Macy's, Inc.'s core business. This segment is capturing market share aggressively, driven by consumers prioritizing value amid persistent economic pressures. In the first quarter of 2025, off-price inventory rose 13% year-over-year, starkly contrasting with the 1% inventory increase reported at department stores. Analysts project off-price sales to rise 6% in the second quarter of 2025, while department store sales are expected to fall 6% for the same period. On a rolling four-quarter basis as of Q1 2025, the off-price segment's share of total sales expanded by 210 basis points to reach 66.6%. The entire Off-Price Retail Market is estimated to be valued at USD 372.46 Bn in 2025, with apparel and footwear alone contributing an expected 37.2% share of that total. For context, TJX Companies reported a 4% comparable store sales change, while Burlington Stores reported 1% growth in Q3 2025.

Direct-to-consumer (DTC) brands continue to bypass the traditional department store distribution network entirely. These digitally native and established brands are capturing significant e-commerce spend. Established DTC brands are projected to generate $187 billion in e-commerce sales in 2025, contributing to a U.S. DTC e-commerce total expected to reach $212.9 billion in 2025. To be fair, the pure-play DTC model is evolving; wholesale distribution growth was poised to grow 51% in 2024, accounting for 60% of some brands' sales, compared to only 11% growth expected from DTC brands' own stores. Still, the direct relationship allows these brands to own the customer interaction and data stream, a capability Macy's, Inc. must counter.

The shift toward access over ownership is fueling the growth of online resale and rental platforms, offering a cost-effective, trend-driven alternative, especially for apparel. The Online Clothing Rental Market size was valued at approximately USD 2.6 billion in 2025. This market is projected to expand at a Compound Annual Growth Rate (CAGR) of 9.5% through 2035. In 2024, women accounted for 65.73% of the market share, indicating a strong pull in the key demographic for department stores. This segment allows consumers to cycle through fashion without the commitment of purchase, directly substituting for the seasonal wardrobe refresh that department stores rely upon.

Mass merchants like Walmart and Target compete by offering a wider, more convenient, one-stop product assortment that includes apparel. Walmart, in particular, is proving resilient, with Walmart U.S. comparable sales advancing 4.5% in Q3 2025, and the company raising its full-year sales guidance to between 4.8% and 5.1% growth. Walmart's Q3 U.S. sales reached $120.7 billion. Conversely, Target faced headwinds, reporting a 2.7% drop in comparable sales for Q3 2025, with its in-store comparable sales falling 5.7% in Q1 2025. While Target's digital sales showed a 4.7% increase, it was insufficient to offset the in-store decline. This dynamic shows that consumers are consolidating purchases at value leaders like Walmart, while pulling back on discretionary categories like apparel at mid-tier retailers like Target, a pressure Macy's, Inc. also feels.

Here is a quick look at the scale of these substitute markets as of 2025 data points:

The competitive pressure is multifaceted. You see off-price retailers gaining share through superior inventory flow, DTC brands capturing brand loyalty online, rental platforms offering a low-commitment fashion cycle, and mass merchants leveraging scale and convenience for broad-based shopping trips.

• Off-price share of sales expanded 210 basis points YoY in Q1 2025.
• Wholesale distribution growth was poised to grow 51% in 2024.
• Online rental market CAGR projected at 9.5% through 2035.
• Walmart raised full-year sales guidance to 4.8% to 5.1% growth.
• Macy's Q3 2024 owned basis comparable sales were down 2.4%.

Finance: draft 13-week cash view by Friday.

Macy's, Inc. (M) - Porter's Five Forces: Threat of new entrants

The threat of new entrants for Macy's, Inc. is segmented by the required scale of entry. Establishing a comparable physical footprint requires massive upfront investment, creating a high barrier for traditional department store rivals.

High capital requirements for physical retail infrastructure and prime real estate form a significant barrier.

The sheer scale of Macy's, Inc.'s existing real estate portfolio represents a massive sunk cost that new entrants must match or surpass to achieve similar market presence. Activist investors estimate Macy's real estate portfolio, which includes stores and distribution centers, to be worth as much as US$9 billion as of late 2024/early 2025 discussions. Further analysis suggests the entire portfolio value could range between $7.9 billion and $10.5 billion. Consider the flagship location in Herald Square alone, which is valued between $1 billion and $3 billion, with some sources pegging it near $4 billion. To put this in perspective, as of August 2025, Macy's market capitalization was $3.6 billion, meaning the real estate value alone significantly exceeds the company's equity valuation. Furthermore, Macy's is actively managing this asset base, projecting to generate $275 million from retail property sales in 2025, while simultaneously planning capital reinvestment between $600 million and $700 million to support renovations at 350 go-forward locations.

Established brand recognition since 1858 and complex supply chain logistics are hard to replicate.

Macy's, Inc. benefits from decades of established cultural relevance. The Macy's Thanksgiving Day Parade, for instance, is an investment that yields measurable commercial returns, correlating with a 15 to 20 percent uptick in same-store sales during peak holiday weeks, despite an estimated outlay of $13 million for the event in 2025. On the operational side, the complexity of the logistics network is a barrier. Macy's, Inc. is working to streamline this, targeting annual run-rate cost savings of some $235 million by 2026 through supply chain efforts. Replicating a network that supports operations across hundreds of physical locations and a growing digital presence, while achieving these targeted efficiencies, is a multi-year, capital-intensive endeavor for any new entrant.

Digital-only retail models face lower entry barriers, requiring strong niche focus and marketing.

While the physical barrier is high, digital-only entrants bypass the need for massive real estate capital. These entrants must, however, immediately contend with Macy's, Inc.'s established digital footprint and customer base. Macy's, Inc. is actively expanding its digital reach through formats like Macy's Marketplace. New entrants must secure significant marketing spend to cut through the noise, especially given Macy's, Inc.'s ability to drive traffic through events like the Parade. The company's strategy includes opening 30 new small-format Macy's stores by fall 2025, indicating a focus on lower-cost physical engagement where digital players might also target expansion.

New entrants must compete immediately against Macy's established loyalty program.

Macy's, Inc.'s Star Rewards program locks in customer spending through a tiered rewards structure. New entrants face the immediate challenge of matching or exceeding the perceived value of earning Star Money, where 1,000 points converts to $10 in rewards. The structure immediately incentivizes higher spending through credit card usage, as Platinum members earn 5 points per $1 spent, while Bronze members earn 1 point per $1 spent.

Here is a breakdown of the Star Rewards earning structure:

During peak promotional periods, the value proposition intensifies; for example, an offer of $20 Star Money for every $100 spent effectively represents a 20% return on that purchase amount. Any new competitor must offer a compelling, immediate, and easily understood incentive to draw customers away from this established ecosystem.