Macy’s Inc. is refinancing to ease its debt obligations.
On Monday, Macy’s said that a subsidiary would offer $500 million worth of unsecured senior notes due 2033, in a private offering.
The proceeds from the offering, as well as cash on hand, will be used to repay approximately $587 million in senior notes that are maturing while also covering a $175 million tender offer for other debt.
Fitch Ratings assigned a BBB- rating to Macy’s proposed $500 million of unsecured notes. According to Fitch, “BBB ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity.”
Fitch said the rating reflects Macy’s “industry leadership, good cash flow and reasonable balance sheet management, enabling it to navigate the challenging department store industry and maintain market share.”
The agency also cited the need for the retailer to continue repositioning its portfolio, which includes closing about 150 department stores from 2024 to 2026, many of which have already been closed.
Fitch does see Macy’s and other retailers selling discretionaries experiencing near-term operational challenges due to softening consumer sentiment and the evolving tariff policy.
Longer term, the Fitch ratings assumes Macy’s can generate annual earnings before interest, taxes, depreciation and amortization of around $1.7 billion to $1.8 billion.
“With $23 billion in 2024 total revenue, Macy’s is the clear leader in the U.S. department store space,” Fitch indicated. “The company’s scale, physical and digital infrastructure, cash flow and relationships with vendors and customers are assets that, if used effectively, could allow Macy’s to defend market share in a difficult space.…The company has recently demonstrated some success in managing operations and expenses, with Fitch forecasting EBITDA margins around the mid-8 percent range in the medium term, similar to 2019, despite around 10 percent revenue declines and the absorption of cost inflation.”
As of the end of first quarter of 2025, Macy’s had total debt of $2.8 billion and no material long-term debt maturities until 2027. Fitch said that near-term maturities are “limited” and include $61 million in 2027 and $176 million due 2028.