Macy's Q1 earnings crush estimates; warns about tariffs
Macy’s Inc. got off to a solid start in its first quarter, with profit and same-store sales that easily topped Street estimates.
In the company's quarterly call with investors, Macy's chairman and CEO Jeff Gennette discussed the impact of the recent and proposed tariff increases. He said that the higher tariff that went into effect last Friday would have an effect on Macy's furniture business, but it would be mitigated. He was not as sanguine, however, about the proposed tariff on an additional $300 billion of Chinese goods that is being considered by the Trump Administration.
"When you do the math, it’s hard to find a path through that wouldn’t impact customers,” Gennette told investors. He noted that the tariff would apply to a lot of apparel and accessory items, for Macy's in-house brands as well as national labels.
The nation’s largest department store retailer reported that its income totaled $136 million, or 44 cents per share, in the quarter ended May 4, down from $139 million, or 45 cents per share last year. Analysts had expected earnings per share of 33 cents.
Sales totaled $5.50 billion, down slightly from $5.54 billion last year and just missing analysts’ estimates.
Same-store sales rose 0.6%, the company’s sixth consecutive quarter of comp growth. Analysts were expecting a 0.6% decline.
“We had another quarter of double-digit growth in our digital business, and mobile continues to be our fastest-growing channel,” said Gennette. “We are pleased with the progress we are making on our strategic initiatives as they continue to drive top-line growth, keeping us on track to reach our 2019 goals. We believe these initiatives, coupled with productivity improvements, position our company well for long-term profit growth.”
Gennette also said that Macy’s brick-and-mortar sales improved “sequentially” in the first quarter, supported by its off-price Backstage in-store concept and its updated store initiative.
“As an omnichannel retailer, we are focused on growing our customer base by providing a great experience across all channels and taking market share category by category,” he said.
For the full year, Macy’s expects net sales to be about flat with the prior year. Same-store sales, on an owned plus licensed basis, are estimated to be flat to up 1%. And Macy’s still expects adjusted earnings per share to fall within a range of $3.05 to $3.25. Analysts had been calling for annual earnings of $3.09 a share.