Macy’s Q1 tops Street; cuts earnings and will raise some prices due to tariffs
Macy’s Inc. reported better-than-expected first-quarter earnings and sales but cut its full-year profit outlook amid tariff costs.
The department store giant said that it reduced its full-year earnings forecast based on several factors, including initial and current tariffs, some moderation in consumer discretionary spending, and a heightened competitive promotional landscape. It maintained its full-year sales outlook.
Macy’s CEO Tony Spring told CNBC that about 15 cents to 40 cents per share of the earnings guidance cut is due to tariffs. He also said the retailer will raise some prices and stop carrying certain items to mitigate the tariff increases.
“It’s not a one-size-fits-all kind of approach,” Spring said in the CNBC report. “There are going to be items that are the same price as they were a year ago. There is going to be, selectively, items that may be more expensive, and there are items that we might not carry because the pricing doesn’t merit the quality or the perceived value by the consumer.”
In a presentation to analysts, Macy’s outlined actions it is taking to mitigate tariffs. These include diversifying countries of origin, renegotiating orders with suppliers and cancelling or delaying orders.
Macy’s is in the middle of a turnaround effort, dubbed Bold New Chapter, that includes closing about 150 poor-performing namesake stores by 2027, as well as a big bet on its luxury and beauty brands. It also includes prioritizing investment in approximately 350 “go-forward” nameplate locations.
First Quarter
Macy's reported net income of $38 million, or $0.13 per share, in the quarter ended May 3, compared with $62 million, or $0.22 per share, in the year-ago period. Excluding some one-time charges adjusted earnings share were $0.16 per share.
Sales fell 5.1% to $4.85 billion, ahead of analysts’ estimates of $4.42 billion. Comparable sales on an owned basis fell 2%, which was not as much as expected. Comp sales benefitted from better than expected performance across all nameplates, the company said.
By division, Macy’s net sales were down 6.5% inclusive of store closures, with comparable sales down 2.9% on an owned basis and down 2.1% on an owned-plus-licensed-plus-marketplace basis. At Macy’s “go-forward” stores, comparable sales were down 1.9%. At the 125 “reimagine” locations that Macy’s has invested in with additional staffing, better displays and other improvement, percent, comp sales were down 1.3% on an owned basis and down 0.8% on an owned-plus-licensed basis.
Bloomingdale’s reported comparable sales growth on an owned and owned-plus-licensed-plus-marketplace basis of 3.0% and 3.8%, respectively. Bluemercury reported comp sales growth of 1.5%, its 17th consecutive quarter of comparable sales growth.
In other revenue, credit card net revenues increased 31.6% to $154 million. Macy’s media network net revenue rose 8.1%, to $40 million.
“We continued to execute against our Bold New Chapter strategy during the quarter, scaling key initiatives that improved our customer experience and contributed to stronger than expected performance across all three of our nameplates,” Spring stated in the earnings release. “Our first quarter results give us confidence that we have the right strategy and team in place to navigate the current environment while we continue to invest in our customer on the path to returning Macy’s, Inc. to sustainable profitable growth.”
In April, Macy's said that its COO and CFO Adrian Mitchell, will be leaving the company. He will be succeeded by Capri Holdings executive Thomas J. Edwards, effective June 22.
Macy’s said it now expects adjusted earnings of $1.60 to $2 per share for its full fiscal year, down from its previous outlook for $2.05 to $2.25 a share. sales are still expected to come in at $21 billion to $21.4 billion, down about $1 billion from the prior fiscal year.
In commentary, David Silverman, senior director, Fitch Ratings, said that similar to most discretionary retailers, Macy’s near term trajectory will be complicated by an evolving tariff policy and its impact on product cost, inventory and pricing decisions, and consumer sentiment.
“Given the company’s reasonable financial position, good cash flow, and limited near term debt maturities, the company has the ability to absorb increased costs and the potential for market share gains if it chooses to support a competitive pricing position in the near term,” he added. “Longer term, Macy’s success will hinge on its ability to successfully execute against its ‘Bold New Chapter’ strategies to combat secular challenges affecting traffic at malls and department stores."
Macy's Inc. had a total of 679 stores at the end of the quarter.
