Macy’s (M) Stock Climbs as Third Quarter Earnings Beat Expectations

TLDR

• Macy’s reported strongest comparable sales growth in over three years at 3.2%, beating Wall Street expectations for third consecutive quarter
• Company raised full-year earnings guidance to $2.00-$2.20 per share, up from previous $1.70-$2.05 range
• Bloomingdale’s led performance with 9% comparable sales increase, marking fifth consecutive quarter of growth
• Macy’s implementing selective price increases across categories due to tariff pressures on imported goods
• Stock fell nearly 5% in premarket trading despite earnings beat as company warns of consumer spending pressures and tariff costs during holiday quarter

Macy’s posted third-quarter earnings that topped analyst expectations on Wednesday. The department store chain reported adjusted earnings of 9 cents per share versus forecasts for a 14-cent loss.

Revenue reached $4.71 billion, beating the $4.62 billion estimate. This marks the third straight quarter Macy’s has exceeded Wall Street’s sales projections.

Comparable sales climbed 3.2% across the company. This represents the retailer’s strongest growth rate in 13 quarters.

Macy’s, Inc., M

CEO Tony Spring credited the performance to the company’s turnaround strategy. The retailer has added more staff and updated displays at its namesake department stores.

Macy’s raised its full-year earnings outlook to $2.00-$2.20 per share. The previous range stood at $1.70-$2.05 per share.

The company also lifted its annual sales guidance to $21.48-$21.63 billion. That compares to the prior forecast of $21.15-$21.45 billion.

Despite the earnings beat, Macy’s stock dropped nearly 5% in premarket trading. The company warned that selective consumer spending and higher tariffs will continue to pressure results.

Brand Performance Varies Across Portfolio

Bloomingdale’s delivered the strongest results among Macy’s brands. The upscale department store posted 9% comparable sales growth, marking its fifth consecutive quarter of increases.

Bluemercury, the company’s beauty chain, saw comparable sales rise 1.1%. The 125 Macy’s stores receiving enhanced investment, called “Reimagine 125” locations, grew comparable sales 2.7%.

Spring said shoppers are responding to changes at Macy’s department stores. These include additional sales staff and new brands like MacKenzie-Childs home goods.

The cooler October weather also helped drive sales. Customers bought cashmere sweaters, outerwear and boots as temperatures dropped.

Tariffs Force Selective Price Hikes

Macy’s implemented selective price increases across almost every category. Some items cost more due to improved quality or added features, while others reflect higher import costs.

Spring said the company worked with vendors to reduce the tariff impact. The margin hit in the third quarter came in lower than Macy’s expected.

However, higher duties will continue to affect pricing going forward. The company anticipates these cost pressures will persist through the holiday quarter.

Macy’s expects promotional activity to match last year’s levels during the holiday season. Spring said the company is taking a “prudent view” of the fourth quarter.

The retailer faces tough year-over-year comparisons and uncertainty about how financially pressured shoppers will spend. Macy’s calls these customers “aspirational” – people who like shopping at its stores but face budget constraints.

The company closed 64 stores at the end of last fiscal year and early this fiscal year. About $700 million of the anticipated annual sales decline stems from these closures.

Macy’s announced in early 2024 it would permanently shut about 150 namesake stores by early 2027. The retailer plans to keep 350 Macy’s locations open while adding Bloomingdale’s and Bluemercury stores.

Net income for the third quarter fell to $11 million, or 4 cents per share. That compares to $28 million, or 10 cents per share, in the year-ago period.

Macy’s returned approximately $99 million to shareholders through dividends and share repurchases during the quarter. The company’s shares have risen about 34% this year through Tuesday’s close, outpacing the S&P 500’s 16% gains.

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