Macy’s on Wednesday beat Wall Street’s sales expectations for the third quarter in a row and posted its strongest growth in more than three years as the company’s turnaround strategy showed signs of momentum.
The department store operator raised its full-year sales and earnings outlook after its better-than-expected fiscal third quarter. The retailer now expects adjusted earnings per share of between $2 and $2.20, up from its previous expectation of $1.70 to $2.05, and net sales of $21.48 billion to $21.63 billion, compared with its prior outlook of $21.15 billion and $21.45 billion.
Macy’s said it expects flat to roughly 0.5% comparable sales growth from the previous year. That compares with its previous expectations for a year-over-year decline of between 0.5% and 1.5%. The industry metric takes out one-time dynamics like store openings and closures, and Macy’s includes merchandise that it owns, items for brands that pay for space within its stores and its third-party online marketplace.
It marked the second consecutive quarter Macy’s raised its full-year sales and earnings outlook. The company had cut its full-year earnings outlook in May because of higher tariffs, more promotions and “some moderation” in discretionary spending.
Even so, the projected annual sales would represent a drop from year-ago net sales of $22.29 billion. Macy’s said about $700 million of that annual net sales decrease is due to the 64 stores it shuttered at the end of the last fiscal year, which ended Feb. 1, and in the early part of this fiscal year.
And Macy’s said in its news release that its outlook anticipates two challenging dynamics – selective spending by consumers and higher tariffs – will persist in the holiday quarter.
The company’s shares dropped nearly 5% in premarket trading Wednesday.
In an interview with CNBC, CEO Tony Spring said the company is taking a “prudent view” of the fourth quarter because it faces tough year-over-year comparisons and because it’s not sure how “aspirational customers,” those who like to shop at its stores but are more financially pressured, may spend during the season.
“We’re pleased with the fourth quarter to date, but we have a big holiday in front of us,” he said.
Spring said Macy’s department store model is an advantage during the gift-giving season because it offers a wide variety of merchandise and a range of prices, from off-price to luxury.
Here’s how the department store operator did during its fiscal third quarter compared with what Wall Street expected, based on a survey of analysts by LSEG:
Earnings per share: 9 cents adjusted vs. an expected loss of 14 cents Revenue: $4.71 billion vs. $4.62 billion expected
Macy’s is trying to put up better and more consistent sales, particularly for its namesake brand. Macy’s department stores account for the majority of the New York City-based legacy retailer’s business, but their performance has lagged behind the company’s higher-end department store, Bloomingdale’s, and beauty chain, Bluemercury. To try to reverse that trend, the retailer has stepped up investments in staffing, sharper merchandise and eye-catching displays at Macy’s stores. It first rolled out that strategy at 50 locations, which were dubbed the “First 50,” and has since expanded that approach to a total of 125 Macy’s locations. That’s more than a third of the 350 namesake stores that Macy’s plans to keep open.
Along with the added investment, it has shuttered lower-performing Macy’s locations. It announced in early 2024 that it would permanently close about 150 of its namesake stores by early 2027, while planning to add locations for Bloomingdale’s and Bluemercury.
The company hasn’t yet said how many additional stores it may close this fiscal year.
In the three-month period that ended Nov. 1, Macy’s net income fell to $11 million, or 4 cents per share, compared with $28 million, or 10 cents per share, in the year-ago period. Adjusting for some one-time items, including gains on the sale of real estate, it reported earnings per share of 9 cents.
Revenue decreased from $4.74 billion in the year-ago quarter.
In the fiscal third quarter, companywide comparable sales rose 3.2% including owned and licensed merchandise and its third-party marketplace. When the company excluded stores that won’t be part of its go-forward business, that growth was 3.4%.
Bloomingdale’s posted the strongest performance of the company’s brands, with comparable sales jumping 9% year over year on an owned-plus-licensed basis, including its third-party marketplace. And Bluemercury’s comparable sales increased 1.1%.
Spring attributed the company’s better performance to shoppers responding to changes that Macy’s has made to its legacy department stores – such as additional staff ready to help and newer brands like high-end home goods company MacKenzie-Childs.
He said he visited Macy’s stores, and those of its competitors, on Black Friday and was pleased by what he saw.
“I like the way we’re showing up,” Spring said. “We look crisp. We look clean. We look interesting, compelling, inspiring, easy to shop.”
The snap to cooler weather helped, too, he said. As temperatures dropped in October, shoppers bought items including cashmere sweaters, outerwear and boots.
For the holiday season, Spring said he expects promotions to be at similar levels to the year-ago period at Macy’s stores and website, along with those of its competitors.
Higher tariffs, however, will mean higher prices for some items. Macy’s has worked with vendors and manufacturers to blunt the impact of the duties, and the hit to margins in the third quarter came in lower than the company expected, he said.
Still, Spring said Macy’s has made “selective” price increases in almost every category, with some items costing more because of improved quality or an added embellishment and some simply due to higher import costs.
As of Tuesday’s close, Macy’s shares have risen about 34% so far this year. That outpaces the S&P 500’s 16% gains during the same period. Macy’s stock closed Tuesday at $22.71, bringing the company’s market cap to about $6.10 billion.
