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Macy’s Sees Strong Holiday Sales, But Economic Headwinds Loom
NEW YORK – Department store giant Macy’s reported stronger-than-expected profits in the crucial fourth quarter, driven by a successful overhaul of its merchandise and improved customer service. Comparable sales also saw an increase, indicating positive momentum for the retailer, which also operates upscale Bloomingdale’s and beauty chain Bluemercury.
Despite the positive holiday performance, Macy’s offered a cautious outlook for the coming year. While projecting sales above Wall Street expectations, the company provided a more conservative estimate for profits.
CEO Tony Spring, entering his second year at the helm, attributed this reserved outlook to the “tension” between Macy’s healthy business and broader economic uncertainties. These include potential impacts from President Donald Trump’s tariffs and the ongoing conflict in Iran, which has driven up energy prices.
“Sitting here today, there’s more unknown than there is known,” Spring told The Associated Press on Wednesday.
Investors reacted positively to the news, with shares jumping nearly 9% before the opening bell. Bloomingdale’s, in particular, achieved its highest holiday sales performance on record, a success that some industry analysts attribute, in part, to the recent bankruptcy filings of competitors like Saks Fifth Avenue and Neiman Marcus.
However, Macy’s, like its rivals and the retail sector as a whole, continues to grapple with significant challenges. The U.S. has implemented tariffs that have disrupted global trade and increased prices, leading many American consumers to re-evaluate their spending priorities. The recent conflict in Iran has further exacerbated these pressures, causing sharp increases in gasoline and diesel prices, which impact both consumers at the pump and retailers through higher shipping costs.
Retailers face difficult decisions regarding how much of these increased costs, particularly from tariffs, can be absorbed versus passed on to consumers who are already exercising more caution with their spending. While the Supreme Court struck down the largest of President Donald Trump’s tariffs, the administration is seeking to replace them, and the timing of potential refunds from overturned tariffs remains uncertain for companies.
Consumer spending patterns have been uneven, reflecting a “K-shaped economy” where higher-income households continue to spend more freely, while lower-income families pull back.
“I just don’t know how long this war is going to last,” Spring remarked to the AP. “I don’t know how long the (Strait of Hormuz) is going to be disrupted.
I don’t know whether the Supreme Court ruling and the tax refunds are going to happen. I think we have to lean into what we can control, and then I think that we have to respond accordingly as we learn more.”
While Macy’s has not yet seen an increase in shipping costs, Spring acknowledged that a prolonged conflict in Iran could change this. The company can absorb some of these costs, he noted, but ultimately, some will need to be passed on to shoppers.
Since taking over in early 2024, Spring has focused on revitalizing Macy’s by closing unprofitable stores, modernizing others, and enhancing customer service. The company is also striving to differentiate its luxury business through exclusive merchandise offerings.
For the three-month period ending January 31, Macy’s reported a net income of $507 million, or $1.84 per share, a significant increase from $342 million, or $1.21 per share, in the prior-year period. Adjusted per-share results for the latest quarter were $1.67. Net sales dipped slightly to $7.64 billion from $7.68 billion, a reflection of the company’s strategic store closures.
Comparable sales, encompassing both online and physical store sales, rose 1.8%. This follows a 3.2% increase in the fiscal third quarter and a 1.9% increase in the second quarter. Analysts had anticipated $1.57 per share on sales of $7.51 billion.
Overall comparable sales for Macy’s increased by 0.4% for the quarter. Notably, the 125 revamped locations saw a more encouraging 0.9% rise in comparable sales, suggesting a positive return on investment. Bloomingdale’s saw a robust 9.9% increase in comparable sales, while Bluemercury experienced a 1.3% rise.
Looking ahead, Macy’s projects net sales for the current year to be between $21.4 billion and $21.65 billion, with comparable sales ranging from a 0.5% decrease to a 0.5% increase. The company expects earnings per share to be in the range of $1.90 to $2.10, while analysts are forecasting $2.20 per share on sales of $20.97 billion.