Macy's beats low earnings expectations as the retailer faces tariffs and cautious consumers

Macy's reported Q1 results exceeding muted expectations with revenue of $4.6 billion and adjusted EPS of $0.16, but same-store sales declined 1.2%. Despite reaffirming sales guidance of $21 billion to $21.4 billion, the company lowered its 2025 adjusted EPS outlook to $1.60-$2.00, citing tariff uncertainty, consumer sentiment, and competitive pressures; shares edged down slightly following the announcement. While Bloomingdale's and Bluemercury showed positive same-store sales growth, overall same-store sales are still expected to decline for the year.

Analysis

Macy's (M) reported first-quarter revenue of $4.6 billion, a 5.1% year-over-year decline yet exceeding the $4.46 billion estimate, and adjusted earnings per share of $0.16, down 40.7% but topping the $0.14 forecast. Same-store sales fell 1.2%, a shallower contraction than the anticipated 3.85% decline, leading to a slight downward movement in Macy's shares following the announcement. Despite these Q1 outperformances against muted expectations, Macy's significantly lowered its full-year 2025 adjusted EPS guidance to $1.60-$2.00 from a prior $2.05-$2.25, a range already below the $2.64 EPS recorded in 2024 and consensus estimates. This revision, attributed to uncertainties from potential tariffs (with the U.S. having temporarily adjusted rates on some Chinese imports), weakening consumer sentiment, and a competitive landscape, underscores substantial profit pressure. The company reaffirmed its 2025 revenue forecast of $21 billion to $21.4 billion, which is below the prior year's $22.29 billion and prevailing analyst expectations. While CEO Tony Spring expressed confidence, citing positive same-store sales at Bloomingdale's (+3.8%) and Bluemercury (+1.5%), the core Macy's stores, including those with recent investment, saw a 0.8% same-store sales decrease. The reiterated full-year same-store sales guidance of a 0.5% to 2% decrease contrasts starkly with Wall Street's expectation for a 0.71% increase, highlighting persistent headwinds, including tariff risks on its significant China-sourced merchandise (approximately 20% for direct products, with third-party brands sourcing nearly 18% and private brands 27% from China).

Key Decisions for Investors

• The substantial downward revision of full-year EPS guidance, despite a Q1 beat against muted expectations, signals significant headwinds and warrants caution regarding Macy's near-term profitability outlook.
• Investors should closely monitor U.S.-China trade tariff developments, given Macy's significant sourcing exposure to China (approximately 20% for direct products, with third-party and private brands also heavily reliant on Chinese manufacturing), and consumer sentiment trends, as these are pivotal to the company's revised financial outlook and operational cost structure.
• The efficacy of Macy's turnaround strategy for its core brand warrants scrutiny, evidenced by a 0.8% same-store sales dip in recently invested stores and a negative full-year same-store sales forecast, contrasting with the positive performance of its luxury (Bloomingdale's) and beauty (Bluemercury) segments.