Macy's stock soars as sales rise by most in 3 years, company plans more store closures

Macy's (M) stock surged 16% after reporting its first positive same-store sales in three years, up 1.9% in Q2, prompting an uplift in its full-year revenue and earnings outlook. CEO Tony Spring cited momentum from turnaround efforts, including strategic store investments, even as the retailer continues to prune its portfolio by closing 150 stores over three years. However, Telsey Advisory Group maintained a "Market Perform" rating, expressing skepticism that rightsizing alone will offset persistent macro pressures, traffic declines, and tariff risks, which continue to cloud near-term sales and profitability visibility.

Analysis

Macy's (M) demonstrated initial signs of a turnaround, with its stock surging 16% after reporting a 1.9% increase in Q2 same-store sales, the first positive result in three years. This performance, driven by targeted investments in 125 stores where sales grew 1.4%, prompted management to raise its full-year revenue and earnings outlook. However, this optimism is tempered by several factors. The full-year same-store sales forecast, while narrowed, still anticipates a decline between 0.5% and 1.5%, indicating that a comprehensive recovery is not yet secured. CEO Tony Spring acknowledged this uncertainty, citing potential headwinds from consumer behavior and tariffs in the second half. The positive operational results are also set against an ongoing, significant restructuring that includes closing 150 stores over three years. Analyst sentiment, as represented by Telsey Advisory Group's 'Market Perform' rating, remains cautious, highlighting that near-term visibility is limited by macro pressures and a competitive landscape, questioning if rightsizing the store base alone is sufficient. Despite the daily gain, the stock remains down over 6% year-to-date, reflecting persistent investor skepticism.

Key Decisions for Investors

• Investors may view the positive same-store sales growth as an early, speculative indicator that the new CEO's turnaround strategy is gaining traction, but should weigh this against the stock's negative year-to-date performance.
• It is prudent to monitor macroeconomic indicators and future management commentary closely, as the CEO's expressed caution on consumer resiliency and potential tariffs, along with a full-year sales forecast that is still negative, represent significant risks to the current momentum.
• The long-term thesis rests on the success of the ongoing restructuring; investors should track the margin improvements from the 150 planned store closures and the sustained sales lift from the 'reimagined' locations as key performance indicators.