Compared to Estimates, Macy's (M) Q1 Earnings: A Look at Key Metrics

Macy's reported Q1 revenue of $4.6 billion, a 5.1% year-over-year decline, but a 3.16% positive surprise compared to the Zacks Consensus Estimate; EPS was $0.16, down from $0.27 year-over-year, but also a positive surprise of 14.29%. Comparable store sales on an owned basis decreased 2%, outperforming the estimated 4.3% decline, while other revenue streams, particularly credit card revenues, showed significant growth, offsetting some of the overall sales decline. Despite the earnings and revenue beats, Macy's stock has a Zacks Rank #4 (Sell), suggesting potential underperformance in the near term.

Analysis

Macy's (M) reported mixed Q1 2025 results, characterized by year-over-year declines in key headline figures but outperformance relative to analyst expectations. Revenue reached $4.6 billion, a 5.1% decrease from the prior year, yet surpassed the Zacks Consensus Estimate of $4.46 billion by 3.16%. Similarly, earnings per share (EPS) of $0.16, while down from $0.27 a year ago, exceeded the consensus estimate of $0.14 by 14.29%. A significant positive was the comparable store sales on an owned basis (domestic retail), which declined by 2% year-over-year, a notably better performance than the anticipated 4.3% contraction. This suggests some resilience in Macy's core retail operations despite the broader sales downturn. The company's 'Other Revenue' segment was a bright spot, increasing 26% year-over-year to $194 million, driven primarily by net credit card revenues which surged to $154 million, well above the $132.16 million estimate. However, Macy's Media Network revenue, while up 8.1% YoY to $40 million, fell short of the $43.74 million analyst projection. Store counts for Bluemercury (170), Macy's Stores (450), and consolidated stores (679) were all slightly below analyst estimates. Despite these estimate beats, Macy's stock has returned +5.3% over the past month, lagging the S&P 500 composite's +7.4% gain, and currently holds a Zacks Rank #4 (Sell), signaling potential near-term underperformance.

Key Decisions for Investors

• Investors should acknowledge the better-than-feared Q1 operational metrics, particularly the modest comparable sales decline and strong earnings beat, but weigh these against the persistent year-over-year revenue and EPS contraction.
• The significant growth in credit card revenues offers a partial offset to declining merchandise sales and should be monitored for its sustainability and contribution to overall profitability.
• Given the Zacks Rank #4 (Sell) and recent stock underperformance despite the Q1 beats, a cautious stance is warranted; consider waiting for sustained improvement in top-line trends or a change in analyst outlook before initiating or adding to positions.