Macy's Feels Tariffs And Consumer Spending Heat, Cuts Profit Forecast

Macy's reported Q1 net sales of $4.6 billion, a 5.1% year-over-year decrease but above the $4.5 billion consensus, while also revising its FY25 EPS outlook downward to $1.60–$2.00 from $2.05–$2.25 due to initial and current tariffs, moderating consumer spending, and increased competition; the company affirmed its FY25 sales guidance of $21 billion-$21.4 billion. The retailer's Q2 forecast anticipates sales of $4.65 billion-$4.75 billion and adjusted earnings of 15 cents-20 cents per share, below consensus estimates, with comparable sales projected to be between -1.5% and +0.5%.

Analysis

Macy's Inc. reported first-quarter 2025 net sales of $4.6 billion, a 5.1% year-over-year decline, yet surpassing the $4.5 billion consensus. Adjusted earnings per share of 16 cents also exceeded the consensus of 14 cents. However, the company significantly revised its fiscal 2025 outlook downwards, cutting its adjusted EPS forecast to $1.60–$2.00 from $2.05–$2.25, below the $1.93 consensus, and trimming its core adjusted EBITDA margin expectation to 7.0%–7.5% from 8.0%-8.2%. These revisions are attributed to initial and current tariffs, a moderation in consumer discretionary spending, and a heightened competitive promotional landscape. Despite the profitability forecast reduction, Macy's affirmed its 2025 sales guidance of $21 billion-$21.4 billion. Comparable sales in Q1 fell 2.0% on an owned basis and 1.2% on an owned-plus-licensed-plus-marketplace basis, with the Macy's nameplate experiencing a 2.9% decline in owned comparable sales, while Bloomingdale’s and Bluemercury posted comparable sales growth of 3.0% and 1.5% on an owned basis, respectively. The gross margin remained flat at 39.2%, as improved merchandise margin was offset by higher delivery expenses. For the second quarter of 2025, Macy’s anticipates sales between $4.65 billion and $4.75 billion and adjusted EPS of 15 to 20 cents, both trailing consensus estimates of $4.76 billion and 34 cents, respectively, with comparable sales expected to range from -1.5% to +0.5%. Despite the lowered guidance, M stock saw a 2.57% premarket increase.

Key Decisions for Investors

• Investors should note the Q1 top and bottom-line beat but weigh it against the significant reduction in FY25 EPS and EBITDA margin guidance, reflecting substantial headwinds from tariffs, cautious consumer spending, and heightened competition.
• Careful monitoring of the performance differential between the declining Macy's nameplate and the growing Bloomingdale's and Bluemercury segments is warranted, alongside the progress of the 'Reimagine 125 locations' initiative, to assess the overall turnaround strategy's viability.
• Given that Q2 sales and EPS guidance fall below consensus estimates, and core adjusted EBITDA is guided lower than Q1 levels, investors should exercise caution regarding near-term profitability pressures, even as full-year sales guidance remains affirmed.