Macy’s Makeover Smoothes Out Earnings-Related Worry Lines for Investors

Macy’s had a small miracle on 34th Street: Its same-store sales rose last quarter for the first time in three years. Investors went on a shopping spree after hearing the upbeat earnings, pushing Macy’s stock yesterday to its second-biggest single-day gain ever. 

The department store also seems cautiously optimistic for the holidays, raising its profit forecast for the year after cutting it last quarter. It still expects tariffs to hurt its margins, since Macy’s has said about 20% of its products are sourced from China. But the retail giant is ultimately counting on higher-income shoppers, especially at its pricey Bloomingdale’s and Bluemercury stores, to keep buying $200 serums and designer totes despite price hikes. 

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Though sales at stores open at least a year grew less than 1% in the past quarter, the positive push could represent the revival of a company that has been circled by buyout firms twice in the past two years. Macy’s turned down the offers, which would’ve seen the icon gutted for real estate similar to fallen rivals Sears and Lord & Taylor. 

Instead, Macy’s is in the midst of a makeover that’ll see it with fewer stores that get more attention: 

• CEO Tony Spring has been rolling out a plan to make Macy’s relevant again after stepping into the role last year from his previous post at Bloomingdale’s. His plan starts with shuttering underperforming stores. About a third of all Macy’s locations are targeted to close, leaving 350 stores — less than half of what it had in 2015. 
• The remaining stores are getting revamped with new brands, more staff, and a cleanout of clutter. More than 100 stores have gotten upgrades so far, driving their same-store sales up 1.1% last quarter to outpace the company’s overall growth. 

Platinum Preferred: American shoppers told PwC they plan to spend less this holiday season than they did last year, which would mark the first spending dip since 2020. Macy’s is looking to its wealthiest customers to keep the lights on in the Herald Square window displays. The company said about half of Macy’s shoppers have six-figure incomes and those higher-income customers spend more. That contributes to beauty brand Bluemercury and bougie mall staple Bloomingdale’s achieving greater same-store sales growth than their parent company’s namesake: 1.2% and 3.6%, respectively.