Macy's concluded the holiday season with robust performance, reporting an unexpected increase in fourth-quarter comparable store sales, driven by its Bloomingdale's brand, which supported the company's ongoing transformation.
The department store chain announced a surprise 1.8% rise in fourth-quarter comparable store sales, primarily fueled by the Bloomingdale's brand. However, management expressed a cautious outlook for the coming year.
The company issued a guarded signal for the upcoming period, citing influences from macroeconomic and geopolitical factors. While its revenue forecast surpassed Wall Street estimates, its adjusted earnings per share guidance fell short of expectations.
For the quarter ended January 31, comparable store sales grew by 1.8%, outperforming Wall Street's projection of a 0.9% decline. The company had previously anticipated this metric to range from a 2.5% decrease to being flat.
The Bloomingdale's segment was a standout performer, driving a 9.9% increase in comparable store sales.
Macy's reported a quarterly profit of $507 million, or $1.84 per share, compared to $342 million, or $1.21 per share, in the same period last year. According to financial data provider FactSet, analysts had expected adjusted earnings of $1.57 per share; the company's actual result of $1.67 per share exceeded expectations.
This quarter marked the conclusion of the second year of Macy's three-year "Bold New Chapter" transformation strategy. Under this plan, management is closing underperforming mainline Macy's stores while expanding the higher-end Bloomingdale's footprint.
Initiated in February 2024, the transformation aims to open 15 new Bloomingdale's locations and at least 30 new Bluemercury stores. Both of these brands have outperformed the main Macy's brand.
In the fourth quarter, Macy's overall net sales declined by 3.2%, affected by store closures, while Bloomingdale's sales increased by 8.5% and Bluemercury sales rose by 2.5%.
CEO Tony Spring stated, "The outstanding performance of Bloomingdale's highlights its ability to enhance the customer experience and cater to a full spectrum of demand, from upscale fashion to luxury."
The company's overall net sales decreased by 1.7% to $7.64 billion, surpassing the $7.51 billion anticipated by analysts surveyed by FactSet.
Although the company has reduced expenses, it has simultaneously increased investments in the Bloomingdale's brand and 125 core Macy's locations.
Macy's plans to expand its current focus by adding 75 more stores to the 125 core locations receiving significant transformation resources. The company also indicated that store closures in 2026 will be fewer than in the previous two years. Macy's stated that these increased investments are reflected in its financial guidance.
The company forecasts full-year revenue between $21.4 billion and $21.65 billion, above the analyst consensus of $20.97 billion. The comparable sales outlook is projected between a 0.5% decline and a 0.5% increase, compared to the average analyst expectation of a 0.15% increase.
Macy's expects adjusted earnings per share to be in the range of $1.90 to $2.10, below the analyst forecast of $2.20.
The company attributed its cautious guidance to macroeconomic uncertainties potentially impacting discretionary consumer spending, coupled with increased investments in its transformation plan.
Macy's anticipates that tariffs will have a more significant impact on profitability in the first half of the year, with the most pronounced effect expected in the first quarter. The company noted that its fourth-quarter gross margin declined by approximately 0.5 percentage points year-over-year, primarily due to tariffs.