Department store chain Macy’s (NYSE: M) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 4.1% year on year to $4.79 billion. Its non-GAAP profit of $0.16 per share was in line with analysts’ consensus estimates.
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Macy's (M) Q1 CY2025 Highlights:
- Revenue: $4.79 billion (4.1% year-on-year decline)
- Adjusted EPS: $0.16 vs analyst estimates of $0.15 (in line)
- Management lowered its full-year Adjusted EPS guidance to $1.80 at the midpoint, a 16.3% decrease
- Operating Margin: 2%, in line with the same quarter last year
- Locations: 679 at quarter end, down from 718 in the same quarter last year
- Same-Store Sales fell 2% year on year, in line with the same quarter last year
- Market Capitalization: $3.35 billion
StockStory’s Take
Macy’s first quarter results reflected the impact of ongoing consumer caution and the company’s efforts to adapt to shifting demand patterns. CEO Tony Spring pointed to the outperformance of the reimagined 125 Macy’s locations, as well as momentum in Bloomingdale’s and Blue Mercury, as evidence that the retailer’s “Bold New Chapter” strategy is gaining traction. Management discussed improvements in in-store experience, product assortment, and inventory allocation, with Spring noting, “Customers appreciate our renewed emphasis on the shopping experience and a commitment to providing relevant fashion and newness at a compelling value.” The quarter was also shaped by the closure of underperforming stores and continued discipline in inventory management.
Looking ahead, Macy’s leadership signaled that increased promotional intensity, ongoing tariff uncertainty, and a cautious consumer are key factors shaping the company’s outlook. Spring stated that the company is “being disciplined with our inventory commitments” and remains flexible to adjust to demand shifts, highlighting ongoing negotiations with vendors to limit the impact of tariffs. CFO Adrian Mitchell warned that gross margins will be pressured by higher delivery expenses and selective price increases in response to tariffs, while management anticipates consumers will become “more choiceful as the year progresses.” The company plans to reinvest operational savings into customer-facing initiatives but is also preparing for a more competitive retail environment for the remainder of the year.
Key Insights from Management’s Remarks
Management attributed first quarter performance to strategic investments in store experience, selective product launches, and ongoing cost discipline, while navigating macroeconomic and industry headwinds.
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Reimagined store progress: The reimagined 125 Macy’s stores showed better comp performance than the broader fleet, supported by improved merchandising, additional staffing, and curated product assortments. These initiatives are designed to differentiate Macy’s in a challenging retail landscape.
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Luxury segment resilience: Both Bloomingdale’s and Blue Mercury delivered positive comparable sales, benefiting from targeted brand launches, exclusive partnerships, and a refreshed store experience. Expansion of Bloomingdale’s outlet and small-format “Bloomys” concepts is allowing Macy’s to reach new markets and customer segments.
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Off-price and marketplace growth: The Backstage off-price concept outperformed full-line stores, while Macy’s marketplace platform (which allows third-party sellers) achieved approximately 40% growth in gross merchandise value. These channels help Macy’s capture price-sensitive shoppers and add assortment flexibility.
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Supply chain modernization: The company continued to streamline operations by leveraging generative AI for inventory allocation and improving distribution efficiency. Management highlighted that these actions have contributed to maintaining flat merchandise margins despite growing delivery costs.
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Tariff mitigation efforts: Macy’s actively reduced its sourcing exposure to China, renegotiated supplier contracts, and implemented selective price increases to offset new tariffs. Management estimates a 20 to 40 basis point impact on annual gross margin from tariffs, but noted the situation remains fluid.
Drivers of Future Performance
Macy’s expects ongoing consumer caution, heightened competition, and tariff impacts to influence revenue and profitability in the coming quarters.
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Consumer spending uncertainty: Management anticipates that consumers will remain cautious, leading to a more promotional retail environment. Guidance assumes no rebound in international tourism and that consumers will continue to prioritize value, prompting Macy’s to be flexible with inventory and pricing decisions.
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Tariff and cost headwinds: The company expects tariffs on imported goods, particularly from China, to pressure gross margins by 20 to 40 basis points. Macy’s is mitigating these effects through vendor negotiations, selective price increases, and strategic sourcing shifts, but acknowledges that the overall cost environment remains unpredictable.
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Strategic reinvestment and store optimization: Macy’s plans to reinvest savings from closed stores and operational efficiencies into customer-facing initiatives, including refreshed store formats and expanded product offerings. Management believes these investments are critical for gaining market share amid industry disruption and changing consumer behavior.
Catalysts in Upcoming Quarters
In the quarters ahead, the StockStory team will closely monitor (1) the trajectory of comparable sales at reimagined Macy’s locations and luxury banners, (2) Macy’s ability to offset tariff-related margin pressures through pricing and sourcing actions, and (3) progress in shifting consumer sentiment and discretionary spending. We will also track execution on store optimization and new merchandising strategies as key indicators of sustained recovery.
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