Retail giant struggles with cautious consumers, declining sales, and economic headwinds
Macy’s (M) has joined the ranks of major retailers issuing disappointing outlooks, as the company grapples with slowing consumer spending and mounting tariff pressures. Despite exceeding Wall Street’s earnings expectations for the fourth quarter, its sluggish same-store sales growth and weak 2025 guidance have cast a shadow over its performance. Shares of the retailer fell 2.7% in pre-market trading on Thursday.
Earnings Beat, But Sales Lag
For the fourth quarter, Macy’s reported adjusted earnings per share (EPS) of $1.80, surpassing analyst expectations of $1.54. However, same-store sales grew just 0.2%, falling well short of the 1.23% increase anticipated by analysts. Net sales came in at $7.77 billion, slightly above Bloomberg’s estimate of $7.76 billion.
Looking at full-year results, Macy’s posted net sales of $22.29 billion, a slight miss compared to the estimated $22.39 billion. Adjusted EPS was $2.64, exceeding expectations of $2.37. Same-store sales declined 0.9%, though this was slightly better than Wall Street’s expected 1.01% decline.
A Bleak 2025 Outlook
Macy’s is preparing for another tough year. The company forecasts 2025 revenue between $21.0 billion and $21.4 billion, well below 2024’s $22.29 billion and missing estimates of $21.66 billion. Same-store sales are expected to decline between 0.5% and 2%, contrasting with the modest 0.71% increase that analysts had predicted.
The retailer also expects adjusted EPS to range between $2.05 and $2.25—short of the $2.31 consensus estimate and significantly lower than last year’s $2.64. This gloomy forecast follows a broader trend in the retail sector, with companies like Best Buy (BBY), Target (TGT), and Abercrombie & Fitch (ANF) also issuing weaker-than-expected guidance this week.
Tariff Woes Add to the Pressure
The Trump administration’s latest round of tariffs is exacerbating Macy’s challenges. A new 25% tariff on imports from Mexico and Canada, along with an additional 10% tariff on Chinese goods, could drive up costs for retailers. Although Macy’s private-label brands account for just 15% of sales, Citi analyst Paul Lejuez warned that tariffs on major national brands like Nike (NKE), Steve Madden (SHOO), and Adidas (ADDYY) could put further pressure on pricing and margins.
Macy’s management has previously emphasized its focus on value-conscious consumers, and investors will be keen to see whether the company absorbs the higher costs or passes them on to shoppers. Morningstar analyst David Swartz noted that tariffs add yet another hurdle for Macy’s, which is already struggling with declining foot traffic and evolving consumer preferences.
Turnaround Efforts Under Scrutiny
Amid these challenges, Macy’s is pressing forward with its turnaround plan, dubbed “A Bold New Chapter.” The strategy involves closing 150 underperforming stores while reinvesting in more promising locations and its digital platform. Notably, same-store sales at the 50 stores where Macy’s boosted marketing and staffing rose 1.2% in Q4. The company plans to shutter 66 unprofitable locations this year as part of the broader restructuring.
Luxury chains within Macy’s portfolio continue to be a bright spot. Bloomingdale’s and Bluemercury saw same-store sales increase 6.5% and 6.2%, respectively, in Q4. However, activist investors like Barington Capital Group and Thor Equities argue that Macy’s is still underutilizing its assets, particularly its real estate portfolio, which they value between $5 billion and $9 billion.
Investor Sentiment Remains Skeptical
Macy’s stock has been on a downward trajectory, falling 20% year-to-date and 34% over the past 12 months. In contrast, the S&P 500 (^GSPC) has remained relatively flat for 2025 and gained 15% over the past year.
While CEO Tony Spring remains optimistic about the company’s investments in customer experience, analysts are less confident. Morningstar’s Swartz pointed out that this is the third turnaround strategy Macy’s has attempted in the past decade, and previous efforts have failed to deliver long-term value.
With macroeconomic pressures, tariff concerns, and an ongoing struggle to retain customers, Macy’s faces an uphill battle. Investors will closely watch its execution of the Bold New Chapter strategy to see whether it can reverse its fortunes or remain mired in retail’s ongoing transformation.
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