Macy’s posts strongest Q1 growth in four years, raises guidance despite consumer worries

Macy's posts strongest Q1 growth in four years, raises guidance despite consumer worries

• Macy's raised its full year guidance after posting better than expected fiscal first quarter results.
• During the quarter, comparable sales grew 3%, the strongest first quarter performance in four years.
• CEO Tony Spring told CNBC in an interview the company is reinvesting in the fundamentals, like better staffing and assortment, to drive sales.

Macy's posted its strongest first-quarter comparable sales performance in four years on Wednesday, as the legacy department store's turnaround continues to show progress.

Led by the 200 so-called reimagined stores Macy's has upgraded, comparable sales grew 3% overall during the quarter and 1.6% at its namesake banner.

At Bloomingdale's, comparable sales grew 10.2%, helped by an array of buzzy brands, a "fun factor" unique in the luxury landscape and the recent bankruptcy of rival Saks Fifth Avenue, CEO Tony Spring told CNBC in an interview.

"Is the disruption in the marketplace helpful to us? Sure," he said. "Is it the primary reason we're growing? No."

Spring said better-than-expected sales and profitability led the company to raise its full fiscal year guidance after taking a cautious outlook earlier in the year.

It's now expecting 2026 net sales to be between $21.5 billion and $21.75 billion, largely ahead of expectations of $21.59 billion, according to LSEG. It anticipates earnings per share will be between $2 and $2.20, up from a previous range of between $1.90 and $2.10.

It now expects comparable sales to climb between 0.5% and 1.2% for the year, versus a previous outlook of a 0.5% drop to a 0.5% increase.

Many retailers have reported strong growth during their fiscal first quarters in recent weeks due in part to higher than usual tax refunds. Some companies issued more cautious guidance for the current quarter over concerns less stimulus in the economy could lead to slower demand, especially as shoppers pay more for gas due to the war in the Middle East.

Spring said tax refunds "definitely" helped during the first quarter, but weren't the only reason why Macy's grew. Crucially, the same trends the company saw during the first quarter have so far continued into the second, he said.

"We did raise our guidance in both sales and profit for the remainder of the year to reflect the business trends that we're seeing as we start the second quarter, so pleased with the second quarter to date and the breadth of the categories that are performing," said Spring. "Don't see any significant change in the consumer approach to our categories and our business across all three of our name plates."

He said the steady consumer behavior led Macy's to hike its outlook "despite the macroeconomic and geopolitical uncertainty."

Here's how the department store did in its first fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 13 cents adjusted. The figure wasn't immediately comparable to estimates.
• Revenue: $4.68 billion vs. $4.61 billion expected

The company's reported net income for the three-month period that ended May 2 was $63 million, or 23 cents per share, compared with $38 million, or 13 cents per share, a year earlier. Adjusting for restructuring costs and other one-time charges, Macy's posted earnings per share of 13 cents.

Sales rose to $4.68 billion, up about 2% from $4.60 billion a year earlier.

Macy's is about two years into a three-year turnaround that Spring has spearheaded since taking over as the retailer's chief executive. It's included closing underperforming stores at dead malls across the country and reinvesting in the ones it decided to keep open.

Those investments have included a focus on retail fundamentals, like ensuring stores have enough staff, are enjoyable to spend time in and are stocked with items people actually want to buy.

"We're not doing the fancy stuff, we're doing the stuff that makes the biggest difference in the business," said Spring. "We are really focused on product, we are really focused on taking care of the customer, and I think the results show that when we do those two things consistently, and we don't get bored, we stay relentless in our commitment, we get the results we're looking for."

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