Macy’s Beats Q1 Expectations but Cuts Outlook as Tariffs and Spending Slowdown Bite

Macy’s entered fiscal 2025 under pressure, with investor sentiment low and its stock down nearly 30% year-to-date amid broader department store uncertainty. Yet its first-quarter results, while mixed, managed to exceed Wall Street’s expectations and provided some reassurance that its “Bold New Chapter” turnaround strategy may be stabilizing operations. The retailer is aggressively closing underperforming locations, investing in its stronger Bloomingdale’s and Bluemercury businesses, and revamping key Macy’s stores. While macro headwinds—including Donald Trump’s recent tariff escalations and cooling consumer discretionary spending—led the company to cut profit guidance, investors appeared relieved by the better-than-feared performance, sending shares modestly higher.

For the quarter ended May 3, Macy’s posted adjusted earnings per share of $0.16, slightly beating analyst expectations of $0.15, per FactSet. Revenue of $4.8 billion also exceeded the $4.4 billion forecast, though it was down from $4.85 billion a year earlier. Net income was $38 million, or $0.13 per share, down from $62 million, or $0.22 per share, in the same quarter last year. Despite these declines, Macy’s attributed the performance to better execution at its core brands and early benefits from strategic store reinvestments.

However, management struck a cautious tone in its forward outlook. Macy’s slashed its full-year profit guidance to $1.60–$2.00 per share, down from a prior forecast of $2.05–$2.25. The midpoint of the new range, $1.80, sits well below the Street’s pre-earnings consensus of $1.91. CEO Tony Spring blamed the reduction on increased promotional activity, weaker discretionary spending, and especially tariffs, which he said would trim earnings by $0.15–$0.40 per share. Roughly 20% of Macy’s merchandise is sourced from China, and the company plans to raise prices selectively and eliminate unprofitable SKUs in response to the new cost pressures.

Despite trimming EPS expectations, Macy’s reaffirmed its full-year revenue forecast of $21.0 billion to $21.4 billion, compared with $22.29 billion last year. The company continues to expect comparable sales to fall between 0.5% and 2.0% year over year. In Q1, same-store sales across owned, licensed, and online businesses declined 2.1%, but that result was meaningfully better than analysts’ expectations for a 3.9% drop. Excluding stores slated for closure, comparable sales for Macy’s “go-forward” fleet declined a more modest 1.9%.

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Key to the quarter was performance at the company’s higher-end banners. Bloomingdale’s delivered a 3.8% comp sales increase, and Bluemercury rose 1.5%—a sharp contrast to ongoing weakness at the core Macy’s brand. Within the Macy’s banner, 125 stores that received upgraded merchandising, better staffing, and reimagined layouts performed comparatively well, with same-store sales down only 0.8%. These locations are part of the company’s strategic investment to create a more focused and experience-driven in-store model as it aims to retain relevance in a fragmented retail landscape.

While Macy’s turnaround hinges on operational improvement and store rationalization, the macroeconomic backdrop isn’t doing the company any favors. CEO Spring emphasized that even higher-income customers are becoming more cautious, with economic uncertainty, inflation, and the potential for further tariff volatility weighing on spending behavior. Macy’s pricing strategy going forward will be “surgical,” aiming to preserve value perceptions while offsetting input cost inflation. Some items will see price hikes, others may remain flat, and some will be dropped altogether if price/value dynamics don’t align.

The retailer’s ongoing transformation includes closing about 150 underperforming Macy’s locations by early 2027. More than 60 of those have already shuttered. Meanwhile, Bloomingdale’s and Bluemercury remain bright spots that Macy’s plans to expand, leaning into luxury and beauty where demand has held up better. The company has also been improving online fulfillment, shortening delivery windows and enhancing omnichannel services, which have become crucial differentiators in a competitive post-pandemic landscape.

In a bid to strengthen its executive bench, Macy’s recently appointed Thomas Edwards—formerly of Capri Holdings—as its new CFO. He is set to begin June 22, succeeding Adrian Mitchell. The leadership change reflects an effort to inject fresh thinking as the company tries to reestablish investor confidence and navigate a deeply disrupted sector where scale and agility matter more than ever.

In summary, Macy’s Q1 was a relative win in a tough environment. The beat on earnings and revenue helped distract from a lower profit outlook, and comp sales trends were stronger than feared, especially in Bloomingdale’s and Bluemercury. However, challenges remain significant. Tariff exposure, consumer belt-tightening, and the costs of transformation continue to drag on profitability. For now, management’s focus on disciplined execution, store reinvestments, and selective pricing appears to be buying time—but investors will want to see durable improvements in Macy’s core operations before declaring its turnaround a success.