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Spokane, Washington  Est. May 19, 1883

Macy’s profit beats estimates as turnaround shows progress

A Macy's store in Miami, Florida.    (Eva Marie Uzcategui/Bloomberg)
By Jeannette Neumann Washington Post

Macy’s Inc. handily beat profit estimates in the most recent quarter, leading the department-store operator to raise its outlook for the remainder of the year.

The results will ease some pressure for Chief Executive Officer Tony Spring and help convince shareholders and board members that he deserves more time to execute a turnaround strategy. That may diminish their interest in the $6.6 billion buyout offer from activist investor Arkhouse Management Co. and Brigade Capital Management, at least in the short term.

“I’m a firm believer that we have a strategy that is showing green shoots,” Spring said in an interview. The plan, he added, is working across the company’s three chains - Macy’s, Bloomingdale’s and Bluemercury - helping to address some challenges that have been self-inflicted in recent years.

Macy’s 15-member board is in a due diligence process with the activist investor. “All 15 of us will be involved in evaluating whatever the best proposal would be from Arkhouse, Brigade or anyone else for that matter over the years,” Spring said.

Macy’s shares rose 3.4% at 7:37 a.m. in Tuesday premarket trading in New York. The stock has fallen 5.1% for the year through Monday’s close, while the S&P MidCap 400 Index has gained 8.6%.

Adjusted earnings were 27 cents a share in the first quarter ended May 4, about double the average analyst estimate. The retailer now expects full-year profit to be at least $2.55 a share, up from a prior forecast of at least $2.45 a share.

Macy’s comparable-store sales are still declining, with overall revenue down 1.2% in the last quarter on an owned basis. But the company has been investing in new products, displays and customer experience. Spring says stores that have rolled out those changes have seen stronger growth, particularly in women’s shoes and apparel, men’s tailored clothing, and beauty products.

Consumers remain “under pressure despite strong job growth and wage growth,” Spring said in the interview. He blamed “stubborn inflation” for consumer caution.

This echoes commentary from other large retailers such as Home Depot Inc. that shoppers remain cautious and are pulling back from big-ticket purchases, instead focusing on essentials.

Spring, who took over Macy’s in February, is closing stores that haven’t met growth targets while opening up more Bloomingdale’s, a more expensive department-store brand where sales have fallen less than at the flagship. Spring ran Bloomingdale’s for much of his career.

He’s also expanding Bluemercury, Macy’s high-end skin-care and cosmetics chain, which has benefited from the post-pandemic surge in US demand for beauty products.

In the most recent quarter, comparable sales at Bloomingdale’s rose 0.8% on an owned basis and increased 4.3% at Bluemercury.

Spring noted Bluemercury has reported 13 straight quarters of comparable sales growth, bolstered by a greater assortment of luxury skin-care brands, fragrances and hair-care products.

Across all three chains, Spring said, “beauty remains strong.”