Will the Macy’s Turnaround Stick, Or Is it Too Reliant on its Banners?

Macy’s delivered a healthy second-quarter report card, as CNBC’s Laya Neelakandan reported, with overall comparable sales up 2.7% and Macy’s itself up 1.1%.

“The company also raised its full-year guidance and now projects net sales to be between $21.68 billion and $21.83 billion, compared with a prior expectation of between $21.5 billion and $21.75 billion. It also raised its comparable sales outlook range from between 0.5% and 1.2% growth to a 1% to 1.5% increase,” Neelakandan said.

“Macy’s hiked its full-year earnings per share outlook to a range of $2.15 to $2.35, up from $2 to $2.20. It said that included a roughly 5-cent per-share bump from tariff repayments it will apply to its bottom line,” she added.

A few deeper line items were brought to the fore by Retail Dive’s Daphne Howland, including that the 200 revamped Macy’s locations outperformed (comps improving by 2%), and notably that Bluemercury and Bloomindale’s significant outpaced Macy’s on the same metric, trending upward by 6% and 11% respectively.

Howland went on to cite Macy’s CEO Tony Spring, the chief exec driving the ongoing turnaround being pushed by the retailer, with Spring noting that the company is enjoying six consecutive quarters of “better-than-expected” results – five quarters of comp sales improvement and two quarters recording net sales growth.

“This reflects the strength across Macy’s, Bloomingdale’s and Bluemercury, and underscores the benefits of being a multibrand, multicategory and multichannel retailer serving customers from off-price to luxury,” Spring stated.

Macy's To Reinvest Tariff Funds Toward Earnings and Store Remodels

Macy’s has also benefited by receiving $116 million in tariff refunds – refunds which the company plans to reinvest in its turnaround rather than seeking to slash prices facing the consumer. Approximately $20 million of those funds are earmarked for earnings, and the remainder is slated to reinforce the retailer’s overhaul of stores remaining open for business in addition to mitigation of persisting volatility tied to fuel costs.

Per Howland, Michael Binetti (lead of Evercore ISI analysts) backed this play regarding the allocation of tariff refunds.

“Reinvesting tariff refunds into price has become a concern about a ‘race to the bottom’ on price competition across Softlines space this fall/holiday. We prefer Macy’s approach, especially pulling forward its Reimagine agenda,” Binetti said.

CEO Tony Spring Believes Innovation and Better Assortment Are Key to Macy's Success

On operations as a whole, Spring gestured toward innovation and a better assortment within Macy’s renewed stores as providing accessible and differentiated items for wealthier consumers. Merchandising and improved frontline customer service were also underscored as winning efforts by the retailer.

“The namesake banner remains a work in progress, but five consecutive quarters of comp growth show Macy’s is building momentum beyond the strength of Bloomingdale’s and Bluemercury,” Emarketer VP Suzy Davidkhanian stated, per Howland.

“Today’s intentional shopper needs a reason to buy, and Macy’s mix of sought-after national brands, newness, and private label is helping drive demand while operational discipline is showing up in the results. That momentum bodes well for holiday, when department stores traditionally shine as gift destinations.”

Questions for Discussion

Do you believe Macy's, as a whole, will maintain its current momentum in the near term? Is it too reliant on its banners, Bluemercury and Bloomingdale's?

What's working for Macy's, and what do you believe are some opportunities being left on the table?

Do you agree with the allocation of tariff refunds planned by Macy's? Why or why not?