Macy’s, the top U.S. department store operator, made headlines on Wednesday by slashing its annual profit forecast due to growing concerns over tariff-induced uncertainty and mounting pressure on its pricing strategy. The company also signaled it would offer early discounts on its spring collection to manage its stock more effectively, reflecting the challenges faced by traditional department store chains.
The Impact of Tariffs and Competition
Department stores like Macy’s have struggled to maintain their market share in the face of growing competition from off-price and big-box retailers. In particular, the implementation of tariffs by the Trump administration has put further strain on these businesses. Retailers, including Macy’s, are preparing for significant impacts on both supply chain costs and consumer demand, especially with inflation expected to rise due to the sweeping duties imposed on imports.
In a statement, Macy’s CEO, Tony Spring, acknowledged the impact of tariffs on pricing: “(Higher) pricing is working its way into the system slowly… That’s why we have taken a more cautious approach to our outlook for the year.” The company is also selectively increasing prices to help offset margin losses caused by tariffs.
Adjusted Profit Forecast Revised
As a result of these challenges, Macy’s revised its 2025 adjusted profit per share forecast, now expecting it to range between $1.60 and $2.00, a decline from the previously projected $2.05 to $2.25. Despite this downward revision, the company did not pull its full-year guidance, a move seen positively by analysts.
Macy’s shares experienced a slight increase of 1% in volatile morning trading but have still lost approximately 28% of their value this year.
Resilient Sales and Store Remodels
While the company has struggled with the broader challenges in the retail sector, Macy’s performed better than expected in the first quarter. Net sales for the period ending May 3 were $4.6 billion, surpassing analyst expectations of $4.5 billion. Additionally, Macy’s adjusted profit per share of 16 cents beat expectations by 2 cents. The company also maintained its annual net sales forecast of $21 billion to $21.4 billion.
A key factor in this better-than-expected performance has been Macy’s focus on remodeling stores and revamping its offerings. Spring’s efforts to elevate the Macy’s brand through store upgrades, as well as focusing on higher-end products at Bluemercury and Bloomingdale’s, have helped offset some of the challenges faced by its flagship label.
David Swartz, a Morningstar analyst, noted that although remodeled Macy’s stores are performing better, the company still has a lot of work to do as it struggles with inconsistent comparable sales reports.
The Toll of Tariffs
Macy’s also warned that tariffs would have a notable impact on its earnings, projecting a reduction of 10 to 25 cents per share for the year. About 20% of its private brand products are sourced from China, where tariffs have hit particularly hard.
Despite these challenges, Macy’s is holding onto its strategy of remodeling stores, boosting high-margin segments, and managing its inventory effectively through selective pricing and early discounts. However, it remains to be seen whether these measures will be enough to counter the pressures from rising tariffs, increasing competition, and shifting consumer preferences in the retail landscape.
As Macy’s navigates through this period of uncertainty, its ability to adapt and execute its turnaround efforts will be crucial in determining its future trajectory.
