Dive Brief:
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Macy’s Inc. on Thursday posted strength across its portfolio, an indication that the turnaround at its namesake is taking hold. Overall net sales rose 1.1% year on year to $4.9 billion, as comps rose 2.7%.
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At Macy’s, comparable sales grew 1.1%; at its 200 revamped stores comps rose nearly 2%. At Bluemercury comps rose over 6% and at Bloomingdale’s comps soared over 11%.
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Gross margin at Macy’s Inc. expanded by 180 basis points to 41.5%, including tariff refunds and headwinds from tariffs and fuel costs. Without the refunds, gross margin was up 10 basis points. Net income nearly doubled to $169 million.
Dive Insight:
The turnaround at Macy’s Inc.’s namesake store has had a couple different names and lasted for years. In Q2 it showed some staying power, with strength across the portfolio.
“In the past, every single Macy’s earnings day was a tale of gloom and decline,” GlobalData Managing Director Neil Saunders said in emailed comments. “That now isn't the case. And that, in itself, is a major win and a testament to the work that is being done.”
Thursday’s report means there have now been six straight quarters of better-than-expected results, five straight quarters of comparable sales growth and two straight quarters of net sales growth, Macy’s Inc. CEO Tony Spring told analysts. Average prices are up, thanks to an assortment that has more relevant brands, executives said.
“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 said.
The company is taking advantage of its receipt of tariff refunds to bolster the turnaround efforts at Macy’s rather than dedicate them to price cuts, as seen at several other retailers in recent months. The company has received $116 million back, all of what it expected, and will put about $20 million toward earnings. The rest will go toward investment in Macy’s brand-building, speeding up the overhaul of the stores it plans to keep open and mitigating fuel volatility. A small portion will go to cut prices of certain merchandise, including furniture and fine jewelry, executives said.
Evercore ISI analysts led by Michael Binetti endorsed Macy’s plans in a Thursday research note.
“Reinvesting tariff refunds into price has become a concern about a ‘race to the bottom’ on price competition across Softlines space this fall/holiday,” Binetti said. “We prefer Macy’s approach, especially pulling forward its Reimagine agenda.”
Macy’s will hold its 100th Thanksgiving Day parade this year, which Spring noted is less than 77 days away. The quarter sets the department store retailer up well for the holidays, even if there’s still work to be done.
“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 Vice President Suzy Davidkhanian said in emailed comments. “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.”
