Macy's shares soared 20%. The retailer reported its best sales growth in 12 quarters

Shares of department store chain Macy's rose 22% after the report: comparable sales rose for the first time in three years, profits beat expectations, as well as updated forecasts. While the results show that consumers continue to spend despite concerns about inflation and duties, customer behavior may become more cautious in the second half of the year, the company warned.

Shares of Macy's soared nearly 22% in trading on Wednesday, September 3: their price reached $16.43 - the highest since early January 2025. The stock's rise during the day was the highest since 2023, Bloomberg noted. The rally helped improve the dynamics since the beginning of the year: before it, the securities were in the negative by about 20%, now the decline has been reduced to just over 5%.

Investors reacted positively to the retailer's reporting for the second quarter, which exceeded analysts' expectations. This was a new signal that consumers continue to spend despite concerns about inflation and duties, Bloomberg writes.

Comparable chain-wide sales - at stores that have been in business for at least a year - rose 0.8% in the second quarter, while the FactSet consensus called for a 0.5% decline, MarketWatch noted. It's the first positive result in three years, according to FactSet. Macy's itself reported its "best comparable sales growth" in 12 quarters.

Adjusted earnings were 41 cents per share on revenue of $4.8 billion. Analysts had expected 19 cents and $4.7 billion, respectively, Barron's wrote.

Given the solid growth across all business lines, Macy's also slightly improved its revenue forecast: it may reach $21.45 billion (instead of $21.4 billion). That's better than analysts' consensus forecast, Bloomberg noted. In addition, the company increased the boundaries of its earnings forecast: it now stands at $1.7-2.05 per share versus the previous $1.6-2. By comparison, FactSet analysts, whose opinion is cited by Investor's Business Daily, expect annual revenue of $21.18 billion and earnings per share of $1.79.

At the same time, Macy's is still forecasting a year-over-year decline in comparable sales, but there's improvement here, too: it will be 0.5-1.5% instead of the May forecast of 2%, the company said.

Since his appointment as CEO in 2024, Tony Spring has focused on improving Macy's stores with the greatest potential: a modernization program he has dubbed Bold New Chapter. The company believes it has begun to bear fruit: "Significant, broad-based improvements across the business, with a strong focus on customer experience, reinforce our confidence that the Bold New Chapter initiative can deliver sustainable, long-term profitability growth," Spring said, according to a company statement.

"This is the beginning of a turning point in Macy's momentum," Spring said in an interview with Bloomberg News. He said the company's "back-to-school" season has "gotten off to a good start" and is a "good indicator" ahead of the holiday season.

Despite an improved outlook and strong performance in its fiscal second quarter, Macy's warned of more cautious consumer behavior in the second half of the year.

"Shoppers are becoming more selective in how they shop," Spring said.

The company is still accounting for duties that the company intended to offset by selectively raising prices, reducing reliance on China and revising or canceling individual product orders, Barron's wrote.

"We're going to raise prices. We've raised them before. But it's not a one-size-fits-all approach: we've tried to think carefully about which categories of goods can withstand an increase in price," Spring said on a call with investors and analysts, Bloomberg writes.

Bloomberg also pointed out that Macy's quarterly revenue has declined in annualized terms for 13 consecutive quarters. This is a sign that the company is still looking for a sustainable growth model, the agency wrote.

"The results show that the company's recent efforts to boost sales are starting to bear fruit. Nevertheless, in the near term, Macy's will continue to operate in a challenging environment - with pressure from duties and some consumer sentiment," Fitch Ratings analyst David Silverman wrote in a note quoted by Bloomberg.

Macy's shares were rated by 15 analysts and 11 of them are cautious and advise to hold the stock (Hold rating). Two of them recommend buying the company's shares (Buy) and two more recommend selling (Underweight and Sell).

This article was AI-translated and verified by a human editor