Macy's lifts forecasts as luxury banners thrive, but turnaround costs hit shares

Sept 10 — Macy's raised its forecasts on Thursday, buoyed by robust spending among higher-income shoppers at its upscale Bloomingdale's and ​Bluemercury chains even as investments made as part of its turnaround plan could lead to a wider-than-expected current-quarter loss.

The department-store operator's shares dipped about 3% in morning trading after it said it anticipates an adjusted loss between 19 ‌cents and 23 cents per share in the current quarter - above an expected 6-cent-per-share loss.

Macy's is starting to see results two-and-a-half years into its "Bold New Chapter" overhaul under CEO ⁠Tony Spring, with a renewed focus on its premium businesses. ​It is prioritizing higher-margin products and full-price sales, closing underperforming ⁠stores and leaning into partnerships with popular brands from Ralph Lauren to Coach.

Sales are still more consistent among middle- and upper-income ‌shoppers while lower-income consumers remain "choiceful," Spring ‌said.

"Basics are selling a little bit slower and fashion is selling a little bit faster," Spring told Reuters ⁠in a post-earnings interview. "People are looking for newer things."

Apparel sales were strong across ⁠Macy's and Bloomingdale's stores in the second quarter, Spring said, which he attributed in part to the growing use of GLP-1 weight-loss drugs among American shoppers. Petite-size clothing sold particularly well, he said, while plus-size sales were relatively soft.

Shoppers are also splurging on watches and fragrances, two categories that are poised to benefit from holiday gift shopping, Spring said.

"Last year at this time, we were navigating how to deal with the tariffs and how to cut orders and how to cancel ‌things," Spring told Reuters. "This year, we can focus on the customer, we can focus on ​the assortment, we can focus on execution."

'EARLY INNINGS' FOR NAMESAKE BANNER

The Bloomingdale's and Bluemercury chains continue to outperform Macy's namesake stores. Comparable sales at Bloomingdale's rose 11.3% in the second quarter and Bluemercury revenue increased 6.2%, compared with a 1.1% rise at Macy's label stores.

While Macy's has revamped about 200 of its namesake stores to improve product assortment and bolster staffing, the company is still in the "early innings" of rebuilding brand appeal, Spring said.

"The namesake banner remains a work in progress, but five consecutive quarters of (comparable sales) growth show Macy's is building momentum beyond the strength of Bloomingdale's and Bluemercury," eMarketer analyst ​Suzy Davidkhanian said.

Macy's now expects fiscal 2026 net sales between $21.68 billion and $21.83 billion, compared with its prior forecast of $21.50 billion to $21.75 billion. It also sees annual ‌adjusted earnings per ‌share of $2.15 to $2.35, compared ⁠with its previous forecast of $2.00 to $2.20 per share.

The company said its forecast still followed a "prudent approach", given a competitive landscape and macroeconomic and geopolitical factors that could influence discretionary spending.

It has received about $116 million in tariff refunds so far, Macy's said, including $18 million in the current quarter, and plans to invest most of the proceeds in its turnaround efforts and to mitigate fuel price uncertainty.

Second-quarter sales rose ‌1.1% to $4.87 billion, topping analysts' estimate of $4.83 ​billion, while adjusted profit of 40 cents per share, excluding tariff refunds ‌of 23 cents per share, beat ⁠an expectation of 37 cents ​per share, according to data compiled by LSEG.

(Reporting by Neil J Kanatt in Bengaluru and Danielle Kaye in New York; Editing by Pooja Desai ​and Christian Plumb)

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