8-K: Macy's Exceeds Q1 Sales and EPS Guidance, Reaffirms Annual Sales Outlook Amid Strategic Execution

Macy's, Inc. reported first-quarter 2025 net sales and adjusted diluted EPS that surpassed guidance, driven by strong performance in Bloomingdale's and Bluemercury, while reaffirming its annual net sales outlook despite a moderated consumer spending environment.

Summary

• Macy's, Inc. achieved net sales of $4.6 billion for the first quarter of 2025, exceeding the company's prior guidance range.
• Comparable sales were down 1.2% on an owned-plus-licensed-plus-marketplace basis, which surpassed the company's prior guidance range.
• GAAP diluted earnings per share (EPS) was $0.13, and Adjusted diluted EPS was $0.16, both above the company's prior guidance range.
• Bloomingdale's reported strong comparable sales growth of 3.8% on an owned-plus-licensed-plus-marketplace basis.
• Bluemercury delivered its 17th consecutive quarter of comparable sales growth, up 1.5%.
• The company returned approximately $152 million to shareholders, comprising $51 million in quarterly cash dividends and $101 million in share repurchases.
• Overall net sales for Macy's, Inc. decreased 5.1% inclusive of fiscal 2024 store closures.
• Macy's nameplate comparable sales were down 2.1% on an owned-plus-licensed-plus-marketplace basis.
• The gross margin rate remained flat at 39.2%, despite higher delivery expense as a percent of net sales.
• Selling, general and administrative (SG&A) expense as a percent of total revenue increased 170 basis points to 39.9% due to lower net sales.
• GAAP net income was $38 million, a decrease from $62 million in the first quarter of 2024.
• Adjusted net income was $46 million, down from $77 million in the first quarter of 2024.
• Adjusted EBITDA was $324 million, compared to $364 million in the first quarter of 2024.
• Merchandise inventories decreased 0.5% year-over-year.
• The company ended the quarter with $932 million in cash and cash equivalents.
• Macy's amended its asset-based credit facility on April 9, 2025, extending the maturity to April 2030 and reducing borrowing capacity to $2.1 billion from $3.0 billion.
• Total debt stood at $2.8 billion, with no material long-term debt maturities until 2027.
• Approximately $1.3 billion remains under the company's $2.0 billion share repurchase authorization.
• The company reaffirmed its annual net sales guidance of $21.0 billion to $21.4 billion.
• Annual guidance for Adjusted EBITDA as a percent of total revenue was revised downwards to 7.4%-7.9% from the previous 8.4%-8.6%.
• Annual guidance for Adjusted diluted EPS was revised downwards to $1.60-$2.00 from the previous $2.05-$2.25, citing factors like tariffs, moderated consumer spending, and a heightened competitive promotional landscape.

Sentiment

Score: 6

Explanation: While Macy's exceeded its own Q1 guidance for sales and adjusted EPS, and its luxury/beauty segments performed well, the overall net sales declined, and the company significantly lowered its full-year profitability and EPS guidance, indicating ongoing headwinds and a challenging outlook despite the Q1 beat.

Positives

• Net sales of $4.6 billion exceeded the company's prior guidance range.
• Comparable sales down 1.2% on an owned-plus-licensed-plus-marketplace basis surpassed prior guidance, benefiting from better than expected performance across all nameplates.
• Adjusted diluted EPS of $0.16 was above the company's prior guidance range.
• Bloomingdale's reported strong comparable sales growth of 3.8% on an owned-plus-licensed-plus-marketplace basis.
• Bluemercury achieved its 17th consecutive quarter of comparable sales growth, up 1.5%.
• Macy's Reimagine 125 stores outperformed the overall Macy's fleet, with comparable sales down only 0.8% on an owned-plus-licensed basis.
• Credit card net revenues increased significantly by 31.6% to $154 million.
• Macy's Media Network net revenue rose 8.1% to $40 million.
• Gross margin rate remained flat at 39.2%, reflecting improved merchandise margin.
• The company returned approximately $152 million to shareholders through dividends ($51 million) and share repurchases ($101 million).
• Strong balance sheet with $932 million in cash and cash equivalents and no material long-term debt maturities until 2027.
• Successful amendment of asset-based credit facility, extending maturity to April 2030 and improving flexibility.

Negatives

• Overall Macy's, Inc. net sales decreased 5.1% to $4.6 billion, inclusive of store closures.
• Macy's nameplate net sales were down 6.5% and comparable sales were down 2.1% on an owned-plus-licensed-plus-marketplace basis.
• GAAP net income decreased to $38 million from $62 million in Q1 2024.
• Adjusted net income decreased to $46 million from $77 million in Q1 2024.
• GAAP diluted EPS decreased to $0.13 from $0.22 in Q1 2024.
• Adjusted diluted EPS decreased to $0.16 from $0.27 in Q1 2024.
• Adjusted EBITDA decreased to $324 million from $364 million in Q1 2024.
• SG&A expense as a percent of total revenue increased 170 basis points to 39.9% due to lower net sales.
• Annual guidance for Adjusted EBITDA as a percent of total revenue was revised downwards from 8.4%-8.6% to 7.4%-7.9%.
• Annual guidance for Adjusted diluted EPS was revised downwards from $2.05-$2.25 to $1.60-$2.00.
• Net cash used by operating activities was $(64) million, compared to $129 million provided in Q1 2024.

Risks

• Ability to successfully implement the 'Bold New Chapter' strategy and realize anticipated benefits.
• Competitive pressures from specialty stores, general merchandise stores, off-price and discount stores, manufacturers outlets, the Internet, and catalogs.
• General consumer spending levels, including the impact of the availability and level of consumer debt.
• Conditions to, or changes in the timing of proposed real estate and other transactions.
• Declines in credit card revenues.
• Possible systems failures and/or security breaches.
• Reliance on foreign sources of production, including risks related to the disruption of imports by labor disputes, regional or global health pandemics, regional political and economic conditions.
• Effect of trade policies and tariffs, including changes thereto.
• Effect of weather, inflation, inventory shortage, and labor shortages.
• Potential for the incurrence of charges in connection with the impairment of tangible and intangible assets, including goodwill.
• The amount and timing of future dividends and share repurchases.
• Ability to execute on strategies and achieve expectations related to environmental, social, and governance matters.

Future Outlook

Macy's reaffirmed its annual net sales guidance of $21.0 billion to $21.4 billion and comparable owned-plus-licensed-plus-marketplace sales change of down ~2.0% to down ~0.5% versus 2024. However, the company revised its annual Adjusted EBITDA as a percent of total revenue guidance downwards to 7.4%-7.9% (from 8.4%-8.6%) and its Adjusted diluted EPS guidance downwards to $1.60-$2.00 (from $2.05-$2.25). This revision accounts for initial and current tariffs, some moderation in consumer discretionary spending, and a heightened competitive promotional landscape.

Management Comments

• "We continued to execute against our Bold New Chapter strategy during the quarter, scaling key initiatives that improved our customer experience and contributed to stronger than expected performance across all three of our nameplates." Tony Spring, Chairman and Chief Executive Officer of Macy's, Inc.
• "Our first quarter results give us confidence that we have the right strategy and team in place to navigate the current environment while we continue to invest in our customer on the path to returning Macy's, Inc. to sustainable profitable growth." Tony Spring.

Industry Context

The retail industry, particularly department stores, continues to face challenges from moderated consumer discretionary spending, increased competition from online retailers and off-price channels, and inflationary pressures. Macy's 'Bold New Chapter' strategy, focusing on customer experience and specific nameplate performance (Bloomingdale's, Bluemercury, and Reimagine 125 Macy's stores), is an attempt to adapt to these trends. The downward revision of profitability and EPS guidance reflects the ongoing pressures and competitive landscape impacting the broader retail sector, indicating that while some strategic initiatives are showing promise, the overall market environment remains tough.

Comparison to Industry Standards

• The document does not provide specific comparable companies, projects, or global benchmarks to assess Macy's results against.
• Bloomingdale's and Bluemercury's positive comparable sales growth stands out in a challenging department store landscape, suggesting these luxury and beauty segments may be more resilient or Macy's strategy for them is more effective compared to the broader Macy's brand.
• The downward revision of full-year profitability and EPS guidance aligns with broader retail trends of moderated consumer discretionary spending and heightened promotional activity, indicating that Macy's is not immune to these industry-wide pressures.

Corporate Governance

Stakeholder Impact

• Shareholders: Positive impact from continued quarterly dividends and share repurchases ($152 million returned in Q1), but negative impact from downward revised full-year EPS guidance.
• Customers: Positive impact from continued investment in customer-facing initiatives and the 'Bold New Chapter' strategy aimed at improving customer experience.
• Creditors: Positive impact from the amendment of the asset-based credit facility, extending maturity and demonstrating strong balance sheet management.
• Employees: Potential impact from ongoing 'end-to-end operations efforts' and store closures, though the document notes reinvestment of savings into customer-facing initiatives.

Next Steps

• Continue execution of the 'Bold New Chapter' strategy, scaling key initiatives.
• Continued investment in the customer experience.
• Work towards returning Macy's, Inc. to sustainable profitable growth.
• Payment of declared quarterly dividend on July 1, 2025.

Key Dates

Recommendation

Keywords

Retail, Department Store, Macy's, Bloomingdale's, Bluemercury, Financial Results, Earnings, Q1 2025, SEC Filing, 8-K, Retail Strategy, Share Repurchase, Dividend, Credit Facility, Consumer Spending, Omni-channel Retail