Macy's focus on fresh product lines and improved customer experience begins to show results

NEW YORK (AP) — Macy's raised its expectations for the year and reported the first increase in same-store sales since 2022 after the department store chain intensified its focus on modernizing stores and improving the customer experience.

Comparable-store sales are considered a good barometer of a retailer's health and for the last three years they had been been a reminder that the storied department store chain had a long way to go.

Macy's reported an 0.8% increase in comparable sales. Industry analysts, who had expected a 0.5% decrease, were caught off guard by the swing and the company's shares rocketed 19% higher Wednesday. They remain negative for the year, however.

The reversal in comparable-store sales underscored how Macy's campaign to improve customer experience and the merchandise on its shelves has enticed shoppers to buy even as Americans as a whole grow more cautious about spending as President Donald Trump's trade war raises economic anxiety.

Macy’s is grappling with an uncertain economic backdrop and higher costs, particularly because of the tariffs, and said Wednesday that it even though customers have proven resilient, they remain choosy about what they are buying, and executives are usure how tariffs will affect spending for the remainder of the year.

“We're celebrating the second quarter but we’re being prudent in our guidance for the third quarter and the remainder of the year because we want to see how the tariff environment plays out in totality, ” Macy's CEO Tony Spring told investors during a conference call on Wednesday.

The company said in May that it was diversifying the origin of its imports and pulling items when the math doesn’t work.

Spring told analysts that the company is trying to take a “surgical approach" when it comes to price increases. The department store has already raised some prices, though Spring did not specify where. He noted in some cases, it has had to cut back on orders on items where it raised prices.

“We've tried to be really thoughtful about what categories can bear the cost and the increases and where we’ve had to negotiate a little bit harder,” he said.

Spring said the approach by Macy's, which also owns upscale Bloomingdale’s and the cosmetic chain Bluemercury, of running different chains that cater to different types of shoppers, has been an advantage. The company is not as reliant on one product category or one consumer sector, he said.

Roughly 50% of customers at the Macy's has a household income of over $100,000, and for Bloomingdale's and Bluemercury, there's a larger percentage of shoppers with household incomes over $150,000, Spring told The Associated Press on Wednesday. But he said while the lower income segment spent less, the difference wasn't sizeable.

And tariffs may affect prices broadly.

About 20% of the department store's products came from China at the end of its last fiscal year, according to Macy's. Private brands sourced approximately 27% from China, down from 32% last year.

Macy's reported net income of $87 million, or 31 cents per share, for the quarter ended Aug. 2. That compares with $150 million, or 53 cents per share, in the year-ago period. Adjusted earnings were 41 cents a share, well above the 19 cents per share estimated by FactSet.

Sales fell to $4.99 billion from $5.09 billion in the year-ago period. Analysts expected $4.7 billion, according to FactSet.

Including its licensed businesses, comparable sales rose 1.9% for all of its stores including its licensed businesses.

The retailer has closed unprofitable stores while investing heavily in modernizing Macy's locations, and that appears to be working. Macy’s first 125 revamped stores achieved comparable sales growth of 1.4%, surpassing the 1.2% gain for all Macy's locations.

The company has been adding more customer service in the fitting areas as well as the shoe department. It's also been trying to differentiate its luxury business from its rivals by adding exclusive merchandise

For the year, Macy's raised its earnings per share forecast to a range of $1.70 to $2.05, up from $1.60 to $2.

Macy's also expects sales between $21.15 billion and $21.45 billion in 2025, up from $21 billion to $21.4 billion.

Wall Street has been projection per-share earnings of $1.79 on sales of $21.18 billion for the year, according to FactSet.