Macy's (M, Financial) reported a mixed Q4, with shares fluctuating around the flatline, hitting new 52-week lows before attempting to recover. The department store chain exceeded earnings estimates, maintaining its double-digit beat trend. However, revenue continued to decline year-over-year, with comparable sales slipping again. Macy's last reported positive comp growth in Q1 2023. Investors are optimistic about Macy's plans to resume stock buybacks after minimal activity in the past two years.
- Macy's has transformed significantly, aiming to stand out as department stores face competition from e-commerce. In 2024, Macy's focused on its First 50 locations, implementing changes to meet consumer preferences. These stores saw positive comps of +1.2% in Q4.
- Bloomingdale's and Bluemercury, Macy's luxury brands, also underwent changes, achieving comp growth of +6.5% and +6.2% in Q4, respectively. Overall enterprise comp growth was +0.2%, the best since Q1 2023. This growth supported Macy's adjusted EPS of $1.80 in Q4, surpassing its forecast of $1.40-1.65.
- Building on the success of the First 50 locations, Macy's is closing underperforming stores and opening new Bloomingdale's and Bluemercury locations. In FY25, Macy's opened three Bloomingdale's and 17 Bluemercury stores while remodeling seven.
- Macy's aims to stabilize its business and achieve profitable growth, despite economic challenges beyond its control. The company noted consumer health remains fragile due to inflationary pressures. Macy's FY26 guidance forecasts net sales of $21.0-21.4 billion and comps of negative 0.5-2.0%, with Q1 comps expected to decline by 2.5-4.5%.
Despite positive aspects in Q4, concerns persist about Macy's ability to achieve profitable growth through its turnaround initiatives. Macy's is also a target for activist investors, having faced past attempts from Arkhouse and Brigade Capital. While activist pressure can drive management to prioritize long-term shareholder value, it may also increase uncertainty about Macy's future, potentially deterring investors in the short term.
