What: Macy’s first turnaround plan results beat analysts’ expectations.

Why it is important: The group has been under intense pressure so far, and delivering what it promised is an excellent signal.

Macy's reported a decline in sales and profits in the first quarter but still exceeded Wall Street expectations. Despite the broader financial pressures causing customers to become more selective and price-sensitive, Macy's is witnessing positive outcomes from its strategic adjustments, including store closures and enhancements. As a result, the company has upgraded its annual outlook.

Amid these economic pressures, consumers across all income brackets are adjusting their spending habits. Notably, luxury items like handbags and shoes have seen reduced sales at Bloomingdale's, reflecting a shift to more affordable options. Macy's CEO Tony Spring indicated that ongoing economic uncertainties are affecting consumer behavior, prompting the company to remain cautious about external factors beyond its control.

Macy's is actively transforming its physical retail presence by closing 150 underperforming stores over three years and expanding with 30 new small-format locations by fall 2025. This move is expected to nearly triple its count of small-format stores to about 42. Furthermore, Macy’s plans to open 15 new Bloomingdale's and 30 Bluemercury luxury locations to strengthen its position in the high-end market. The retailer's revamped stores have shown a 3.3% increase in comparable sales.

Financially, Macy's earnings fell to $62 million, or 22 cents per share, from $155 million, or 56 cents per share in the previous year. However, adjusted earnings per share were 27 cents, surpassing analyst predictions by 11 cents. Revenue decreased by 2.7% to $4.85 billion, though it still topped analyst forecasts. Macy's comparable store sales dropped by 1.6%, while Bluemercury and Bloomingdale's reported gains. The company also experienced a decline in credit card revenues due to higher delinquency rates.

Macy's has also taken steps to stabilize its governance by appointing two independent directors to its board, supported by Arkhouse Management, amid pressures from activist investors.

Macy’s tops expectations for the first quarter as luxury and beauty sales shine