Macy's reports positive same-store sales for the first time in three years! Stock price soars over 20% in a single day

According to Zhitong Finance APP, the stock price of the well-known American department store Macy's (M.US) surged over 20% as of Wednesday's market close, thanks to its large-scale turnaround strategy that resulted in positive same-store sales for the first time in three years. However, the company still plans to further close stores to continue improving operating profits, attempting to advance both the "store renewal" and "store closure efficiency" plans simultaneously.

In the second quarter, the retailer reported a 1.9% year-on-year increase in overall same-store sales, marking the largest increase in three years and the first positive same-store sales data since the first quarter of 2022. "This is just the beginning of our growth momentum," said CEO Tony Spring, who took the helm in February 2024, during a performance meeting with Wall Street analysts on Wednesday.

In the performance report released on Wednesday, Macy's raised its fiscal year revenue and profit expectations while narrowing the range for same-store sales forecasts, indicating that management is more optimistic about the improvement in same-store sales. Macy's now expects its overall same-store sales (including company-operated stores as well as authorized and platform sales) to decline by 0.5% to 1.5% compared to last year, an improvement over the previously predicted maximum decline of about 2% in May.

The latest performance report and outlook from Macy's show that overall revenue in the second quarter decreased by 2.8% year-on-year to $4.81 billion, while the market expectation was $4.76 billion. The adjusted earnings per share were 41 cents, compared to the market expectation of 18 cents. The retailer stated on Wednesday that, given the strong overall performance of the company, it has raised its full-year revenue and profit guidance, exceeding market expectations. It currently expects net sales for the fiscal year to reach up to $21.45 billion, slightly higher than the previously expected maximum of $21.4 billion and above analysts' general expectations. The company also raised its guidance range for adjusted diluted earnings per share to between $1.70 and $2.05, up from the previous expectation of $1.60 to $2.00.

"Consumers are resilient right now," Spring said. "But we don't know what the fall will bring in terms of consumer behavior and the latest tariff levels from the Trump administration."

Earlier this year, Macy's announced plans to close 66 unprofitable stores this year and a total of 150 stores over the next three years. As of August 2, Macy's had 449 stores, down from 506 stores in the second quarter of last year.

"We still have more unprofitable stores and redundant supply chain facilities to close," Spring stated.

"We will discuss more related content in the fourth quarter earnings call, but these measures are about adjusting our portfolio to the right state. I firmly believe in the importance of physical stores... but we also need to do some more trimming to ensure we have an appropriate and more relevant store portfolio." Dana Telsey from Telsey Advisory Group is not sure whether Macy's latest profit-boosting measures are entirely sufficient, thus reiterating her "Market Perform" rating on the stock.

"While adjusting store sizes to reasonable levels should improve long-term profitability, visibility for comparable sales and profit growth remains very limited in the short term due to macroeconomic pressures, foot traffic and tariff headwinds, as well as a competitive retail environment that may intensify promotions," Telsey wrote in a report to clients.

Including Wednesday's surge, Macy's stock price is still down more than 6% this year, significantly underperforming the S&P 500 index.

After the updates and renovations to Macy's "renewed stores," Spring stated that the company is seeing "strong feedback" from customers. Like many retail peers, the company has observed that consumer spending remains resilient under tariff pressures, but consumers are still making purchasing decisions more cautiously.

"Consumer spending remains resilient at the moment," Spring said. "We cannot control whether consumers have the desire to buy or whether they are focusing on good news or bad news," Spring stated. "I always believe we are a form of retail therapy. We provide an escape from all the noise and clutter."

Macy’s, Inc. is a typical department store retailer, whereas retail giants like Walmart are big-box/supercenter stores with a wide range of SKUs, primarily focused on grocery and daily consumer goods as their core traffic and sales engine. Macy's hardly deals in fresh produce, focusing mainly on non-food categories, featuring a rich assortment of daily department store goods/apparel/cosmetics/home textiles and brand/private label combinations, emphasizing display, service, and fashion orientation, targeting the mid-range department store price segment, relying on promotions/memberships/private labels for price differentiation and image