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Macy's surprises Wall Street with same-store sales growth

Will tariffs erode Q1 momentum?
Posted at 8:54 AM, May 15, 2019

Macy’s Inc. posted a $137 million profit on revenue of $5.5 billion in its first quarter that ended March 31, exceeding analyst expectations on earnings per share and same-store sales.
“Macy’s, Inc. is off to a solid start this year, delivering our sixth consecutive quarter of comparable sales growth,” CEO Jeff Gennette said in a press release.
Macy’s shares jumped more than 6 percent to $23.23 in pre-market trades Wednesday. But the early gains faded as Gennette told investors that U.S. trade disputes with China could have a negative impact on the department store chain if the Trump administration follows through on threats to impose new tariffs on apparel.
"The first three tranches of tariffs that went into effect in 2018 and then the third tranche of tariffs that had an increase from 10% to 25% last week we're working through all those," Gennette said in a conference call with analysts. "We have strategies to mitigate that. We think that those strategies will limit the customer concern and reaction to them."
But he was less optimistic about a fourth tranche of tariffs that has been threatened against all goods made in China.
"It's going to affect a lot of the apparel and accessory categories that are coming in," Gennette said. "Looking at all those categories and those brands that are included it is hard to do the math to find a path that gets you to a place where you don't have a customer impact."
Macy’s reported earnings per share of $0.44, or 11 cents better than analysts were expecting. Comparable-store sales growth of 0.7 percent was much better than the 0.2 percent decline that analysts were forecasting. Macy’s reaffirmed its previously announced guidance of up to 1 percent growth in comparable store sales including revenue from licensed merchandise.
“Our brick & mortar sales trend improved sequentially in the first quarter, supported by the Growth50 stores and Backstage,” Gennette said. “We had another quarter of double-digit growth in our digital business, and mobile continues to be our fastest-growing channel.”
The company continued to benefit from the sale of surplus real estate, with $43 million in pre-tax gains from asset sales that contributed 10 cents per share to the bottom line. Macy’s expects $100 million in asset sale gains this year.