For years, the Macy's story was a slow-motion question about whether department stores could survive at all. This quarter the company gave its most convincing answer in a long time — with an asterisk about which department stores.
Macy's reported comparable sales up 3.0%, its strongest first-quarter performance in four years, with go-forward comps up 3.1%, according to CNBC. Net sales rose 1.8% to $4.7 billion, above the company's own $4.575-to-$4.625-billion guidance, and adjusted EPS of $0.13 cleared the high end of its range on better sales and tighter expense control. Management nudged up full-year guidance to net sales of $21.5 billion to $21.75 billion, comparable-sales growth of 0.5% to 1.2%, and adjusted EPS of $2.00 to $2.20, per the company's results. For a retailer that's spent the better part of a decade managing decline, a raise is a genuine event.
The nameplate split is the whole story
Look under the headline and the quarter is really three different businesses. Bloomingdale's comparable sales jumped 10.2%, its seventh straight quarter of gains. Bluemercury, the beauty chain, rose 6.4%, with strength in makeup, dermatological skincare, and fragrance. The flagship Macy's nameplate? Up just 1.6% — and even that leaned on the "Reimagine 200" stores, the locations getting fresh investment, which posted a 2.4% comp, as the earnings call detailed.
That spread is the K-shaped consumer rendered in a single income statement. The affluent shopper buying handbags at Bloomingdale's and serum at Bluemercury is spending freely. The mid-market Macy's customer is barely positive — and only where the company has poured capital into the store experience. It's the mirror image of what we've seen at the value end of the barbell, where Dollar General, Five Below, and the warehouse clubs are compounding double digits. The middle, as ever, is the hardest place to stand.
"Bold New Chapter" is working at the edges
CEO Tony Spring's "Bold New Chapter" turnaround has always been about pruning the weak and investing in the strong — closing underperforming Macy's locations while feeding Bloomingdale's, Bluemercury, and the Reimagine fleet. This quarter is evidence the thesis has merit: the parts of the portfolio getting investment are growing, and expense discipline is converting modest sales beats into real earnings upside, highlights from the call show.
The harder question is whether the core Macy's nameplate can ever do more than tread water. A 1.6% comp in a quarter the company is calling its best in four years is a reminder that the engine of this business — hundreds of mid-tier mall anchors — is still the slowest-growing piece. Macy's has bought itself credibility and a guidance raise. What it hasn't yet proven is that the brand on the building, rather than the two smaller banners beside it, can carry the next leg.