Macy’s Q4 Earnings: A Mixed Bag Amid Economic Uncertainty

Macy’s, one of America’s iconic department stores, reported a surprising swing to profit in the fourth quarter of its fiscal year, despite a dip in sales as consumers remain cautious about their spending. While the company’s quarterly profit exceeded Wall Street’s expectations, its sales fell slightly below projections. This mixed performance comes at a time when the U.S. retail industry is grappling with heightened uncertainty, driven by fluctuating consumer sentiment and the imposition of new tariffs by the Trump administration. Macy’s shares dipped by 1% in early trading on Thursday, reflecting investor concerns about the company’s outlook for 2025.

Tariffs and Trade Policy: A Growing Headwind for Retailers

The imposition of new tariffs by President Donald Trump on imports from America’s three largest trading partners—Mexico, Canada, and China—has introduced fresh complexity for retailers like Macy’s. The tariffs, which range from 10% on certain Canadian energy products to 20% on Chinese goods, have already triggered retaliation from affected countries and roiled financial markets. This escalation in trade tensions has raised fears of reigniting inflation, which has shown signs of increasing in recent weeks.

Adding to the unpredictability, aspects of U.S. trade policy appear to be in flux. In a sudden reversal, Trump granted a one-month exemption on tariffs for U.S. automakers importing goods from Mexico and Canada. While this move provides temporary relief to the automotive sector, it underscores the fluidity of trade policy, making it increasingly difficult for businesses and households to plan for the future. For retailers like Macy’s, this uncertainty compounds the challenges of navigating a consumer environment marked by caution and hesitation.

Macy’s Strategy: Focusing on What It Can Control

In the face of these external challenges, Macy’s executives are emphasizing the importance of focusing on what the company can control. The retailer is doubling down on efforts to improve its merchandise and services, aiming to create a more compelling shopping experience for its customers. During its recent earnings call, Macy’s revealed that it has been working closely with its suppliers to enhance the variety of its offerings and eliminate redundant styles. At the same time, the company is expanding its range of exclusive products and investing in its store label brands.

Macy’s CEO, Tony Spring, encapsulated the company’s approach when he remarked, “We are in that retail therapy business, a place of escapism, an opportunity to get away from all of the political noise that happens every day.” Spring acknowledged that while consumers may not feel immediate relief from the current economic and political climate, Macy’s must continue to focus on delivering value and creating a welcoming environment for its customers. “I challenge our teams every day to think about what do we control?” Spring said, highlighting the company’s commitment to execution and innovation.

Modernization Efforts Pay Off, But Challenges Remain

Macy’s efforts to modernize its stores appear to be yielding results. The company reported that comparable sales at its first 50 upgraded stores rose by 1.2%, driven by initiatives such as enhanced shoe department services and more engaging visual displays. These improvements have now been extended to an additional 75 stores, underscoring Macy’s commitment to revitalizing its brick-and-mortar presence.

Despite these positive developments, Macy’s overall sales for the quarter fell by 4.3%, dropping to $7.77 billion from $8.12 billion in the year-ago period. However, comparable sales across the company—combining physical stores and online channels—rose by 0.2%, suggesting that Macy’s is making progress in stabilizing its operations. At Macy’s nameplate stores, comparable sales dipped by 1.9%, but the company’s other brands, including Bloomingdale’s and Bluemercury, continued to perform well. Bloomingdale’s reported a 6.5% increase in comparable sales, while Bluemercury achieved its 16th consecutive quarter of comparable sales growth, with the latest figure rising by 6.2%.

Outlook for 2025: Cautious Optimism Amid Economic Headwinds

Looking ahead to 2025, Macy’s is adopting a cautiously optimistic tone, reflecting both the potential for growth and the lingering uncertainties in the market. The company expects to generate earnings per share of $2.05 to $2.25 on net revenue of $21 billion to $21.4 billion for the current year. While these projections align closely with analyst expectations, they also highlight the challenges Macy’s faces in navigating an unpredictable economic and political landscape.

The broader retail sector is similarly bracing for a challenging year. Retailers such as Walmart, Target, Best Buy, and Abercrombie & Fitch have all expressed caution about their outlook for 2025, citing concerns about consumer spending and the impact of tariffs. As the U.S. trade policy remains in flux, retailers are finding it increasingly difficult to anticipate how these developments will affect their supply chains, costs, and ultimately, their bottom lines.

In this context, Macy’s ability to execute its strategy and deliver on its promises will be critical to its success in 2025. By focusing on what it can control—improving its merchandise, enhancing its store experience, and leveraging its portfolio of strong brands—Macy’s is positioning itself to navigate the headwinds and capitalize on opportunities as they arise.

Conclusion: Macy’s Resilience in a Turbulent Retail Landscape

Macy’s fourth-quarter results offer a glimpse into the complex and evolving landscape of American retail. While the company’s profit beat expectations, its sales performance underscores the cautious mood of consumers and the pressures imposed by external factors such as tariffs and trade policy. By emphasizing its ability to adapt and innovate, Macy’s is signaling its determination to thrive in a challenging environment.

However, the road ahead remains fraught with uncertainty. As global trade tensions persist and consumer sentiment continues to shift, Macy’s and other retailers will need to remain agile and responsive to changing circumstances. For now, Macy’s focus on improving its offerings and creating a compelling shopping experience positions it as a resilient player in the retail industry, ready to weather the storms of 2025 and beyond.