Macy’s (M) stock jumped 5% on Wednesday after the department store chain reported better-than-expected fourth quarter earnings results as it heads into the third year of its turnaround strategy.
CEO Tony Spring told Yahoo Finance that it continues to see signs of a K-shaped economy, or the growing divide between high earners and low-income households.
“The lower-income consumer is pressured,” Spring said. “The middle-income consumer is being choiceful and trying to find opportunities to buy. … The upper income consumer is still, despite what they might say about confidence, … rewarding themselves and indulging in things that are new, fashionable, or things that they like.”
Spring said that the retailer is beginning to scale its turnaround efforts after several quarters of piloting new programs. Macy’s still plans to close 65 stores over the next three years, but Spring said the team is focused on growing the company.
“They are not unprofitable; they are underproductive,” he said of the store closures. “There is value to monetize, and we have a healthy balance sheet.”
Macy’s adjusted earnings per share for the holiday quarter came in at $1.67, above the $1.54 per share that Wall Street estimated, according to Bloomberg data. Revenue came in at $7.6 billion, higher than the $7.5 billion the Street was looking for.
Overall, same-store sales increased 1.8%, compared with the 0.12% decline analysts had forecast. Comparable sales grew by 2% for the stores that Macy’s plans to keep open — those it invested in with new merchandise and more staff.
Macy’s luxury business, Bloomingdale’s, is hitting its stride. Same-store sales grew nearly 10% during the quarter, significantly outperforming Wall Street analysts’ expectations for a 2.5% pop.
Spring said there is “still plenty of growth potential” for Bloomingdale’s with the rise of social media coverage of fashion, various price points, and the opportunity to cater to multiple generations.
For the upcoming fiscal year, Macy’s issued cautious guidance, noting “many macroeconomic and geopolitical factors that could influence discretionary spend.”
“We’re in the midst of a lot of uncertainty,” Spring said. “We’re going to stay focused on what we can control. Guidance is not a ceiling. There’s plenty of opportunity for us to do better, but we’ve got to watch and see what happens with … tariffs, gas prices, wars, economy.”
Macy’s expects adjusted earnings in the range of $1.90 to $2.10, below the $2.21 the Street expected, alongside revenue of $21.4 billion to $21.65 billion, above Wall Street’s $21.1 billion forecast.
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