Strong performance but stock price pullback Macy's (M.US) upward guidance is still difficult to support high market expectations

The Zhitong Finance App learned that Macy's (M.US) easily surpassed Wall Street expectations in the most recent quarter and raised its performance guidelines for the rest of this fiscal year, which indicates that consumers continue to spend despite economic concerns.

The company released its third quarter report before the market on Wednesday EST. Revenue reached 4.7 billion US dollars, exceeding the general market forecast of 4.56 billion US dollars. Adjusted earnings per share were 0.09 US dollars, better than analysts' expectations of -0.13 US dollars. Based on the combined calculation of own stores plus licensed operations plus third-party platforms, comparable sales increased by 3.2%, exceeding the company's previous guidance range.

“Our third-quarter sales were the strongest in the past 13 quarters,” Macy's CEO Tony Spring said in a statement. “We are fully prepared for the holiday season.”

Stronger sales brought quarterly profits that exceeded expectations, and tariff mitigation measures and cost cuts also played a positive role.

Despite excellent performance, Macy's shares fell more than 6% in pre-market trading after several retailers released positive reports to boost market expectations. The company's stock price has increased a total of 34% this year, with significant increases over the past week or so.

The company raised its full-year adjusted earnings per share guidance to a maximum of $2.20. In September of this year, it gave a maximum guideline of $2.05. The largest department store chain in the US also raised its sales guidance range to US$21.5 billion to US$21.6 billion, higher than previous guidance.

According to Macy's guidance for the rest of the fiscal year, management expects consumers to maintain some of the spending momentum they showed during Black Friday and Cyber Monday shopping events.

This performance may strengthen Wall Street's support for CEO Spring's transformation strategy. Since taking office in 2024, he has focused on investing in what he believes has the most sales potential to improve performance by increasing staffing, increasing marketing efforts, and updating displays.

The New York-based company said its Bloomingdale's chain saw a significant increase in net sales in the most recent quarter compared to the same period last year. Bluemercurry's net sales also increased.

After Kohl's (KSS.US) raised its full-year outlook at the end of November, some Wall Street agencies have raised their expectations for Macy's. Best Buy (BBY.US) and Dick's Sporting Goods (DKS.US) also raised their guidelines at the end of last month, further showing that American consumers are still willing to spend at retailers that provide the products they need at the right prices.

Spring is still facing challenges to revive Macy's former glory. UBS analyst Jay Sole wrote in a research report on December 1 that since 2012, the department store has taken over a quarter of its market share by discount retailers, brand direct stores, and Amazon. The company said it will close around 150 underperforming stores by 2026.

Despite this, there are signs that Macy's is building up momentum. Analysts Mary Rose Gilbert and Poonam Goyal pointed out that Bloomingdale's performance was particularly outstanding and is taking market share from Saks Global, which has seen a double-digit decline in sales. Macy's transformation plans are also progressing.

“Our survey shows that Macy's womenswear product supply and product display have improved both in stores (especially in remodeled stores) and online.”