Macy's exceeded Wall Street's expectations for its second fiscal quarter, reporting adjusted earnings per share of $0.40 on revenue of $4.87 billion, surpassing analyst estimates of $0.37 EPS and $4.83 billion revenue. The retailer also saw a 2.7% increase in overall comparable sales, extending a five-quarter streak of positive comparable sales growth, with its higher-end brands Bloomingdale's and Bluemercury contributing significantly with 11.3% and 6.2% comparable sales increases, respectively. Net income for the quarter was $169 million, or $0.62 per share, a notable increase from $87 million, or $0.31 per share, in the prior year.
Despite the strong Q2 performance, Macy's shares dropped by approximately 5% in early trading, settling at around $20.45. This decline occurred even after the company raised its full-year guidance for both sales and profit. The updated full-year net sales forecast is now between $21.68 billion and $21.83 billion, up from a previous range of $21.5 billion to $21.75 billion. Full-year adjusted earnings per share are projected to be between $2.15 and $2.35, an increase from the prior forecast of $2.00 to $2.20. The company's comparable sales outlook was also raised to a 1% to 1.5% increase from an earlier 0.5% to 1.2%.
The investor disappointment stemmed from two main factors: a cautious outlook for the third quarter and the perceived influence of tariff refunds on the raised full-year guidance. Macy's projected an adjusted loss per share of $0.23 to $0.19 for Q3, with net sales expected to be between $4.65 billion and $4.70 billion, and comparable sales potentially flat or down 0.5%. Furthermore, the company disclosed receiving $116 million in tariff refunds, with about $96 million being reinvested into its turnaround plan. The raised full-year EPS outlook included a $0.05 per share benefit directly from these tariff repayments, leading some analysts and investors to believe that a portion of the improved guidance was not solely due to operational improvements but rather a one-time financial boost. This nuanced interpretation of the guidance prompted the stock's decline, even as retail peers like Kohl's and TJX saw minimal movement.
