Macy’s, one of the most well-known department stores in the U.S., is undergoing a significant transformation under the leadership of CEO Tony Spring. Despite some mixed results in recent quarters, Macy’s is making strides in reshaping its operations and revitalizing its stores. As the company works to recover from years of declining sales, key investments in store revamps and closures seem to be showing positive results. However, challenges remain as Macy’s tries to balance its turnaround strategy with uncertain economic conditions and increasing competition in retail.
The Road to Recovery: A Mixed Quarter
In the latest fiscal quarter, Macy’s reported a somewhat mixed set of results. While the overall business faced challenges, including a slight decline in comparable sales during the all-important holiday period, some key metrics indicated progress. Comparable sales across Macy’s owned and licensed businesses, including its online marketplace, were up by 0.2%. This marked the highest increase since the first quarter of 2022. Notably, the “First 50” stores—the locations Macy’s is prioritizing for improvement—saw a modest 0.8% increase in comparable sales, signaling some positive momentum.
However, despite these improvements, the company’s projections for fiscal 2025 fell short of Wall Street’s expectations, leading to a slight dip in Macy’s stock price. Investors are still waiting to see whether Spring’s strategy will take hold and produce sustainable growth.
Aggressive Revamp: Focus on Key Locations
Macy’s is focusing heavily on its top-performing stores as part of its ongoing turnaround strategy. According to CEO Tony Spring, the company has invested in reimagining 125 locations, or roughly 36% of the stores Macy’s plans to keep open. These locations have seen improved performance, thanks to increased staffing, better merchandising, and upgraded visual displays. “Performance of both the first 50 and the 100 test stores illustrate that when we invest in the customer experience, we can grow sales,” Spring stated during a recent earnings call.
This strategy of focusing on high-potential stores, particularly in departments like shoes and handbags, has already yielded positive results. In fact, stores that received additional staffing performed better than those that did not, suggesting that customer service improvements are crucial for Macy’s recovery.
A Cautious Outlook: Limited Growth in 2025
Despite the positive signs at some of its locations, Macy’s has tempered its growth expectations for the coming year. The company has forecasted comparable sales to be flat or down by 2% for fiscal 2025, reflecting the ongoing challenges facing the broader retail industry. While this represents an improvement over previous years, it’s clear that Macy’s will have to invest significantly in the remaining stores to maintain its recovery trajectory.
Additionally, the company’s guidance for the current quarter indicates a substantial decline in earnings compared to Wall Street expectations, which has raised concerns about the speed of the company’s recovery.
Barington Capital’s Activist Push: A Threat to Macy’s Strategy?
Macy’s transformation has also attracted the attention of activist investors. In December, Barington Capital revealed its position in Macy’s, pushing the company to reevaluate its real estate holdings, cut unnecessary spending, and potentially sell off luxury brands. This marks the fourth activist campaign against Macy’s in the past decade, with many analysts speculating that Barington is more focused on monetizing the company’s valuable real estate portfolio than executing a long-term retail turnaround.
CEO Tony Spring remains cautious, acknowledging the uncertainty surrounding macroeconomic factors like rising tariffs and cautious consumer spending. “If we weren’t in the environment that we’re operating in, I would be even more bullish on our potential,” Spring said. However, he stressed the importance of being prudent in the current climate.
A Long Road Ahead: Time and Patience Needed
While Macy’s has made progress, the road to recovery is still long. The company is investing in capital improvements, such as store renovations and enhancements to customer service, but it will take time for these changes to affect the company’s bottom line. Spring has given Macy’s two more years to complete its transformation, and the company’s ability to deliver results will depend on how well it can balance its turnaround plan with shifting market conditions.
For now, Macy’s continues to make prudent capital investments, including a plan to resume share buybacks under its remaining $1.4 billion authorization. As the company navigates its turnaround, it remains focused on elevating the customer experience, improving operational excellence, and delivering value to shareholders.
Turning the Corner?
In summary, Macy’s is showing signs of progress in its efforts to turn around its operations, with several positive developments in its core businesses and key stores. While investors are watching closely, and the company faces some tough challenges ahead, CEO Tony Spring’s strategy of investing in select locations and improving the customer experience is beginning to bear fruit. Macy’s success in the coming years will ultimately depend on whether it can scale these improvements across the rest of its stores while overcoming external pressures like changing consumer behaviors and economic uncertainties.