March 18 (Reuters) - Macy's said it was taking a "prudent approach" to its outlook, as it forecast a fall in annual revenue and profit, citing macroeconomic and geopolitical risks that could affect consumer spending.
Shares of the company were up about 7% in early trading after the department store said it expected a comparatively smaller impact from tariffs in the second half of the year and beat quarterly profit estimates, helped by strong growth at its high-margin Bloomingdale's stores.
"Guidance assumes the first half of the year will have a larger tariff impact than the second half, with the first quarter having the most meaningful impact," the company said in a statement.
The outlook largely reflects rates before recent (tariff) changes, as prior tariffs are incorporated into existing inventory costs, CFO Tom Edwards said on a post earnings call, signaling a margin hit in the first half of the year.
Washington has moved to a uniform 10% tariff following a Supreme Court ruling that struck down broader U.S. levies, but the company, which relies on manufacturing in China, is heavily exposed to import duties.
Macy's expects an adjusted profit of $1.90 to $2.10 per share, compared with $2.15 last year and estimates of $2.17, while seeing a 20 to 30 basis point tariff hit to gross margin.
It also forecast annual net sales between $21.4 billion and $21.7 billion, down from $21.8 billion in 2025. Analysts were expecting $21.42 billion.
CEO Tony Spring, in an interview, told Bloomberg News that the Iran conflict and economic uncertainty could drive some shoppers to seek "retail therapy."
"Retail is entertainment and escapism. In moments like these, we believe it's our time to shine, to step up and give people a respite from reality," Spring said in a statement.
GREEN SHOOTS FROM TURNAROUND
Under Spring, Macy's has focused on higher-end labels, expanding full-price sales, reinvesting in high-potential locations and closing underperforming stores, while improving product offerings and loyalty programs.
Macy's customers skew more toward the middle-and upper-income tiers, where performance remains stronger, Spring said on the call, but warned that macroeconomic and geopolitical factors could influence discretionary spending.
Sales at the Macy's brand fell 3.2% in the quarter, including store closures, though on a comparable basis, sales rose 0.4%, compared with a 1.1% decline a year earlier.
Excluding items, Macy's earned $1.67 per share, beating estimates of $1.53, according to data compiled by LSEG.
Other retailers, including Walmart and Kohl's, have also issued cautious guidance.
Analysts at Telsey Advisory Group warned that macro pressure, weak traffic, tariff uncertainty and a competitive, highly promotional retail environment could weigh on near‑term results.
Reporting by Neil J Kanatt in Bengaluru; Editing by Shinjini Ganguli
Source: Reuters