The news: Macy’s turnaround strategy delivered dividends in Q1—but that momentum is being challenged by tariffs and softer discretionary spending, which will likely weigh on profits this year.

By the numbers:

• Net sales fell to $4.6 billion, ahead of LSEG’s $4.5 billion estimate.
• Earnings per share (EPS) came in at 16 cents, beating expectations for 14 cents.
• Same-store sales fell 2% YoY, outpacing estimates for a 3.9% decline. The contraction was led by the Macy’s nameplate, where comparable sales fell 2.9%; Bloomingdale’s and Bluemercury had increases of 3% and 1.5%, respectively.
• Macy’s continues to expect full-year comparable sales to decline between 0.5% and 2%, but it now anticipates EPS of $1.60 to $2, down from its prior range of $2.05 to $2.25.

A difficult environment: While sales trends were better than anticipated—largely due to the strength of the Bloomingdale’s and Bluemercury banners, as well as Macy’s revamped stores—the big picture is not encouraging.

• Department store sales fell 2.1% YoY in the first four months of 2025, per US Commerce Department data, even as shoppers spent more on apparel and furniture.
• Macy’s pointed to “some moderation in consumer discretionary spending” and more promotions from competitors as headwinds in the year ahead, which could complicate its ability to manage tariffs.
• While the retailer is taking steps to diversify sourcing, one-fifth of its total inventory in 2024 originated in China—including 27% of its private-label products. Macy’s expects the duties to deliver a hit of 20 to 40 basis points to its gross margin—which includes the cost of inventory brought in when China tariffs were at 145%.

Our take: Macy’s diversified business, which includes everything from off-price to luxury, could help it stay relevant to a broader array of shoppers. At the same time, Macy’s is especially vulnerable to declines in discretionary spending, which is already under pressure as shoppers prioritize necessities amid uncertainty.