Macy's posts strongest Q1 in 4 years as Berkshire buys in

Macy's reported its strongest first-quarter comparable sales in four years, with revenue and earnings both topping Wall Street estimates as the department store chain's turnaround strategy gained traction.

"The results reflect the strength and viability of the Bold New Chapter strategy," Chief Executive Tony Spring said on the earnings call.

Revenue of $4.89 billion increased 1.8% year over year and exceeded the $4.61 billion consensus. Adjusted earnings per share came in at 13 cents, down from 16 cents a year earlier but well ahead of the 2-cent estimate. Comparable sales rose 3%, the best first-quarter performance since 2022 and above the company's guidance range of 0.5% to 1.5%.

The outperformance was broad-based across Macy's portfolio. Bloomingdale's comparable sales surged 10.2%, marking the brand's strongest first quarter on record. Bluemercury, the luxury beauty chain, posted a 6.4% gain. Macy's nameplate comparable sales rose 1.6%, while the 200 locations that have undergone the company's "Reimagine" remodeling initiative saw comps climb 2.4%.

The results prompted Macy's to raise its full-year outlook. The company now expects net sales of $21.5 billion to $21.75 billion, up from a prior range of $21.4 billion to $21.65 billion. It projects comparable sales growth of 0.5% to 1.2%, compared with earlier guidance of down 0.5% to up 0.5%. Adjusted earnings per share for the year are now seen at $2 to $2.20, up from $1.90 to $2.10.

The turnaround effort, dubbed Bold New Chapter, has centered on closing roughly 150 underperforming stores while investing in the remaining fleet and expanding Bloomingdale's and Bluemercury locations. The company has increased its reimagined store target from 125 to 200 after seeing stronger sales at remodeled locations.

Berkshire Hathaway added a $55 million stake in Macy's during the first quarter, according to its 13F filing, marking the first time the conglomerate has held shares in the retailer. The position represents a tiny fraction of Berkshire's $250 billion equity portfolio but signals confidence in the recovery story.

Wall Street remains cautious despite the momentum. The stock carries a consensus rating of Reduce, with an average price target of about $19.90, roughly 15% below the current share price. Short interest has climbed to 33.5 million shares, or 12.8% of the float, up from 21.1 million shares in January.

Shares of Macy's have rallied about 85% over the past 12 months, closing at $21.76. The stock trades at roughly 10 times earnings, below the retail industry average of 11.3 times.

The guidance raise signals management expects the turnaround to continue gaining momentum. Investors will watch upcoming quarterly results for evidence that the reimagined stores can sustain their outperformance and whether Bloomingdale's and Bluemercury can maintain their double-digit growth trajectory.

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