Macy's reduced profit predictions, attributing reduced outlook to the impact of tariffs.
Macy's lowers full-year profit forecast due to imported tariffs, flagging consumer spending, and intensifying competition. On Wednesday, the New York-based retail giant disclosed that it expects adjusted earnings per share to range between $1.60 and $2.00, down from the previously projected figure of $2.05 to $2.25.
The revised outlook follows President Donald Trump's imposition of tariffs on Chinese imports, which account for approximately 20% of Macy's merchandise. Earlier this month, the president levied a 30% tariff on China, slightly reduced from the earlier 145%, but still significantly above pre-Trump's second term levels.
Macy's is the latest major company to caution the potential adverse effects from tariffs, joining Target, Walmart, and Nike. The retail sector has been grappling with the economic fallout from the trade policies, providing a challenging environment for long-term planning. Moreover, consumer sentiment has been subdued due to the tariff uncertainty, prompting customers to curtail spending.
In a statement, CEO Tony Spring acknowledged the company's ongoing execution of its three-year strategic plan focused on store optimization and improved e-commerce services. Launched more than a year ago, this plan includes shuttering about 150 low-performing stores by 2027. Macy's reported revenue of $4.6 billion in the recent quarter, surpassing expectations as outlined in the earnings release.
Contrasting Macy's less optimistic financial outlook, a Conference Board survey published on Tuesday revealed signs of rebounding consumer confidence in May. Optimism could be linked to Trump's recent rollback of some tariffs, suggesting improved consumer appetite amid uncertainties resulting from trade policies.
In a broader retail sector context, tariffs have prompted numerous companies like American Eagle Outfitters and Ross Stores to withdraw financial outlooks, citing widespread economic uncertainty. This macroeconomic instability has forced retail giants like Walmart and Target to report increased costs or sales declines that can be directly attributed to the tariff-driven price pressures and consumer hesitation.
In summary, Macy's anticipates a modest decline in profit for the current fiscal year due to a combination of tariff-fuelled increased costs, uncertain consumer spending patterns, and competition in a protracted tariff environment. However, the company expects sales to remain within industry expectations.
International business and retail industries are facing challenges due to tariffs, with companies like Macy's, Target, Walmart, and Nike being affected. The retail sector has been struggling with long-term planning due to the economic fallout from trade policies, and customers have been curtailing spending due to tariff uncertainty. In the finance sector, Macy's expects a modest profit decline this fiscal year, attributable to increased costs from tariffs, uncertain consumer spending, and competition.
