Macy’s shares soared 19% on Thursday after the department-store giant reported better-than-expected profits, saying its customers are splurging on new work outfits as they return to the office post-pandemic.
The largest department store in the US is selling lots of blazers, dresses, accessories and make-up as consumers update their wardrobes for their return to office life, chairman and chief executive Jeff Gennette said on an earnings call on Thursday.
“Our downtown flagships are seeing a marked improvement, not so much because of international tourism, but because of return to work and [shopping for special] events,” Gennette said on the investor call. “We are having a good quarter right now.”
Macy’s also defied expectations earlier this year when it delivered better than expected results for its crucial holiday period.
Macy’s also owns Bloomingdales – which Gennette said is “quite hot right now.”
The company reported better than expected earnings for the quarter ended April 30 and raised its full-year profit guidance to between $4.53 and $4.95 a share, up from its February estimate of between $4.13 to $4.52 a share.
It’s sales grew 14% in the quarter to $5.3 billion, and comparable sales were up by 10.1%.
“When you look at the affluent customer, we are not seeing a slowdown there,” Gennette said on the call, adding that “middle-income customers are staying with us.”
By contrast, budget department store Kohls said its customers were pulling back on their spending due to inflation, particularly in April, and it slashed its guidance for the rest of the year.
Macy’s saw brisk sales of luggage – growing by “double digits” Gennette said – and of apparel for special occasions while demand for home goods and big ticket items has softened.
At the same time, Macy’s is bracing for supply chain challenges in the coming weeks when it gears up for back-to-school shopping and the holiday season.
“Headwinds are coming,” Gennette said. “We have 30 tankers in the Los Angeles ports down from 120, but we have to protect back-to-school and the fourth quarter.”