On Wednesday, Macy’s Inc said that the newly imposed tariffs on Chinese imports, from the White House, is hitting the department store pretty hard, mostly in its furniture business. According to executives at the retailer, more trade levies could impose increased vulnerability on the chain’s more popular and accessible categories, like clothing and accessories.
Macy’s Chief Executive Jeff Gennette explained to investors, on an earnings call, “If the potential fourth tranche of tariffs is placed on all Chinese imports, that will have an impact on both our private and our national brands.” He also ads that the company will do whatever is necessary to minimize this effect on the customers. Of course, that probably comes in the form of offering competitive prices even on those products that might be higher in price because of the tariffs.
That said, it should be noted that Macy’s is doing pretty well when it comes to its most loyal shoppers. Transaction growth, for example, is up 5.7 percent this quarter driven by, Gennette says, the company’s most loyal visitors “shopping more frequently than ever.”
And with that, Macy’s reported net income for the quarter (which ended on May 4) reached $136 million; an equivalent of about 44 cents per share. This is not too far off from the $139 million, and 45 cents per share, the company did in the same period last year. More importantly, this is much better than the 33 cents per share analysts had expected.
Still, revenue fell from $5.541 billion to $5.504 billion, which is in line with analyst expectations of $5.505 billion. Also, sales are outperforming, for the most part, with sales at stores open at least a year—on an owned plus licensed basis—were up 0.7 percent. That is also far better than the 0.2 percent drop analysts had expected.
In February, Macy’s announced plans to cut roughly 100 management jobs, which would target $100 million in annual cost savings. This is part of the company’s effort to restructure, which also includes cleaning up its apparel offerings to recover from inflated inventories. This has left items sitting on shelves for a long time which, of course, put more pressure on profits.