Macy's turnaround starts to take shape, but ailing stores weigh on quarterly results

Core Viewpoint - Macy's is experiencing mixed results as it navigates a turnaround under CEO Tony Spring, with pressure from activist investors seeking to take the company private [1][10]. Financial Performance - Comparable sales for Macy's during the holiday quarter decreased by 1.1%, while comparable sales across owned and licensed businesses, plus online marketplace, increased by 0.2%, marking the highest growth since Q1 2022 [2]. - The "First 50" locations, which are prioritized in the turnaround plan, reported a 0.8% increase in comparable sales, showing positive performance for four consecutive quarters [3]. - For fiscal 2025, Macy's anticipates adjusted earnings per share between $2.05 and $2.25, and sales between $21 billion and $21.4 billion, which are below Wall Street expectations of $2.31 per share and $21.8 billion in sales [4]. - The reported net income for the fiscal fourth quarter was $342 million, or $1.21 per share, compared to a loss of $128 million, or a loss of 47 cents per share, a year earlier [4]. - Total sales fell to $7.77 billion, down approximately 4% from $8.12 billion a year prior [5]. Strategic Initiatives - CEO Spring has initiated a plan involving the closure of 150 stores and investment in better-performing locations to address longstanding issues [7]. - The company is focusing on enhancing staffing, merchandising, and visual presentation in the 50 prioritized locations, which have shown better performance than the rest of the chain [8]. - After the store closures, Macy's will retain about 350 locations, and extending the successful strategy to the broader chain will require time and capital [9]. Activist Investor Influence - Activist investor Barington Capital has taken a position in Macy's, advocating for cost-cutting measures, potential sales of luxury brands, and a review of the real estate portfolio [10]. - There is skepticism regarding the motivations of Barington and other activist investors, with concerns that they may prioritize short-term profits over long-term revitalization efforts [11]. Shareholder Returns - Macy's announced plans to resume share buybacks under a remaining $1.4 billion authorization, contingent on market conditions [13]. - The company aims to enhance customer experience, operational excellence, and maintain healthy free cash flow while returning capital to shareholders through buybacks and dividends [13].