Retail giant, Macy's, reduces profit expectations, attributing the move to the perceived dampening effect of tariffs on their outlook.
Major retailer Macy's lowered its full-year profit forecast on Wednesday, citing tariffs imposed by President Donald Trump as a contributing factor. This move makes Macy's the latest major company, joining the likes of Target, Walmart, and Nike, to issue such warnings about tariff-related challenges.
The New York-based company adjusted its expectations for adjusted earnings per share (EPS) from a range of $2.05 to $2.25, to a revised range of $1.60 to $2.00. Besides tariffs, Macy's also attributed its less optimistic outlook to declining consumer spending and heightened competition.
The update comes nearly a year after Macy's announced a three-year plan to bolster its financial health by shutting underperforming stores and optimizing its e-commerce services. In the previous year, the company announced plans to close up to 150 stores by 2027.
Despite reporting revenue of $4.6 billion for the most recent quarter, surpassing expectations, the tariff escalation poses a significant challenge for Macy's. In early May, Trump imposed a 30% tariff on Chinese imports, a crucial source of apparel for the retail chain. Although the current levies are a de-escalation from a previous 145% tariff, they still exceed pre-Trump administration levels.
Approximately 20% of Macy's merchandise originates in China, according to CEO Tony Spring. The tariffs have been detrimental to consumer sentiment, potentially compromising Macy's and similar retailers' bottom lines.
Recent consumer surveys suggest a change in sentiment, however. A survey released on Tuesday indicated a brightening of consumer attitudes in May, signaling a potential recovery in consumer spending as some tariffs were rolled back.
Enrichment Data indicates that these challenges are not unique to Macy's. Retailers such as American Eagle Outfitters and Ross Stores have also suspended their financial outlooks due to macroeconomic uncertainties created by tariffs and consumer spending shifts.
Retailers like Walmart and Target face similar pressures. Walmart has already increased prices on certain items, hinting at more increases, particularly during important retail periods like back-to-school. Former President Trump publicly criticized retailers for passing tariff costs onto consumers via higher prices.
Similarly, Target and Nike face heightened expenses due to tariffs on imported goods. These companies typically respond by altering supply chains, renegotiating supplier contracts, and sometimes passing costs onto consumers through higher prices.
The international business industry, especially retail, is grappling with financial challenges due to tariffs. Macy's, following companies like Target and Walmart, adjusted its full-year profit forecast, citing tariffs as a significant factor. Enrichment Data suggests that other retailers, such as American Eagle Outfitters and Ross Stores, are also facing similar uncertainties due to macroeconomic issues like tariffs and consumer spending shifts.
