Fast Facts
- Macy’s Inc. is facing Q2 impact from China goods bought at the 145% tariff rate
- For the full year, the company expects gross margin to take a 20-40 basis point hit from tariffs
- Macy’s has cancelled and delayed orders, but is selectively absorbing some higher costs
- Price increases will be broad-based, although Macy’s will hold price in some cases
NEW YORK – Macy’s Inc. is expecting its annual gross margin to take a 20-40 basis point hit from President Trump’s tariffs – assuming the rates currently in place under the 90-day pause don’t get jacked up again.
Coming off a first quarter that exceeded expectations, the company faces a unique challenge in Q2: flowing through “a meaningful portion” of the product it bought under the 145% China tariff, explained chairman and CEO Tony Spring.
The company is now slapping markdowns on early spring inventory that arrived late in the fourth quarter (sic) and in February to make sure it can provide newness over the summer. Macy’s Inc. has also cancelled some orders and delayed others where tariff rates are too steep. Ultimately, the company aims to be well-positioned for the fall and holiday season, he told investors during this morning’s Q1 earnings call.
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The company is taking a “surgical” approach to rising prices – renegotiating where it can, taking some vendor discounts and absorbing some tariff costs. Higher costs will be spread more broadly across categories.
“If something isn’t priced fairly, we’re not going to buy it. If a price point is important, we’re going to hold it,” said Spring.
Macy’s Inc. has also reduced its receipts from China. Last year, about 20% of total company products originated from China. In Q1, roughly 27% of total private brands were sourced from China, down from 32% in 2024 and sharply down from more than 50% in the pre-pandemic era.
Given the fluid macro economic environment and concerns about how willingly shoppers will respond to higher ticket prices, Macy’s Inc. cut its full-year earnings guidance this morning while maintaining its outlook for top-line growth.
Macy’s is now forecasting adjusted EBITDA as a percentage of total revenue to range between 7.4% to 7.9%, down from its previous guidance of 8.4% to 8.6%.
The low end of the company’s updated full-year guidance assumes that sales trends soften from first-quarter levels, spurring the company to cancel more orders and take deep markdowns to maintain a healthy inventory-to-sales ratio. That plan also includes selectively raising prices, Spring told investors.
Macy’s high-end guidance assumes a continuation of the improved March/April sales trend and only moderate gross margin pressure.
“In this environment of uncertainty, we remain focused on navigating the near-term while executing to our long-term goals,” said Spring. “We are in a unique moment, and we will not be complacent.”