Why Macy's Stock Soared 20.7% Today

Key Points

• The company reported a much better-than-expected Q2, more than doubling the consensus target for earnings per share.

• Macy's was also able to raise its outlook for the whole year for both its top and bottom lines.

• 10 stocks we like better than Macy's ›

Shares of Macy's (NYSE: M) jumped on Wednesday, finishing the day up 20.7%. The surge came as the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) gained 0.5% and 1%, respectively.

The department store chain reported its Q2 earnings this morning, delivering numbers that crushed Wall Street's expectations and raised its full-year outlook.

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Macy's beats across the board

The retailer reported Q2 adjusted earnings per share (EPS) of $0.41 on sales of $4.81 billion. Wall Street had been expecting just $0.18 a share on sales of $4.76 billion. That's a pretty significant earnings beat.

The company also raised its full-year guidance, now expecting adjusted earnings between $1.70 and $2.05 per share, up from its previous range of $1.60 to $2.00. Revenue guidance inched higher to between $21.15 billion and $21.45 billion from the prior $21 billion to $21.4 billion range.

The improved outlook is particularly notable, given that Macy's cut its guidance just last quarter, blaming pricing pressure from import duties. CEO Tony Spring acknowledged that tariffs remain a real challenge for the business, but pointed to improvements in store experiences and product mix as factors helping to offset those pressures.

Image source: Getty Images

Challenges remain for Macy's

The company is making progress with store updates and product selection, but the retailer still faces significant structural challenges in an e-commerce-dominated environment.

While today's results show Macy's transformation is making progress, ongoing import costs remain a significant risk in the short term, and consumer preference for online shopping in the long term. The opportunity is real, but significant challenges remain.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.