NEW YORK — Macy’s swung to a profit in the fourth quarter, though sales dipped with shoppers remaining cautious about spending.

The strength of the quarterly profit surprised Wall Street, but sales were just below expectations and uncertainty about both the American consumer and new tariffs seeped into the company’s outlook for 2025.

Shares dipped 1% in morning trading Thursday.

Macy’s joins other retailers including Walmart, Target, Best Buy and Abercrombie & Fitch that have grown cautious about their expectations for 2025.

Tariff Tensions and Economic Uncertainty

The imposition of new tariffs this week by President Donald Trump against America’s three biggest trading partners resulted in immediate retaliation from Mexico, Canada and China, while roiling financial markets. Tariffs risk reigniting inflation, which in recent weeks appears to have begun to tick higher.

The U.S. slapped 25% taxes, or tariffs, on Mexican and Canadian imports, though he limited the levy to 10% on Canadian energy. It also doubled the tariff Trump announced last month on Chinese products, to 20%.

Possibly raising anxiety further, certain aspects of U.S. trade policy appears to be fluid, making it more difficult for businesses and households to plan ahead. On Wednesday, Trump reversed course and granted a one-month exemption on his new tariffs on imports from Mexico and Canada for U.S. automakers.

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Macy’s Strategy Amid Uncertainty

Macy’s executives emphasized that the company is facing lots of uncertainty given the ever-changing tariff policies. But the company is focusing on what it can control and zeroing in on improving its merchandise and services. Company executives told analysts on the earnings call Thursday that Macy’s has been working with its suppliers to increase variety and reduce redundant styles, while adding more exclusive offerings. It’s also focusing on improving its store label brands.

“We are in that retail therapy business, a place of escapism, an opportunity to get away from all of the political noise that happens every day,” Macy’s CEO Tony Spring said. “And we have to lean into that. And so, I don’t think the consumer is going to feel a sense of relief in the short term. I’m not an economist, I can’t tell you how long it’ll go on. I challenge our teams every day to think about what do we control?”

Financial Performance and Future Outlook

The uncertainty comes as retailers like Macy’s were already dealing with cautious consumer spending though sales at the department store have been improving.

Macy’s, which also runs Bloomingdale’s and Bluemercury, reported net income of $342 million, or $1.21 per share, for the three-month period ended Feb. 1. Adjusted per-share earnings per were $1.80, exceeding analyst expectations of $1.54 per share, according to FactSet, and reversing a $128 million loss last year.

Sales fell 4.3% to $7.77 billion from $8.12 billion in the year-ago period.

Comparable sales at the overall company— established business from physical stores and online channels — rose 0.2%. At Macy’s nameplate stores, comparable store sales dipped 1.9%.

Macy’s has been on a campaign to modernize stores, and that appears to be working. At the first 50 stores that have been upgraded, comparable sales rose 1.2%. Those initiatives — which include offering more service in shoe departments and more visual displays— have been added to another 75 stores.

Macy’s other brands continue to excel, with comparable sales growth at Bloomingdale’s hitting 6.5%, while Bluemercury reported its 16th consecutive quarter of comparable sales growth, the latest at of 6.2%.

Macy’s expects to earn $2.05 to $2.25 per share on net revenue of $21 billion to $21.4 billion in the current year. Analysts expect a profit of $2.29 per share on sales of $21.34 billion.