This department store chain has lifted its full-year outlook for the second time, with executives attributing part of the momentum to higher merchandise pricing after growth across all its brands.

Macy's is reaping the benefits of elevated price points. The retailer raised its annual guidance on Thursday, with management citing increased product prices as a key driver. By introducing more premium labels and high-ticket items such as genuine leather and fur goods, Macy's aims to attract a growing base of higher-income clientele. CEO Tony Spring told analysts on Thursday, "We are only at the beginning of our efforts to elevate the quality of our merchandise mix."

The strategic shift in product assortment drove a 9% increase in average selling prices during the quarter. Executives noted that while lower-income consumers are tightening spending, mid-to-high income customers are boosting order volumes. Sales of Ralph Lauren and Coach products have climbed, while watch and fine jewelry categories at Bloomingdale's locations are also performing strongly.

Macy's now projects full-year net sales of $21.68 billion to $21.83 billion, up from the $21.5 billion to $21.75 billion range provided in June. Adjusted earnings per share are expected to land between $2.15 and $2.35, compared with the prior forecast of $2.00 to $2.20. Over the past year, retailers nationwide have raised prices to absorb tariff-related cost pressures. Some have used recent tariff refunds to lower prices, but Macy's sees an opportunity to continue selling premium goods as its transformation strategy enters its next phase.

Spring stated, "We have the ability to premiumize the assortment across all three of our brands, for lack of a better term." During the quarter, Macy's received $98 million in tariff refunds and an additional $18 million after the period ended. The company plans to funnel $96 million of that into store renovations under its "Macy's Rebuild" initiative, a physical retail overhaul designed to boost store-level sales and profitability. Management indicated that price reductions will be limited to select categories, primarily high-cost big-ticket items and fine jewelry. Roughly $20 million of the total refunds will contribute to full-year earnings per share.

To date, 200 locations have completed the "Macy's Rebuild" transformation, generating nearly 75% of total store sales. The company intends to expand the program to additional stores next year, with the ultimate goal of upgrading its entire fleet. Spring remarked, "These remodeled stores are tangible proof of our ability to drive growth, and we are confident in continuing this initiative."

Second-quarter net sales rose 1.1% year over year to $4.87 billion, surpassing the $4.81 billion consensus estimate compiled by FactSet. Comparable store sales increased 2.7%, exceeding analysts' expectations of 1%. Breaking it down, same-store sales at the Macy's namesake brand grew 1.1%, Bloomingdale's jumped 11.3%, and the Bluemercury beauty chain advanced 6.2%. Bloomingdale's once again stood out as a company highlight, achieving its highest-ever merchandise sales for a second quarter in brand history.

Net income for the quarter reached $169 million, or $0.62 per share, compared with $87 million, or $0.31 per share, in the year-ago period. On an adjusted basis, excluding certain one-time items, earnings per share came in at $0.63 per FactSet data, beating the analyst forecast of $0.37.