Dive Brief:

• Macy's on Wednesday said that first quarter revenue slid to $5.5 billion from $5.54 billion in the year-ago quarter, but comp sales rose 0.6% on an owned basis and 0.7% on an owned-plus-licensed basis. That reflects the department store's sixth consecutive quarter of comparable sales growth, CEO Jeff Gennette said in a statement.

• The retailer, which runs Macy's, Bloomingdale's, Bluemercury and off-price banners, saw "double-digit growth" in e-commerce, and mobile "continues to be our fastest-growing channel," he also said. Total inventory was up 3.9% year over year and comp inventories were up 2.4%, higher than what the company would like, executives told analysts on a Wednesday​ call.

• Net income in the quarter rose to $136 million from $131 million a year ago. Operating income fell to $203 million and was 3.7% of net sales, compared to $238 million and 4.3% of net sales in last year's first quarter, according to a company press release.

Dive Insight:

While overall sales fell in the quarter and e-commerce grew, Macy's did sequentially improve its physical store sales trend thanks to its pilot Growth50 stores, which are outpacing the rest of the Macy's fleet, as well as its off-price Backstage operations, according to Gennette​.

Growth50​ are "magnet stores" found at better malls, and Macy's now calls it "Growth150" in light of its roll-out of the concept to 100 additional stores this year. Eventually, those stores will take up half the Macy's footprint, Gennette said. The company also now runs seven standalone Backstage stores and has carved out space for the off-price banner within several of its full-line stores, and will expand to 50 stores, Gennette said. "We're getting better at off-price every day," he said on a conference call Wednesday morning, also noting that Backstage benefits the overall performance at every store where it's been placed. He also called out its acquisition of Story, which is being implemented into some stores, as an important way to reach new customers.

While department stores in general once made customer service provided by humans a differentiator, Gennette emphasized the role of mobile to improve the store experience for customers, from personalized sales and product guidance to checkout. He noted that the company is also piloting virtual styling services. "Mobile is a big chunk of our emphasis," he said.

Gennette opened the call with remarks on tariffs, telling analysts that last year's implementation had no material impact on its operations. The most recent boost from 10% to 25% on many goods imported from China does have some impact, particularly on furniture sales, though the company thinks it can mitigate it, he said.

If there are yet more tariffs, the company didn't factor that into its guidance, he warned. (The company in its release Wednesday reaffirmed its guidance for the year, saying it expects net sales to be about flat and comps on both an owned and owned-plus-licensed basis to remain flat or rise up to 1%.) Gennette expressed hope that trade tensions with China would "de-escalate" and said that, meanwhile, the retailer would work with vendors to help avoid passing the impact onto customers.

Analysts are also concerned with the impact of tariffs on Macy's and other retailers. UBS on Tuesday released a note warning that recently raised tariffs on Chinese goods could imperil retailers to the tune of $40 billion in sales and 12,000 store closures in just one year. On Wednesday, the UBS team led by Jay Sole reiterated their tariff concerns for Macy's specifically in comments emailed to Retail Dive. That the department store delivered a 0.6% comp rise "in a tough retail environment ... could bode well for retail in general," they said.

"Macy's Q1 was better than we expected. This does cause our view on the stock to improve slightly," they wrote. "However, we note operating income was still down 31% y/y (ex-real estate) in the quarter. ... This suggests to us [Macy's] still faces big challenges."