For a few weeks now, the stock market has been increasingly concerned that economic growth is slowing and potentially going to turn negative. These concerns were magnified following results from big-box retailers like Walmart (WMT  ), Costco (COST  ), and Target (TGT  ).

However, the bullish interpretation is that overall economic activity remains robust, but we are simply seeing a boom in services, while the goods part of the economy is due for a reversal. Macy's (M  ) earnings gave fuel to the bullish argument as the company exceeded analysts' expectations on the top and bottom line and also issued better than expected guidance.

Macy's results are quite instructive as the company straddles the line between goods and services. Yes, it's firmly in the goods category, but its sales of clothes, formalwear, jewelry, luggage, makeup, etc, are tied to people going out, to the office, on vacations, or celebrations. These are the parts of the economy that are now booming or at least recovering.

Inside the Numbers

In Q1, Macy's reported $1.08 in adjusted EPS which was well above expectations of $0.82 per share. Revenue also beat at $5.35 billion vs. $5.33 billion which was a 14% increase from last year. Net income increased from $103 million to $0.32.

It sees revenue growing 1% in 2022 and seas earnings between $4.53 and $4.95 which was above the prior range of $4.13 to $4.52. It's interesting that Macy's and Nordstrom's (JWN  ) have been exceptions as most retailers saw a big drop in profits due to higher costs.

Online sales increased by 2% and now account for 33% of all sales. In total, the company has 44.4 million active customers, a 14% increase from last year. Same-store sales were up 12.4%.

The company said standout categories were tailored men's wear, formal attire, and more expensive items at Bloomingdale's. It also benefitted from an increase in international tourism as its stores are a draw for travelers. It also noted supply chain improvements.

Overall, Macy's stock looks interesting as a trade rather than an investment. As long as the Fed is focused on inflation, growth slowing seems inevitable which means that Macy's is unlikely to make new highs.