Macy’s slashes expectations for the year after a pullback by shoppers in the spring

by Madison Thomas
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economic challenges

Macy’s Slashes Expectations for the Year

Macy’s, the New York department store, has revised its outlook for the entire year due to weakened sales in the first quarter. The challenging economic environment, including high inflation, has impacted consumer behavior. As a result, Macy’s had to cut prices on clothing and discretionary items in an effort to stimulate sales.

Impact of High Inflation on Consumer Spending

The retail industry’s first-quarter earnings season has revealed the impact of high inflation, particularly in food, on consumer spending habits. Shoppers are forced to cut back on discretionary items like clothing to afford their increasing grocery bills. Even retailers catering to low-income shoppers, such as Dollar General, have experienced declines in sales of seasonal items, home goods, and apparel.

The Effect on Wealthy Shoppers

The economic challenges are not limited to lower-income shoppers. Nordstrom, a high-end retailer, reported an 11% decline in sales but still managed to surprise analysts with a profit in the first quarter. The company noted that even wealthy shoppers are becoming more restrained in their spending habits. This has led retailers like Nordstrom to adopt a conservative approach to inventory management.

Changing Consumer Preferences

The impact of economic challenges is also reflected in changing consumer preferences. Costco Wholesale Corp., which caters to high-income shoppers, observed a shift in purchasing behavior. Customers are trading down from beef to poultry and pork, and even switching to canned foods like chicken and tuna. Walmart, the largest retailer in the US, has seen an influx of wealthier shoppers seeking lower prices in the grocery aisle.

The Toll on Shoppers

The cumulative effect of high inflation and interest rates is taking a toll on shoppers. Vivek Astvansh, a marketing professor at Indiana University, noted a sense of hopelessness and decreased confidence about the future among consumers.

Macy’s Sales Decline and Factors Affecting Performance

Macy’s CEO, Jeff Gennette, stated that sales started to weaken in late March and worsened in April. Cooler temperatures during spring made clothing less appealing to shoppers. The banking crisis headlines in mid-March also contributed to consumer worries. The compounding effect of inflation led shoppers to allocate more of their money to essential items like food and services, resulting in reduced spending on discretionary items. Macy’s stores, which have a large customer base with lower to middle incomes, were most affected by the decline. However, certain categories such as fragrances, women’s career sportswear, and men’s tailored items performed well. Pandemic-related items like housewares also experienced a comeback.

Performance of Luxury Nameplates

Macy’s luxury nameplates, Bloomingdale’s and beauty chain Bluemercury, were affected by the challenging economic environment but not to the same intensity as Macy’s flagship stores. Business showed slight improvement in May at Macy’s stores, while sales rebounded more significantly at Bloomingdale’s. Gennette mentioned that it is unclear whether the difference reflects a split between higher and lower income consumers or different fashion offerings.

Revised Guidance and Financial Results

Macy’s reported net income of $155 billion, or 56 cents per share, for the first quarter. While this exceeded Wall Street’s expectation of 45 cents per share, it represented a significant decline from the $286 million earned in the same period the previous year. Sales fell to $5.17 billion, missing analyst projections. Comparable sales across all categories, including licensed businesses, declined by 7.2%. Macy’s revised its guidance for the year, expecting earnings in the range of $2.70 to $3.20 per share and sales between $22.8 billion and $23.2 billion. This is a decrease from the previous guidance of $3.67 to $

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