Macy’s and Costco issued an economic warning. According to reports from major retail brands like Macy’s and Costco, customers shop less at their locations and make other purchases. This can be a warning sign for the economy of the United States.
After seeing a slowdown in customer demand in March, Macy’s (M) was forced to lower its annual profit and sales prediction on Thursday.
Macy’s CEO Jeff Gennette stated this on an earnings call on Thursday. “The US consumer, particularly at Macy’s, pulled back more than we anticipated,” Gennette said. According to what he claimed, consumers “reallocated” their spending money to food, basics, and services.
The previous quarter’s same-store sales were down 8.7% at Macy’s, while they were down 3.9% at Bloomingdale’s, a more upscale department store.
During Thursday’s early trading session, the price of Macy’s stock remained unchanged.
The corporation was the most recent retailer to note changes in the preferences of its customers. Richard Galanti, the chief financial officer of Costco (COST), stated the previous week that some consumers were converting from more expensive foods like steaks and cattle to less expensive meats like pork and chicken. According to him, this pattern has emerged frequently throughout prior economic downturns.
Macy’s and Costco appeal to customers with middle and higher incomes, yet, their findings demonstrate a decline in sales among customers in this income bracket.
Despite the pandemic, these shoppers have purchased most of the apparel, electronics, furniture, and other items they desire over the past three years. Now that the epidemic has passed, many people are spending extra money on vacations and other services they could not obtain during the outbreak. There have been record bookings posted by certain airlines and hotels.
Many retailers are suffering as a result of this development.
According to David Silverman, a senior director at Fitch Ratings, “Macy’s significant earnings guidance reduction underscores the challenges facing retailers given a softening consumer spending environment and shifts in budgets toward services.” This statement was made about the difficulties that retailers are currently experiencing.
Shoppers with lower incomes also have less money to spend on goods of their choosing, contributing to their slower shopping pace.
Dollar General (DG) reported that most lower-income consumers were not purchasing discretionary items like apparel and household goods. The company cut its outlook due to weak customer demand, which resulted in the stock of the company dropping by 20% during early trade.
Dollar General stated, “The macroeconomic environment is more challenging than the [company] had previously anticipated.” It is “having a significant impact on customers’ spending levels and behaviors.”
Despite this, not all retailers are having a hard time.
Some merchants, such as Walmart (WMT), are profiting from the move toward food and basics as consumers’ spending priorities.
The company can communicate with a large number of consumers, and the majority of its revenue comes from selling necessities like food and other non-luxury items. Walmart reported that customers from more affluent households buy at its stores more frequently.