Retail giant Macy’s slashed its full-year sales guidance on Thursday by almost $1 billion, marking the latest sign that increasingly cash-strapped consumers are pulling back on their spending.
The retailer reported net sales of $5 billion in the first quarter, reflecting a 7 percent decline in revenue. The company’s stock fell about 3 percent shortly after U.S. markets opened but was down less than 1% by midday.
Demand weakened significantly in the first half of the year and has crimped sales more than expected, Macy’s CEO Jeff Gennette said.
“We planned the year assuming that the economic health of the consumer would be challenged, but starting in late March, demand trends weakened further in our discretionary categories,” Gennette said in a statement.
The retailer’s full-year guidance for net sales previously stood between $23.7 billion and $24.2 billion as of early March. The revised guidance is now between $22.8 billion and $23.2 billion.
Noting that it’s the fourth consecutive quarter of falling sales, GlobalData managing director Neil Saunders described the company as “in full retreat,” with its pandemic-era growth firmly in its rearview mirror.
“Worryingly, the pace of decline has accelerated in a sign that the business is starting to struggle against the backdrop of a tightening economy,” Saunders said in a client note.
Macy’s is being swept up in a broader pullback in retail spending as consumers feel squeezed by rising prices and higher interest rates. A recent report from the Census Bureau showed that retail sales inched up just 0.4 percent in April, a smaller increase than analysts had expected. So-called “discretionary” sectors like apparel, home furnishings and sporting goods were especially weak.
Other retailers have been hit hard as well. Target, which relies heavily on discretionary categories, saw its total sales increase just 0.5 percent in the first quarter compared to last year. Home Depot suffered a sales decline of 4.2 percent in the first quarter. Nordstrom, in first-quarter earnings reported on Wednesday, experienced an 11 percent decline in revenue for the year even though it beat analysts’ expectations.
However, some retailers, especially those that specialize in lower-priced goods, are seeing growth. Walmart reported that comparable U.S. store sales had jumped 7.4 percent year-over-year in the most recent quarter, while e-commerce was up 27 percent.
Macy’s may be particularly vulnerable to consumer pullback, Saunders said, because of its reliance on middle-income consumers. But he also noted issues with business execution, describing the recent string of negative results as a return to the company’s pre-pandemic norm.
“In this kind of environment retailers need to entice customers into buying,” Saunders wrote. “Macy’s is not well positioned to do this as things like displays, assortments, and the general ambiance of many stores is substandard. If anything, Macy’s provides consumers with excuses as to why they should not purchase things.”
Gennette, the Macy’s CEO, said in the company’s earnings release that it has moved quickly to manage its expenses and meet current consumer demand. The revised guidance includes price markdowns on clearance items, he added.