Macy’s cuts sales forecast as shoppers tighten belts

America’s largest department store chain has lowered its sales outlook for the rest of the year as cautious consumers cut back on spending.
Macy’s blamed steep discounting as it cut its sales forecast, sending the shares down more than 13 per cent in morning trading in New York.
The department store chain now expects annual net sales of $22.1 billion to $22.4 billion, compared with its prior forecast of $22.3 billion to $22.9 billion.
The update came as Macy’s reported a bigger than expected fall in sales for the second quarter. Sales in the three months to August 3 fell 3.8 per cent to $4.9 billion, compared with analysts’ expectations of $5.12 billion, according to LSEG.
Tony Spring, chief executive of Macy’s, said: “As the quarter progressed, our customers became more discriminating, which we attribute to ongoing macroeconomic uncertainty and an increasingly complex news cycle.”
The retail group reported net income of $150 million for the period, up from a $22 million loss in the same period last year.
The shares closed down $2.29, or 12.9 per cent, at $15.45 in New York.
Macy’s, the owner of Bloomingdale’s, traces its origins to 1858 and a small dry goods shop in New York City and now operates more than 500 stores. It has struggled for years amid rising competition and shoppers moving away from department stores. The company also sells products online.
It is hoping to encourage more spending with “sharper” messaging on value purchases, a broader range of products and the promise of “escapism and entertainment” at its stores in the run-up to the holiday season, analysts were told on a call with Macy’s bosses on Wednesday.
US consumers have been flocking to budget chains as they react to higher costs since the pandemic.
Target, the store chain selling clothing, food, beauty products and electronics, raised its full-year profit expectations on Wednesday as it said price cuts had attracted more shoppers to its stores, highlighting the competitive trading environment for retailers.
Second-quarter comparable sales, or sales from online and stores open at least 12 months, rose 2 per cent in the three months to the end of August, the first quarterly rise in over a year.
Brian Cornell, Target’s chief executive, said “newness”, price cuts and sales events were key factors that drove a 3 per cent rise in visits to its nearly 2,000 stores.
In February, Target launched a new budget brand for everyday basics with prices starting at under $1.
“We see an incredibly resilient consumer in the face of high inflation and some of the other challenges they’ve been facing to manage their household budgets,” Cornell said.
The Minneapolis-based retailer’s shares climbed $16.04, or 11.2 per cent, to close at $159.25 on Wednesday.
Elsewhere, Walmart, Target’s rival, sold its entire $3.74 billion stake in JD.com, the Chinese e-commerce firm. The sale comes amid a slowdown in China’s economy and weak consumer demand. Shares of JD.com have fallen by about 70 per cent from their peak in early 2021 and prices are little changed from the levels in 2016 when Walmart became its major shareholder.
“This decision allows us to focus on our strong China operations for Walmart China and Sam’s Club, and deploy capital towards other priorities,” Walmart said in a statement.
Walmart’s share gained $0.70, or 0.9 per cent, to close at $75.24.