Macy’s and Target have both released cautious sales forecasts for the year, signaling possible softness ahead for the all-important consumer spending, which accounts for two-thirds of U.S. economic output.
In its second-quarter earnings report released on Aug. 21, Macy’s slashed its full-year sales forecast, saying that inflation-weary shoppers were more picky with their purchases and that the retailer had to offer more discounts to get people to buy.
“The company updated its annual outlook to reflect a more discriminating consumer and heightened promotional environment relative to its prior expectations,” the department store operator said in the report.
Macy’s cut its projected net sales for 2024, now expecting between $22.1 billion and $22.4 billion, compared to the previous estimate of $22.3 billion to $22.9 billion. This would represent a decline from the $23.09 billion Macy’s reported in fiscal 2023.
The company also lowered its expectations for comparable sales, a key retail metric that measures the performance of existing stores over a 12-month period that excludes the impact of new store openings to provide a like-for-like comparison of sales trends. Macy’s now anticipates a comp sales decrease of 2 percent to 0.5 percent, down from the earlier forecast of a 1 percent decline to a 1.5 percent increase.
The downward revision to the outlook range gives Macy’s “the flexibility to address the ongoing uncertainty in the discretionary consumer market,” the department store operator said in the report.
The earnings report also showed that Macy’s posted a 3.8 percent year-over-year decline in net sales, to $3.9 billion, while comp sales fell by 4 percent. Both measures came in below Wall Street estimates, sending Macy’s stock price falling by more than 13 percent in morning trading.
The sales decline resulted from shoppers growing weary of higher prices and increasingly looking for bargains before buying, Macy’s CEO Tony Spring told CNBC during an interview.
“We see that there is definitely a softness, a carefulness, a delay in the conversion of purchasing,” Spring told the outlet. “And people on the things that they want, the things that are priced sharply, on the newness, they’re responding, but even the affluent consumer is not spending like they were a year ago.”
Target, another barometer of U.S. retail sales, posted relatively strong quarterly earnings and sales numbers on Aug. 21, although the company struck a mostly cautious note in its outlook, dovetailing with Macy’s view of softness in consumer spending.
In its second-quarter earnings report, Target posted forecast-beating revenues of $25.42 billion, up by around 2.6 percent year over year.
The discount retailer also reported a return to growth in comp sales in the second quarter, which rose by 2 percent from the year-ago period, after declining in the first quarter.
Target also said that discretionary sales “continued to improve meaningfully,” a positive development from the prior quarter, in which the company’s sales decline was driven by a drop in discretionary items as customers focused their spending on essentials.
“We also saw improving trends across our discretionary categories, most notably in apparel, and we’re seeing continued strength in beauty,” Target CEO Brian Cornell said in a statement.
However, the company struck a cautious note in its full-year sales outlook, which Cornell described as “measured.”
“While the company believes its full-year guidance range of a zero to 2 percent increase in its comparable sales remains appropriate, it now believes the increase will more likely be in the lower half of that range,” Target stated in the report, aligning with Macy’s view that consumer spending seems to be set for a slowdown in the second half of the year.
Customers wait in line to make purchases at a Target store in Daly City, Calif., on Dec. 14, 2023. Justin Sullivan/Getty Images
Macy’s and Target’s caution on their respective sales outlooks dovetail with that of Home Depot, a consumer spending bellwether.
In its second-quarter report, the world’s largest home-improvement retailer cited “continued uncertainty around consumer demand” in cutting its full-year comp sales forecast from an earlier 1 percent decline to a deeper slump of between 3 percent and 4 percent.
Concerns about a slowdown in consumer spending align with a recent survey from the Federal Reserve Bank of New York that shows that household spending expectations have fallen to their lowest level since April 2021.
By contrast, July retail sales rose by the most in 18 months, suggesting that the U.S. consumer has been holding up quite well and offering a counterpoint to the view of an imminent consumer spending slump.
However, some experts point out that the retail sales numbers as reported by the Census Bureau are nominal, meaning not adjusted for inflation. According to economist E.J. Antoni, consumers are spending more to buy fewer, higher-priced items rather than buying more, which suggests that inflation, rather than increased demand, is behind the seemingly strong retail sales data.
Tom Ozimek
Reporter
Tom Ozimek is a senior reporter for The Epoch Times. He has a broad background in journalism, deposit insurance, marketing and communications, and adult education.
