As cautious consumers reduce their spending, Macy’s, America’s largest department store chain, has revised its sales outlook for the rest of the year downward. The retailer cited significant discounting as a reason for this change, resulting in a more than 13% drop in its shares during morning trading in New York. Macy’s now expects annual net sales to range between $22.1 billion and $22.4 billion, a decrease from its earlier forecast of $22.3 billion to $22.9 billion.
This updated outlook aligns with the company’s report of a larger-than-expected decline in sales for the second quarter. For the three months ending August 3, sales fell by 3.8% to $4.9 billion, missing analyst expectations of $5.12 billion, according to LSEG. Tony Spring, Macy’s CEO, noted a shift in consumer behavior, attributing it to ongoing macroeconomic uncertainty and a complex news environment.
Despite these challenging conditions, Macy’s reported a net income of $150 million for the period, a significant improvement from the $22 million loss reported in the same quarter last year. However, the company’s shares closed down 2.29%, or 12.9%, at $15.45 in New York.
Macy’s, which also owns Bloomingdale’s, is facing increased competition and a shift in consumer preferences away from department stores. To boost spending during the upcoming holiday season, the retailer plans to adopt “sharper” messaging focused on value purchases, broaden its product offerings, and highlight the “escapism and entertainment” aspects of its stores.
The trend of consumers favoring budget chains is evident across the retail sector. Target, which offers a wide variety of products, raised its full-year profit expectations on Wednesday, crediting successful price cuts for attracting more shoppers. The company’s second-quarter comparable sales rose by 2%, marking its first quarterly increase in over a year.
In a related move, Walmart, a competitor to Target, divested its entire $3.74 billion stake in JD.com, the Chinese e-commerce firm, amid a slowdown in China’s economy and weak consumer demand. JD.com’s shares have plummeted approximately 70% from their peak in early 2021, with prices remaining relatively flat compared to levels seen in 2016 when Walmart became a major shareholder.
As retailers navigate this challenging economic environment, it remains to be seen how they will adjust their strategies to meet the changing needs and preferences of consumers while striving to maintain profitability in an increasingly competitive market.
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