Macy’s Challenges and Outlook Amid Declining Consumer Spending

Macy’s Faces Challenges Amidst Tough Consumer Environment

Macy’s, the largest department store chain in the United States, provided a sobering outlook on Wednesday, forecasting a challenging consumer landscape in the upcoming months as shoppers begin to tighten their spending. The retail giant has revised its financial guidance for the remainder of the year, now anticipating that its net earnings will experience a decline of up to 2.2 percent, potentially totaling $22.4 billion.

The company reported a 4 percent drop in overall comparable sales for the second quarter across all its brands, which include Bloomingdale’s and Bluemercury. Looking ahead, Macy’s expects comparable sales to further decline by as much as 2 percent when compared to 2023. In a statement issued on Wednesday, Tony Spring, the chief executive of Macy’s, characterized the current consumer environment as “challenging.”

This bleak forecast comes just a week after Walmart announced a modest increase in sales at its U.S. stores, reporting a growth of just over 4 percent, amounting to $115.3 billion. Walmart’s performance was attributed to its customers gravitating toward lower prices and the convenience of their shopping experience.

Bloomingdale’s, a segment that Macy’s considers vital for its growth strategy, reported a decrease in sales for the quarter, while Bluemercury experienced a slight sales uptick of 1.7 percent. Earlier this year, Mr. Spring introduced a comprehensive turnaround plan aimed at revitalizing Macy’s business, which includes closing 150 underperforming stores over the next three years. These closures represent about 25 percent of the company’s total square footage, yet only accounted for 10 percent of overall sales.

“We are witnessing signs of our strategy taking root,” Mr. Spring noted in his statement, emphasizing the importance of adapting to the current retail climate.

Department store chains, including Macy’s, are grappling with the challenge of appealing to consumers who, faced with budget constraints, are spending less time and money at traditional retail outlets. The distinction between retailers like Walmart, which sell groceries, and other department store chains is becoming increasingly pronounced as shoppers become more selective about their purchases.

However, Macy’s did highlight some positive trends within its business. The company reported a 0.8 percent increase in comparable sales at 50 locations deemed representative of its future potential, based on factors like geography and staffing. This marks the second consecutive quarter of growth for that particular segment. In contrast, comparable sales at the approximately 350 locations Macy’s plans to keep open saw a decline of 2.4 percent, while stores slated for closure experienced a more significant drop of 6.5 percent.

Despite the challenges, last week analysts and investors were reassured by signs of resilience in U.S. consumer spending. Retail sales in July rose and even surpassed expectations, although some categories, such as department stores, furniture, hobby shops, and retailers selling building materials, have seen a decline in sales this year. Nevertheless, a recent survey conducted by the University of Michigan’s Survey of Consumers indicates that Americans are becoming increasingly pessimistic about their financial outlook, even as they anticipate a cooling in inflation.