A person walks past a Macy’s store in Hyattsville, Maryland, on February 22, 2022.
Stefanie Reynolds | AFP | Getty Images
As inflation threatens to weigh on consumer demand, particularly among low- to middle-income consumers, Macy’s says more shoppers could be faced with a consistent choice: hit the mall or take a summer vacation.
“The biggest challenge we’ve had when it comes to economics into early 2022 is where the demand is going to come from,” said Adrian Mitchell, Macy’s chief financial officer, during a presentation Thursday morning at JP’s annual retail round Morgan Up Event.
“We think the demand is out there,” he said. “We believe consumers will spend. But will they spend on items we sell, or will they spend on a plane ticket to Florida or travel or going out to restaurants more? ?”
These questions create a level of unpredictability that Macy’s must carefully plan for, Mitchell said. For example, the retailer doesn’t want to order too many beach blankets or suitcases when shoppers don’t spend as much money in the summer.
The department store chain is far from alone in this difficult dynamic as some signs of a recession are emerging. Economists at Deutsche Bank said this week that persistent inflation combined with regular rate hikes is likely to push the US into a recession in 2023. annual note.
These pressures are raising expectations that some Americans, particularly those in low-wage jobs, will be forced to choose between, say, a long-awaited vacation or a concert ticket versus a new bathing suit or handbag.
According to one report, some premature inflation compromises are already taking place. According to the latest data from Numerator’s Shopping Behavior Index, consumers are spending an average of 59% more at gas stations and convenience stores than last year.
According to the report, the gains are most pronounced among lower- and middle-income groups. Conversely, discretionary categories like home improvement and beauty are seeing the largest declines in unit sales across income brackets week-over-week, Numerator found.
Chip Bergh, CEO of Levi Strauss & Co., told CNBC on Wednesday that the denim retailer has not yet noticed that consumers are choosing cheaper goods amid inflationary pressures and that demand has remained resilient. But Bergh added that some consumers are just beginning to dive into their savings accounts to make extra money — a trend Levi is watching closely. “We don’t stick our heads in the sand,” he said.
Levi was confident enough about its current business to reiterate its full-year outlook, while Macy’s has yet to adjust its 2022 financial guidance in February, when it called for flat sales of 1% from the year-ago period.
Macy’s said Thursday that it had recently noticed a slowdown in demand for certain homewares and casual wear compared to the peak of the pandemic. On the plus side, it says weddings are picking up fast, which would boost sales of dresses, cosmetics and bespoke menswear.
Still, Mitchell stressed that Macy’s remains cautious.
“Although consumers are healthy, we see that inflation has increased more than we expected for the coming year,” he said. “And we also recognize that the supply chain disruptions are not resolved.”
Nordstrom, which also attended JP Morgan’s retail event this week, noted that given the volatility of gas prices, its typically affluent customer base is reluctant to spend more or less. The health of the stock market tends to be more closely correlated with the performance of its business, said CEO Erik Nordstrom.
https://www.cnbc.com/2022/04/07/macys-warns-inflation-squeezed-consumers-may-choose-travel-over-shopping.html Macy’s warns consumers stung by inflation may choose travel over shopping