Macy’s, the country’s largest department store chain, has revised down its sales forecast for the year. Wilfredo Lee/` Hide caption
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Wilfred Lee/`
Macy’s, the country’s largest department store chain, has revised down its sales forecast for the year.
Wilfred Lee/`
Shoppers make fewer purchases and visit stores less frequently. But when they check out at the register, they often spend more, revealing the impact of inflation. Many lower-income shoppers cut back on non-essentials like home accessories and spend heavily at discount stores.
These are some of the takeaways from a spate of mid-year financial report cards issued by America’s top retailers, including Walmart, Macy’s and Dollar Tree. They reflect a deep uncertainty that has set in in the US economy, with inflation hitting the highest rate in decades.
Department store chains Macy’s and Nordstrom and Victoria’s Secret this week joined a growing list of retailers trimming their forecasts for the remainder of the year. Businesses are reporting fewer visits from shoppers than a year ago, although some retailers, including homewares retailer Williams-Sonoma on Wednesday and Home Depot last week, continued to report rising sales despite slower store traffic.
Inflation led to rising sales at Dollar General and Dollar Tree, the companies reported Thursday, as shoppers sought cheaper groceries, smaller packages and more deals on essentials.
Some retailers who have seen sales slump have blamed their race for discounting and selling off unwanted inventory: an unexpected spate of things like pajamas and kitchen appliances that have been hot during the pandemic until shoppers are suddenly turning more to travel and restaurant trips interested.
People are still shopping
All of this comes against the backdrop of a massive, record-breaking shopping spree that marked 2020 and 2021. This year, as pandemic restrictions were lifted, people turned back to experiences instead of things. And then, as gas and grocery prices fueled inflation, more and more shoppers began to switch to private label or off-the-shelf specialty items.
In surveys, people say they are extremely worried about finances. Nevertheless, inflation-adjusted retail sales rose slightly in July compared to both June and July 2021 as prices softened somewhat.
“Every metric I’m looking at is that the economy is pretty resilient,” said Sucharita Kodali, an analyst at Forrester, pointing to higher wages, low unemployment, reasonable levels of savings and retail spending above pre-pandemic levels. “Retail spending is at a record high despite inflation.”
Buyers are “under pressure”
This week Macy’s, the largest US department store chain, lowered its full-year forecast. The company said its shoppers aren’t switching to cheaper brands, as other retailers have seen, but are more likely to seek discounts and prioritize purchases like office wear as more people return to the workplace in person.
The consumer “is actually still healthy, but he is under pressure. The wage share is not keeping up with the pace of inflation,” CEO Jeff Gennette told Bloomberg on Tuesday, suggesting that upscale shoppers were less affected and luxury goods were selling well.
Kodali points out that many retailers — department stores in particular — were reeling well before the pandemic, especially as many malls declined and big brands rushed to sell directly to shoppers online.
Wells Fargo economists warn that back-to-school shopping has been a key factor driving retail spending in recent months.
“Once children return to school and bills come due, households will begin to tighten their belts,” the company wrote in a report last week. “Even if inflation is showing signs of slowing down, it will only do so slowly.”
Meanwhile, Walmart — whose large footprint and low prices make it much more of an economic trailblazer — has done a reversal of warnings for the rest of the year to signal better times ahead.
In July, the company warned Wall Street of collapsing profits as people’s high grocery bills made products in other aisles less attractive. But last week, Walmart upgraded its forecast, noting that its stores are attracting more middle- and upper-income shoppers.
For its part, Walmart’s biggest rival Amazon said last month it hadn’t seen inflation impact demand at all as the company’s buyers continued to spend more.
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