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Macy’s cut its full-year outlook after a tough Q1 resulting from consumer pull-back on non-essential spending, and a decision to convert to spring fashion a bit too early.
Net sales dropped 7% year over year to $5 billion. Brick-and-mortar sales dipped 6%, and e-commerce sales sank 8%. Macy’s is now anticipating full-year sales of $22.8 billion to $23.2 billion, down from its previous expectation of $23.7 billion to $24.2 billion.
CEO Jeff Gennette said demand trends “began to worsen” in the middle of March, and continued to decrease in April, as Macy’s customers “pulled back more than anticipated,” spending on food and essentials instead. Gennette said the retailer also introduced spring fashion “too early” in March, while temperatures were still low. While he noted sales had begun to pick up in May, it was unclear whether that was due to a higher demand for warm weather clothing or “an improvement in the macro environment.”
- The Macy’s brand largely caters to lower- and middle-income consumers with an average household income of $75,000 or under, he noted, compared to its Bloomingdale’s and Bluemercury brands, which attract a higher-income shopper and performed better in the quarter.
Some categories outperformed, like beauty, especially fragrances (President Tony Spring noted the retailer has seen “very limited price resistance” in luxury beauty), along with women’s sportswear and men’s tailored apparel. Gennette said the company will double down on categories that are doing well in the third and fourth quarters, and will offer more new exclusives in beauty and toys for the gifting season.
Zoom out: Other retailers reaching lower- and middle-income shoppers have reported similar struggles; Costco, Dollar Tree, and Dollar General all recently said their shoppers are pulling back on discretionary spending. Meanwhile, beauty retailers continue to see strong sales; last week, Ulta reported net sales were up 12.3% for Q1, and said luxury beauty is driving growth.