Macy's warning of weak second-half demand hits retail sector shares
Published August 23, 2023
Aug 22 (Reuters) - Macy's (M.N) on Tuesday warned of weak consumer spending through the crucial holiday shopping season and signaled a faster-than-expected rise in credit card payment delays.
Shares of the department store chain closed 14% down at $12.66, their worst day since June 2020. The stock has lost nearly 39% this year.
The company kept its 2023 forecasts unchanged despite beating Wall Street expectations for the second quarter. Its cautious view also weighed on the retail sector shares, including Kohl's (KSS.N) and Nordstrom (JWN.N).
"The macro environment is having the lion's share of the impact on credit and is a real indicator of where we think the health of the consumer is ... supporting our cautious approach," Macy's CFO Adrian Mitchell said on a conference call.
In a clear sign that higher borrowing costs were straining customers, Macy's credit card revenue, which accounted for about 2% of the total revenue in the quarter, slumped 41%
"The biggest negative surprise was the sharp fall-off in credit income," Citi analyst Paul Lejuez said.
This led to bloated inventories for U.S. retailers. Throughout the quarter, Macy's cleared excess stock after a move to convert its merchandise for the spring and summer hurt demand, leading to a slip in gross margin.