Macy's, Target miss earnings forecasts in latest sign of slowdown in consumer spending
Department stores among retailers hit by inflation as shoppers rein in spending on non-essentials
Macy's Inc. and Target Corp. became the latest US retailers to report disappointing results on Tuesday, as decades-high inflation dents consumer spending and weighs on corporate profits.
Macy's misses on both earnings and revenue
Macy's missed expectations on both its top and bottom lines. The department store chain reported adjusted earnings per share of $1.08, below the $1.17 analysts had forecast, according to Refinitiv IBES data. Revenue was $5.44 billion, also below the $5.48 billion estimate.
Comparable sales, a key metric for retailers, rose 0.7%, below the 1.2% growth analysts had predicted. The company said the increase was driven by strength in its off-price business, but that was offset by weakness in its department stores.
Target's profit falls 90% as markdowns weigh
Target's profit plunged 90% in the second quarter as the retailer discounted heavily to clear excess inventory. The company reported adjusted earnings per share of $0.39, missing the $0.70 analysts had forecast, according to Refinitiv IBES data.
Retail sales growth slows in July
The reports from Macy's and Target come as retail sales growth slowed in July, according to data released by the Commerce Department on Tuesday. Retail sales rose 0.7% last month, below the 1.0% increase economists had forecast.
The slowdown in consumer spending is a worrying sign for the economy, as consumer spending accounts for about 70% of US economic activity. The Federal Reserve is raising interest rates in an effort to cool inflation, but that is also making it more expensive for consumers to borrow money and spend.
More retailers expected to report weak results
Analysts expect more retailers to report weak results in the coming weeks. Walmart Inc., the largest US retailer, is due to report its quarterly results on August 16.
The disappointing results from Macy's and Target are a reminder that even the most well-established retailers are not immune to the challenges posed by inflation. Consumers are becoming more price-conscious, and that is forcing retailers to discount heavily in order to clear excess inventory.
It is unclear how long the current slowdown in consumer spending will last. However, the Federal Reserve is expected to continue raising interest rates in an effort to cool inflation. That could further weigh on consumer spending and make it more difficult for retailers to generate profits.
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