(CTN News) – The luxury department store company Macy’s has kept its annual forecasts unchanged despite the fact that it topped market expectations in terms of sales and profit in the second quarter as it anticipates continued consumer spending pressure in the future.
In the face of elevated inflation, the retailer, like Target and Coach’s parent company Tapestry, has seen a drop in demand from middle-income customers as they cut back on their spending on apparel and handbags, according to Reuters.
“As a result of continuing macroeconomic pressures and uncertainty on when those will abate, Macy’s continues to take a cautious approach toward the consumer,” the retailer said in a statement.
According to the company, its sales expectations for 2023 will range from $22.8 billion to $23.2 billion and it expects to earn between $2.70 and $3.20 per share for the full year.
Macy’s, the parent company of Bloomingdale’s, worked to clear excess inventory throughout the second quarter following a move to convert its merchandise for the spring and early summer that hurt demand, forcing the company to cut its sales and profit forecasts in June.
There was a drop in gross margin from 38.9% a year ago to 38.1% this year.
There was a 5.8% rise in Macy’s comparable sales for its higher-end beauty brand Bluemercury in the quarter.
In spite of a beating of profit and sales expectations, Macy’s earnings indicate that discretionary demand remains constrained due to shoppers allocating more of their budgets to everyday necessities, said Insider Intelligence analyst Rachel Wolff.
According to Macy’s data for the quarter ended July 29, the company posted an adjusted net income of $71 million, or 26 cents per share, beating expectations of 13 cents per share for the same period.
It was reported that Macy’s owned and licensed stores saw comparable sales drop 7.3%, against expectations of a 6.48% drop, according to data from Refinitiv.
In the first quarter of this year, Bloomingdale’s parent company reported that credit card revenues dropped to $120 million from $204 million last year, due to a faster-than-expected increase in delinquencies.
As of premarket trading, the company’s shares, which have lost nearly 30% this year, were down about 1% in premarket trading.