NEW YORK (AP) — Macy's cut its outlook for the year Tuesday despite topping Wall Street expectations as it faces a glut of unsold inventory that has afflicted almost the entire retail sector.
The department store earned $275 million, or 99 cents per share, in the three-month period that ended July 30, or $1 if one-time charges are removed. That easily topped the per-share earnings of 86 cents that industry analysts had expected, according to a survey by FactSet.
Sales slipped roughly 1% to $5.6 billion, but that was also stronger than anticipated.
However, sales and profit are down from last year.
Sales at stores opened at least a year fell 1.5%, or 1.6% including licensed businesses like cosmetics. Online sales fell 5%.
“We delivered sold results despite the challenging environment," said CEO Jeff Gennette.
Macy's cut orders where it could to better sync with customer demand, but Gennette said inventory in some categories remains high. The company is cutting prices on seasonal goods, private label and pandemic-related merchandise like casual wear and home furnishings to clear it, he said.
Americans are under financial pressure from inflation that is hovering near four-decade highs. That has registered across the retail sector in the last few months with few exceptions.
Shoppers are trading down to cheaper brands, looking for discounts, and making fewer visits to stores.
Kohl’s last week slashed its sales and profit expectations for the year, a result of its stepped up price cutting to shed unwanted merchandise. Both Target and Walmart also said last week that shoppers are cutting back and sticking to essentials.
Soaring prices have forced families to become more cautious, cutting back on new clothing, electronics, furniture and almost everything else that is not absolutely necessary. And the spending habits of Americans have shifted faster than anyone expected this year as the pandemic eased. After being cooped up at home, they seemed to shift almost overnight to spending outside of stores, choosing instead to go to restaurants, shows or to travel.
That uncertainly has made it difficult for retailers to figure out what is coming as the holiday season approaches.
The company said its outlook for the rest of the year is based on the “continued deterioration of consumer discretionary spending” and high levels of inventory, both at Macy’s and at other stores. Macy’s anticipates more price cuts and the need to “liquidate aged inventory” as the holiday season approaches.
The company said it now expects sales to be in the range of $24.34 billion to $24.58 billion this year, down from its May guidance of between $24.46 billion and $24.7 billion. Macy's expects per-share earnings of $4 to $4.20, down from earlier guidance of between $4.53 and $4.95 per share.
Shares rose nearly 2% in premarket trading.