Weak profit forecasts from department store chain Macy's to discounter Dollar General on Thursday underscored the fragile health of the U.S. consumer as persistent inflation curbs spending.
Several U.S. retailers said sales have ebbed as consumers react to higher prices for food and other essentials. Broadly, U.S. consumer spending trends showed resilience in the face of high inflation, but big-ticket purchases suffered.
Upscale retailer Macy's said the U.S. consumer pulled back more than anticipated and slashed its annual sales and profit forecasts for the year. The glum forecast sent shares of the company down 4%.
"We are seeing continued evidence of a consumption pattern that has shifted from goods to services. Goods demand has fallen off a cliff," said Art Hogan, chief market strategist at B Riley Wealth.
Shares of major retailers are in a slump, with the S&P 500 Retail ETF down about 25% on Thursday since a recent peak in early February. The S&P 500 was flat during the same period.
Macy's and lingerie brand Victoria's Secret & Co. are resorting to more discounts to clear out excess inventory.
"Our business in North America became increasingly more challenging," Victoria's Secret CEO Martin Waters said during a post earnings call on Thursday. "We were more promotional than planned."
Its shares fell 11% after the company trimmed its annual sales forecast late on Wednesday, saying it expects sales of its Victoria's Secret and Pink brands to be down mid-to-high single digits.
Macy's peer Nordstrom Inc. maintained its outlook for the year, but said the company was also seeing high-end consumers turn more cautious.
"We would say they're pretty resilient, but they're also cautious. And we're seeing that really across the board, that caution," Nordstrom president Peter Nordstrom told investors on a Wednesday call.
Dr Martens' shares dropped more than 10% on Thursday after the British shoemaker flagged that the consumer backdrop in the United States "was the toughest in the world at the moment."
The pinch from slowing consumer spending was not just limited to high-end retailers.
Discount store operator Dollar General joined rival Dollar Tree in cutting its full-year profit forecast due to weaker discretionary spending.
"The health of the lower-income consumer is clearly in question as inflationary pressures continue to take a toll on spending," said Arun Sundaram, equity analyst at CFRA Research.
Dollar General's shares slumped as much as 20% on Thursday, and were down by more than one-third since October.
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