Macy's warns of lower holiday sales amid inflation

Yahoo Finance Live anchors discuss Macy’s issuing a warning of lower holiday sales in Q4 amid inflation.

Video transcript

[AUDIO LOGO]

JULIE HYMAN: But let's talk about Macy's as well, right? Because as you said, a lot of preannouncements ahead of ICR. Macy's got out even ahead of the game, coming out with this news late on Friday, after the market had closed, and saying sales are going to be weaker than forecast. And you wrote all about it in your "Morning Brief" today, Sozz.

BRIAN SOZZI: What I actually published on the Morning Brief is not actually what I wrote. I edited myself-- [? or handed ?] [? in ?] [? our ?] [? top ?] [? editors-- ?] I was very upset with Macy's doing that news dump on a Friday afternoon. Shame on CEO Jeff Gennette. I think he could have did a better job here. I hate when companies do this on a late Friday-- this news dump-- thinking investors are going to ignore the fact that they came out with bad news.

Well, if you own a share in Macy's, best believe you were concerned. You spent the whole weekend researching this company, and you probably came up here, and you're trying to figure out what should I do come the open of trading? So just a bad look here by Macy's. I hate to see it. But in terms of performance, again, another company swept into the discounting wave. You see this concern about what Target might put up, concern what Kohl's is going to put up shortly. Margins under pressure for retail right now.

BRAD SMITH: Yeah. Within this, Gennette saying, based on the current macroeconomic indicators and proprietary credit card data, they believe the consumer is going to continue to be pressured in 2023. That's a major headwind if you have a company as large as Macy's, signaling to the entire environment that this consumer that we're going after-- and we know you are as well, and we're all competing for their discretionary dollars, especially in some of the apparel, footwear categories, and even more so into the electronics, given the many departments that Macy's still tries to play in.

It really comes back to how that's also going to impact some of the other companies, whether or not they've already signaled how much this is going to be a detriment to them in the consumer mindset in that sentiment, and how they're spending their dollars, and where they're placing them. I think that's just a shot across the industry right now, and how it's going to be largely and noticeably impactful in the near term.

BRIAN SOZZI: Absolutely. And I also mentioned in the newsletter this morning, too-- Macy's effectively came out here and warned for the first half of this year, it looks like they're going to be placing conservative orders for the first half. And immediately, you're thinking what does it mean for VF Corp? What does it mean for Polo Ralph Lauren? Not only these companies or these suppliers-- department stores like Macy's and Kohl's-- I'll even add Under Armour there-- they may not only have disappointing fourth quarters, but their outlooks may also be pretty bad, just going by what Macy's had to say.

JULIE HYMAN: One more thing I want to say is that if you look at some of the analyst coverage of Macy's here, they kind of shrugged, to some extent, and said, we expected Macy's to be kind of bad. So it's not that shocking that it is bad. Oliver Chen-- one of them-- saying Macy's performed relatively better than feared. Strength in occasion apparel and gift-giving, a couple of things he called out. So I thought that was interesting that the--

BRIAN SOZZI: Well, the inventory could have been worse. It looks like if there's any positive here--

JULIE HYMAN: Yes. That's one of the other comments.

BRIAN SOZZI: --despite the sales miss, their inventory didn't balloon. But that is, I think, very much a Macy's-specific factor. For all my criticisms of Macy's, they have done a good job the past three quarters managing their inventory.

BRAD SMITH: I think the question may just pivot to, what does a trade down for the consumer look like within a Macy's? Does it look like more of those home-grown brands that Macy's has authored and brought into the square footage, in the retail space? And the department stores-- did they start to have to turn down on the amount that they're producing themselves, if they're not seeing the same type of buying activity from the consumers who-- across other retail experiences are seeing, or having to trade down in some fashion or another? And so I don't know, in the near term, if there's a consumer shift that a Macy's will see in terms of the trade down, similar to what we'd seen in some of the other major grocery businesses or a Target or a Walmart.

JULIE HYMAN: Well, again, to get back to the Short Hills Mall indicator, I didn't even bother to go into Macy's.