Macy’s earnings will reflect inflation’s impact on consumer spending, analyst

Macy’s fourth quarter and full year 2022 earnings results will likely reflect a consumer shift from leisure spending as inflationary tensions mount. The department store chain reports financial results Thursday morning before the U.S markets open.

With a weakened U.S. dollar and possible recession, Macy’s has already announced the closing of four store locations this year and expressed caution after seeing a dip in self-purchases. 

Macy’s also reduced its full year forecast in August 2022 after reporting a 2.7% dip in comparable sales and is predicted to lose millions when compared to the same period one year ago.

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In an interview with FOX Business, Adam Kobeissi, founder of the financial newsletter, The Kobeissi Letter, said tomorrow’s earnings are critical because of the data’s insight into inflation’s impact on consumer spending.

“We have seen warning signs from Home Depot and Walmart that the future is uncertain, and consumers are shifting away from leisure spending and the potential of a recession is hindering outlook,” he continued. “Markets will look at Macy’s results to confirm similar trends observed throughout the entire retail sector.”

Kobeissi said Macy’s shareholders will be on the lookout for management’s guidance on the direction of margins and how seasonality may impact demand going forward, especially as the post-pandemic demand spike has dissipated. 

“While expectations have come down for Macy’s and retail as a whole, investors are extremely cautious about owning these stocks in a high rate and decreasing consumer spending environment,” he finished.

Refinitiv’s mean analyst estimate for Macy’s is $1.57 per share, after the company adjusted guidance of Jan. 6 to between $1.47 and $1.67 per share. Net sales are now expected to be at the low-end to mid-point of the previously issued range of $8.16 to $8.4 billion.

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While retail contemporaries like Target and Dollar Tree recently exceeded Wall Street’s expectations in their latest earnings’ reports, both retailers issued a cautious guidance for 2023 and Macy’s is predicted to follow the pattern. 

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Based on Refinitiv data, Macy’s is expected to report a 4.7% loss in revenue, falling from $8.67 billion the previous year to just $8.255 billion in 2022.  

The company’s guidance outlined revenue between $8.16 billion and $8.28 billion.

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Edward Moya, a senior market analyst for OANDA in New York, said “Macy’s probably won’t deliver any surprises with this earnings report.”

“If they deliver a strong top and bottom-line beat, it will most likely be accompanied by cost cuts and a cautious outlook,” he explained. “While the consumer remains resilient, spending might not be too strong until we know what type of recession will hit the economy.”

“After this earnings report, we will know if Macy shares can make a run back towards last month’s highs at around $25, or if they are vulnerable to selling pressure towards last year’s low just below the $16 level,” Moya added.