Macy’s, Best Buy’s sales decline, reflecting withdrawal of shoppers

According to some of the largest US retailers, consumers have reduced their purchases of clothing and electronics in recent months while continuing to spend on groceries and other basic necessities.

Macy’s department store chain Inc.

M 10.28%

Thursday, said sales fell 4.6% in the fourth quarter as people spent less online and in stores. The company doesn’t expect sales to start growing again until 2024 as consumers remain under pressure this year and shift spending away from discretionary items and the purchase of goods towards services.

Chief Executive Jeff Gennette said he’s seeing weakness across all revenue levels. He said Macy’s is focused on finding ways to grow by adding new categories. It now sells electronics, video games, food and wine on its online marketplace of third-party sellers and plans to add 2,000 more brands to the marketplace this year.

Macy’s profit in the quarter fell 32% from a year earlier to $508 million, but beat analysts’ expectations largely because the company was able to reduce excess inventory without having to “continue unprofitable sales,” Gennette said. He said the company has benefited from the ability to offer more targeted promotions to shoppers.

best buy Inc.

BBY -1.81%

said macroeconomic conditions continued to weigh on the company and its customers. For the three months ended Jan. 28, Best Buy’s U.S. sales fell nearly 10%, dragged down by weak spending on everything from computers and phones to home theaters and appliances. The company noted some bright spots, reporting growth in video game products and tablets.

In an environment of high inflation, people are splurging on luxury items more than ever while continuing to save money on other goods and services like groceries. The WSJ’s Daniela Hernandez explains why. Photo composition: David Fang

Macy’s shares gained 9% in morning trading, while shares of Best Buy slid nearly 2%.

The results illustrate the difficulties that sellers of discretionary goods could face in getting consumers to pay for items that were bought in droves earlier in the Covid-19 pandemic. Persistent inflation, shifts in the labor market and a slowdown in stock market corners have all contributed to unease hitting shoppers across the country, analysts and retail executives said.

To cope with high levels of inflation, people cut back on some purchases and, in some categories, switched to cheaper private label. walmart Inc.

said it had added more higher-income customers who were looking for deals on goods.

Sales growth has been easier to obtain for grocery and food suppliers. Walmart and Target Corp.

said the food and beverage categories helped them show an increase in sales as more people spent time at home and prepared more food at home. Brands that deliver value such as TJ Maxx parent TJX Cos. and Burlington Stores Inc.

continue to show sales gains.

“It’s the middle that’s in a hurry,” said Neil Saunders, chief executive of research firm GlobalData PLC.

Kroger supermarket operator Co.

KR 3.87%

Thursday said same-store sales, excluding fuel, rose 6.2% in its recently completed quarter from a year ago as shoppers continued to spend on groceries. The results were boosted by a 10% increase in sales of its private label products, which generally have lower prices than their branded competitors.

Inflation also pushes some of these increases. Consumer food prices at grocery stores and supermarkets rose 11.3% in January from the same month a year earlier, according to federal data.

Kroger said it worked to reduce supply chain costs over the past quarter and manage high product cost inflation by improving its supply. Kroger held profit margins roughly flat and posted better earnings than analysts had expected. Shares soared nearly 3% in morning trading.

Many retailers’ financial forecasts for this year reflect challenges in projecting consumer spending. Big Lots Furniture and Decor Retailer Inc.

On Thursday, it said it was not providing annual guidance at this time, citing greater uncertainty in the macroeconomic environment.

Macy’s said sales could fall as much as 3% this year, acknowledging it was cautious in its forecast. The department store chain’s full-year profit forecast, meanwhile, was stronger than analysts had expected.

Macy’s said sales began to slow late in the first quarter of 2022. It said the holiday season was marked by lulls in spending that lasted longer and ran deeper than expected. But he said demand picked up in January.

Still, the company expects consumers to be in worse shape in 2023 than they were last year. The retailer said it expects prices to rise slightly this year, but not as much as last year.

For the current fiscal year, Best Buy is forecasting a 3-6% drop in same-store sales. Overall revenue is expected to be between $43.8 billion and $45.2 billion, below the $45.69 billion expected by analysts, according to FactSet.

Best Buy expects adjusted earnings to be between $5.70 and $6.50 per share, also below the $6.72 per share sought by analysts.

—Will Feuer contributed to this article.

Write to Suzanne Kapner at and Dean Seal at

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