Macy’s, Best Buy sales decline, reflecting shopper decline

Consumers have scaled back their purchases of clothing and electronics in recent months, while continuing to spend money on groceries and other essentials, according to some of the largest US retailers.

Department store chain Macy’s Inc.

m 9.67%

on Thursday said sales fell 4.6% in the fourth quarter as people spent less online and in stores. The company does not expect sales to grow again until 2024 as consumers continue to be under pressure this year and spending shifts from discretionary items and also from buying goods to services.

Chief Executive Jeff Gennette said he sees weakness in all income 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 from 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 came in better than analysts had expected, largely because the company has been able to reduce excess inventory without “chasing unprofitable sales” , said Mr. Gennette. He said the company has benefited from offering more targeted promotions to shoppers.

Best Buy Inc.

BBY -1.07%

said macroeconomic conditions continue to weigh on the company and its customers. For the three months ended Jan. 28, Best Buy’s U.S. sales fell nearly 10%, due to soft spending on everything from computers and phones to home theaters and appliances. The company noticed some bright spots and reported growth in video gaming products and tablets.

In the midst of high inflation, people are spending more than ever on luxury items, while still spending money on other goods and services, such as groceries. WSJ’s Daniela Hernandez explains why. Photo composition: David Fang

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

The results illustrate the challenges discretionary goods sellers may have in getting consumers to pay for items that have been mass-bought earlier in the Covid-19 pandemic. Persistent inflation, shifts in the labor market and a downturn in stock market corners have all contributed to a slump hitting shoppers across the country, retail analysts and executives said.

To cope with high inflation, people have cut back on some purchases and opted for cheaper private label brands in some categories. walmart Inc.

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

Sales growth was easier to achieve for grocery and food suppliers. Walmart and Target Corp.

said the food and beverage categories helped them realize an increase in sales as more people spend time at home and make more food. Brands that provide value, such as TJ Maxx, parent company TJX Cos. and Burlington Stores Inc.

continue to post sales gains.

“It’s the middle that’s coming under pressure,” said Neil Saunders, managing director of research firm GlobalData PLC.

Grocery store operator Kroger Co.

KR 3.76%

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

Inflation is also pushing some of those increases. Consumer prices for food at supermarkets and grocery stores were up 11.3% in January from the same month a year earlier, federal data shows.

Kroger said it worked in the last quarter to reduce supply chain costs and manage high product cost inflation by improving sourcing. Kroger kept its profit margins about the same and posted better earnings than analysts had expected. Shares were up nearly 3% in morning trading.

Several retailers’ financial forecasts for this year reflect challenges in consumer spending forecasting. Furniture and home decor store Big Lots Inc.

on Thursday said it is not issuing annual guidance for now, citing greater uncertainty in the macroeconomic environment.

Macy’s said sales could fall by as much as 3% this year, acknowledging it was cautious about its forecasts. The department store chain’s annual 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 pauses in spending that lasted longer and were deeper than expected. But it said demand picked up in January.

Still, the company expects consumers to be in a worse state in 2023 than last year. The retailer expects prices to rise slightly this year, but not as much as last year.

For the current fiscal year, Best Buy forecasts a 3% to 6% decline in same-store sales. Total revenue is expected to be between $43.8 billion and $45.2 billion, less than the $45.69 billion analysts had expected, according to FactSet.

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

—Will Feuer contributed to this article.

Write to Suzanne Kapner at and Dean Seal at

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