By Ananya Mariam Rajesh
(Reuters) -Macy's Inc on Thursday cut annual sales and profit forecasts, blaming an inflation-induced slowdown in demand for disrupting the department store chain's plans to rein in margin-crushing discounts it has been offering to lure in customers.
Higher rental and food prices have pushed upscale retailers such as Macy's (NYSE:M) lower on customers' list as they either trade down cheaper prices alternatives or cut back on purchases.
Macy's said it will need to discount further in the second quarter to clear out excess spring and summer stocks.
This comes after the company's efforts to control promotions and easing costs helped it post a gross margin of 40% in the first quarter, marginally up from a year earlier, and beat profit expectations.
Department store peers Nordstrom Inc (NYSE:JWN) and Kohl's Corp (NYSE:KSS) posted surprise quarterly profit seeing a benefit from efforts to control inventory and also maintained their annual forecasts.
CFRA Research analyst Zachary Warring believes Macy's is being "more conservative compared to other department stores and apparel retailers which we believe is the right move in this macroeconomic backdrop."
Shares of the company, which fell as much as 12% after the results, pared some losses and was down 5% in morning trading.
Major U.S. companies including Target (NYSE:TGT) and Home Depot (NYSE:HD) have also issued cautious outlook as American consumers' disposable income remains pressured.
CEO Jeff Gennette said U.S. consumer, particularly at its Macy's stores "pulled back more than we anticipated as they reallocated spend to food, essentials and services." Macy's expects 2023 sales to be between $22.8 billion and $23.2 billion, compared with its prior forecast of $23.7 billion to $24.2 billion.
It sees adjusted full-year profit per share between $2.70 and $3.20, compared with $3.67 to $4.11 per share it had forecast previously.