For retailers, such a long stretch of deepening discounts is straining profit margins among even the country’s strongest brands.
Macy’s Inc. warned Friday that its fourth quarter sales are now expected to be at the low-end to mid-point of its previously issued range. Lululemon Athletica Inc., which popularized athleisure and benefited from the pandemic-driven pivot to loungewear, said Monday that it expects its gross margin in the three-month period ending late January to shrink as much as 1.1 percentage point compared to a prior forecast for an increase.
Companies like Macy’s and Lululemon are at the center of the country’s hard turn away from discretionary and work-from-home spending toward essentials and groceries as people brace for a possible recession. Retailers with piles of hard-to-move inventory have been slashing prices to clear their warehouses as shoppers pass on yoga pants and opt for a new cocktail dress instead. Despite that, retail sales are estimated to have dropped 0.8% in December in the first back-to-back monthly decline since 2020, according to a Bloomberg poll of analysts.
A “competitive holiday season’’ is making way for a year in which the consumer will continue to be pressured, Macy’s Chief Executive Officer Jeff Genette said in Friday’s statement.
Some of this was expected. Executives have been warning that the first six months of 2023 are likely to be rough given the choppy economic environment. But the data also points to consumers having something of a shopping hangover. Apparel sales fell for the 10th straight month through December 23 as consumers spend more on travel and experiences, according to Bloomberg Intelligence. Even steep discounts couldn’t get people shopping for clothes or at outlet stores, where same store sales slid by about 15% through December.
Discounts and heavy promotions have been retail’s main strategy so far for clearing excess goods and right-sizing inventory. The steep discounting will likely have prompted many shoppers to bring forward purchases that would have happened in the first half. With signs of discount fatigue emerging, retailers have an uphill battle ahead as they try to get shoppers spending again.More From Bloomberg Opinion:
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Leticia Miranda is a Bloomberg Opinion columnist covering consumer goods and the retail industry. She was previously a business reporter at NBC News and a retail reporter at BuzzFeed News.
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