Macy's and Dollar General slash sales outlook as consumer spending wanes trends now

Retailers from Macy's to Dollar General have issued warnings on consumer spending, slashing their sales forecasts and citing an increasingly challenging economic environment, including stubbornly high inflation.

In an earnings report on Thursday, Macy's said same-store sales sank 8.7 percent last quarter, forcing the New York-based department store to cut prices on clothes and other discretionary items.

Macy's results concluded the retail industry's earnings season, which showed how stubbornly high inflation, particularly in food, is forcing shoppers to further cut back on discretionary items like clothing to afford their soaring grocery bills. 

Meanwhile, Dollar General, which caters to low-income shoppers and is the fastest-growing US retail chain by store locations, also cut its annual sales and profit outlook on Thursday, sending the company's stock down 19.55 percent for the day.

Dollar General said it saw sales growth in groceries and other basic necessities, but that was offset by declines in seasonal, home and apparel items as inflation bit into consumer budgets.

Dollar General's net sales of $9.3 billion in the first quarter were up 6.8 percent from a year ago, though profits declined 6.9 percent on the year, to $514.4 million.

The budget retailer has expanded rapidly, particularly in rural areas, and as of May 5 operated 19,294 stores in the US under the brands Dollar General, DG Market, DGX and Popshelf. 

But the discount store chain now expects fiscal 2023 same-store sales to increase in the range of 1 to 2 percent, compared with its prior growth projection of 3 to 3.5 percent. 

In response to the consumer spending slowdown, Dollar General said it plans to scale back its expansion plans for Popshelf, a retail chain focused on home goods that is targeted at middle-class women.

Dollar General previously said it planned to 1,050 more new stores in fiscal 2023, including around 150 new Popshelf stores. 

Now, only 90 new Popshelf stores are slated to open, and the company plans only 990 new store openings across all its brands.

The economic challenges are starting to affect the wealthy, too, with Nordstrom on Wednesday reporting an 11 percent sales decline, despite posting a surprise profit.

Nordstrom said its wealthy shoppers are becoming more restrained. That's forced the Seattle-based company to take a conservative approach to inventory.

'They're pretty resilient, but they're also cautious,' Nordstrom CEO Erik Nordstrom told analysts during its earnings call.