Companies have warned for months that while American consumers have stayed resilient against a backdrop of sky-high interest rates, they're still feeling the pinch from a tough economic environment. Now, retailers are doubling down on that warning.
The US economy avoided a highly anticipated recession in 2023, aided by continued consumer spending even as the Federal Reserve brought interest rates to a 22-year high and elevated prices ate into Americans' savings.
Recent economic data has confirmed the American consumer's shocking resiliency. The second estimate for the fourth quarter of 2023, released on Wednesday, revealed that the broadest measure of economic output rose at an annual pace of 3.2%. That robust growth was driven in part by an uptick in consumer spending for both goods and services, according to the Commerce Department.
But a look at some of the United States's biggest retailers tells a different story. Guidance from corporate earnings reported this week suggest that the companies that have their fingers on the pulse of the economy expect consumers to tighten their purse strings this year.
Here's what three of them had to say.
Lowe's: The home improvement giant projected total sales of $84 to $85 billion for 2024 in fourth-quarter results reported on Tuesday. That's below the $86.4 billion in sales it raked in during 2023.
"While there is increased confidence of a soft landing, there's still a lot of speculation on the timing of anticipated interest rate cuts and the pace of slowing inflation," said Marvin Ellison, Lowe's CEO, in the company's post-earnings call. "We expect DIY demand to remain under pressure."
Macy's: The department store chain predicted net sales between $22.2 billion and $22.9 billion for the current fiscal year, lower than the $23.1 billion in net sales it generated in 2023.
Macy's also said it will shutter 150 underperforming stores over the next few years as part of its strategy to entice wealthier shoppers to make up for its shrinking middle-class customer base.
"Inflation has slowed, but so has labor and wage growth. As such, we expect our consumer to remain under pressure," chief executive Tony Spring said in a Tuesday call with analysts.
Best Buy: The company projected revenue between $41.3 billion and $42.6 billion for the 2025 fiscal year, down from the $43.5 billion revenue it generated in the fiscal 2024 year.
CEO Corie Barry outlined a number of challenges weighing on Best Buy, including consumers' prioritization of food and lodging as prices stay high, the continued shift to spending on experiences over goods and the stagnant housing market.
The factors together have been "a heavy weight on the industry," Barry said in a Thursday call with analysts.
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