For retailers, this long stretch of deep discounts is straining profit margins even among the nation’s strongest brands.
Macy’s Inc. warned: on Friday that its fourth-quarter sales are now expected to be at the lower end to the mid-range of the previously reported range. Lululemon Athletica Inc. said: , which has promoted athletics and benefited from the pandemic-driven pivot to sleepwear, said on Monday it expected gross margin in the three-month period ending in late January to contract by as much as 1.1 percentage points, compared with a previous forecast of an increase.
Companies like Macy’s and Lululemon are at the center of the country’s difficult move away from discretionary spending and working from home toward essentials and groceries as people prepare for a possible recession. Retailers with piles of hard-to-move inventory have slashed prices to clear out their warehouses as shoppers pass out yoga pants and opt for a new cocktail dress instead. Despite this, retail sales were estimated to drop 0.8% in December in the first consecutive monthly decline since 2020, according to a Bloomberg survey of analysts.
The “competitive holiday season” is giving way to a year in which consumer pressure continues, Macy’s CEO Jeff Genette said in a statement Friday.
Some of this was expected The first six months of 2023 are likely to be rough given the volatile economic environment, executives warned. But the data also suggests that consumers have something of a shopping hangover. Apparel sales fell for the 10th consecutive month through December 23 as consumers spend more on travel and experiences, according to Bloomberg Intelligence. Even steep discounts couldn’t get people to shop for clothes or in retail stores, as same-store sales fell about 15% during the month of December.
Big discounts and promotions have been the main retail strategy thus far to clear excess merchandise and adequate inventory. The sharp cut likely prompted many shoppers to give up on purchases that could have happened in the first half. With signs of discount fatigue emerging, retailers face an uphill battle ahead as they try to entice shoppers to spend again.
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Leticia Miranda is a columnist for Bloomberg Opinion covering the consumer goods and retail industry. Previously, she was Business Correspondent for NBC News and Retail Correspondent for BuzzFeed News.
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