Macy's lifts profit forecast on strong luxury demand

US upscale department store chain Macy’s Inc raised its annual profit forecast on Thursday (Nov 17) on resilient demand for high-end suits, gowns and beauty products as wealthier shoppers were undeterred by inflation.

Luxury goods sales have held up relatively well for Macy’s as higher-income shoppers, eager to get back to social events after the pandemic, splurge their savings on pricier handbags, perfumes and clothing.

Rival Kohl’s Corp, however, withdrew its 2022 sales and profit forecasts, as the company, which caters to more lower-income customers and stocks fewer luxury goods, took a hit from weakening demand due to rising prices.

Shares of Macy’s rose 8 per cent in pre-market trading, while Kohl’s shares fell 4 per cent, with the company also blaming the sudden departure of top boss Michelle Gass as a reason for pulling the forecasts.

Macy’s inventory levels were just 4 per cent higher, thanks to heavy discounts to clear the excess stocks of cheaper, casual and athleisure apparel. In contrast, Kohl’s inventories were 34 per cent higher in the third quarter.

“Our middle-income customers continued to purchase fewer items per trip and trade down to value-oriented private brands,” Kohl’s said in a statement.

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Macy’s said it expects fiscal 2022 adjusted profit of US$4.07 to US$4.27 per share, compared with its previous forecast of US$4 to US$4.20.

Excluding items, it earned 52 US cents per share in the quarter ended Oct 29, beating estimates of 19 US cents, according to Refinitiv data. REUTERS