Macy's credit card delinquencies show tighter consumer wallets

Macy's (M) revealed in its first quarter earnings report that more consumers with Macy's credit cards are falling behind on their payments.

The company's credit card revenue was $117 million in its first quarter, a decline of $45 million from the prior year. This figure signals a weakening consumer as inflation remains sticky and wallets tighten.

Credit card delinquencies rose nearly 8.9%, according to the Federal Reserve Bank of New York. Meanwhile, the average credit card debt per borrower, according to TransUnion, sits at just over $6,000.

Yahoo Finance's Seana Smith breaks down this consumer pressure and how major companies are responding.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Melanie Riehl

Video Transcript

Macy's is out with its first quarter earnings report and one big takeaway more consumers with Macy's credit cards are falling behind on their payments.

Joining me now in studios with the details is my morning brief co anchor, Shawna Smith.

Ok. You've been diving into this one,?

I've been diving into this one ever since.

You and I were on air not too long ago.

And let's talk about what we learned from Macy's here this quarter because when you take a look at their credit card revenue, we did see a drop in terms of what we saw a year ago.

So credit card revenues decline by 45 million falling down to 117 million.

Why are we seeing this decline?

Well, it's because of a weakening consumer within this report, Macy saying that this decline was attributed attributable to the impact of expected higher delinquency rates.

A trend that we've seen here from a number of retailers here in recent quarters and also net credit card losses within the portfolio.

And this is also consistent with the data that we are seeing even outside of earnings.

When you take a look at the recent that we're getting here from the New York Fed.

And they're saying that credit card delinquencies on a year over year basis, that change was falling by about 8.9%.

As we do see our excuse me rising 8.9%.

And then the total us household debt that actually increased by about 1.1% from Q 4 to 17.69 trillion average credit card debt per borrower that is now just over 6200 bucks.

So we bring all of this up because this really paints a picture of what is happening right now.

When you take a step back, everything that we've learned from the earnings so far this season, taking into account what we're hearing from Macy's on this earnings call this morning where they're saying yes, the consumer is under pressure, they likely will remain under pressure for at least the remainder of this year.

They're making some changes, adding promotional activity here in order to try and boost sales, you see it reflected in the delinquency rates.

Clearly, there has been this pressure because of sticky inflation.

Uh that has forced consumers to make so many of these tough choices.

And that's also reflected, I think in so many of the stock prices here because you and I have been talking to strategist after strategist who has said the consumer, consumer discretionary sector has been under pressure.

A lot of that.

A lot of those bigger names will likely remain under pressure as they try to navigate what this new normal is going to look like here for these retailers, at least over the next couple of quarters.

I just find it and you know, I find it fascinating how exactly are talking about the consumer and how that's changed the delta between this time last year where it was, hey, the consumer is resilient everyone to now, the consumer is under pressure, the consumer stretch or relatively stable like we heard from Walmart CFO Yeah, exactly.

And also just the difference that we are seeing from the lower income consumer versus the higher income consumer.

And that was also on display in Macy's report, right?

Because when you take a look at the Macy's brand, that was under pressure.

But then when you take a look at Blue Mercury and a number of prints here, even within Bloomingdale's business is showing more resilience than its namesake brand.

So we are seeing that discrepancy, which is certainly worth noting, we will be getting earnings results out from target also this week, which will paint a bigger, a better picture of exactly how the consumer is feeling right now.

But again, at least the sentiment is we will likely hear similar commentary to what we heard from Walmart.

If people are trading down, they are forgo some of those larger tickets, a bigger ticket uh purchases for those staple items.

And as a result, likely to remain under pressure here, at least in the short term.

Well, I can't wait for the target earnings.

I just got a LEGO set from target just last week.

Yeah.

Well, I mean, well, yeah, for myself.

Look, I'm just trying to be like, I, I'm trying to be like I play with my four year old then done.

Do.

I'm trying to be like Victor Wanyama.

So maybe we'll get Victor, we'll get, you know, your son and myself and we'll have a grand old time when somebody that goes.

All right.

Thanks so much, Sean.