Macy's, Target hurt by consumers looking for value: Retail expert

Retail giants Target (TGT) and Macy's (M) both reported second quarter earnings on Wednesday. Target claims it will keep its "measured outlook," and Macy's reported a 3.8% decrease in net sales. What does this mean for the sector and what does it signal about the consumer?

Storch Advisors CEO, Former Toys R Us CEO, and Former Hudson's Bay CEO Jerry Storch joins Market Domination to give insight into retail earnings from Macy's and Target and what it means for the sector moving forward.

Storch says plainly: "I think all these reports have been very consistent. I'd like to say it's an open book exam and the results from the earnings we've seen over the last two weeks are very consistent. The consumer remains stressed. They're leveraged. They're running out of pandemic money. And inflation has been hurting their ability to spend on discretionary items."

In terms of what the data signals about the consumer, Storch points out Walmart's (WMT) recent earnings: "Walmart just last week posted a 4.2% same-store sales gain, more than doubled Target's and on the internet, Target was up around 9%, Walmart was up 22%. So Walmart is absolutely crushing it with their strong value, low-price message, and Target, who's trying to get that back, they lowered a lot of prices, they're emphasizing that, did better than they've been doing, but still lags a lot. So we're seeing a consumer who is looking for value and every piece of data that comes out supports that."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Nicholas Jacobino

Video Transcript

Retail in focus on Wall Street after a batch of earnings reports ahead of the opening Bell target, surpassing Wall Street expectations in the second quarter, it was a comeback quarter, delivering a beat on earnings.

However, the company still remaining cautious with its full year sales guidance.

Meanwhile, from Macy's, the retail reporting a year over year decline in net sales amid a challenging consumer environment, and joining us now is Storch, Advisor CEO and former Toys R. US.

Toys R US CO Jerry Storch Uh, Jerry, it is good to see you.

So, uh, let's start with those earnings reports because different reactions there Macy's Jerry, uh, cuts the forecast.

The stock is getting crushed today.

I I'm I'm curious, Jerry.

What?

You made that report and more broadly, what it tells you about that department store sector.

Look, I think all these reports have been very consistent.

I like to say it's an open book exam and the and the results from the earnings we've seen over the last two weeks are are very consistent.

The consumer remains stressed, you know, they're they're, uh, leveraged.

Uh, they're running out of pandemic money, and inflation has been hurting their ability to spend on discretionary items.

So let's take Macy's, which you're asking about.

Macy's is a little more of a luxury spend.

You know, it's a choice whether or not you need to shop there and spend that money.

Meanwhile, today we also had TJ X reporting and TJ Maxx numbers were the mirror opposite, You know, they were excellent today, so their com stores are up 4% for for for the for the quarter.

And their stock, uh, also did quite well today.

So you know, TJ X is the the off price discounter.

That's kind of the eating department stores alive.

And you see that in each of their results today and also reflective of the state of the consumer looking for value and finding an off price as opposed to traditional department stores.

We see the same thing with target.

Look, you know, Target did well compared to how they've been doing.

This is the first quarter in, like, five quarters or something that they've had positive same store sales.

So kudos to them.

That's great news.

But meanwhile, uh, their comp sales gain at 2% was pretty tepid.

When you realise that WalMart just last week posted a 4.2% same store sales gain, more than double tar targets.

And on the Internet, Target was up around 9%.

Walmart was up 22%.

So Walmart is absolutely crushing it with their strong value, low price message and target who's trying to get that back?

You know, they lowered a lot of prices.

They're emphasising that did better than they've been doing, but still lags a lot.

So we're seeing a consumer who is looking for value, and every piece of data that comes out supports that, um I. I wanna linger on Macy's for a moment, Jerry, if we could, right?

Because I think what you're saying about the macro picture for the, uh, consumer is important.

But I think we also have to consider the the individual execution of these various retailers.

And I thought it was interesting that Tony Spring, the Macy's CO who just took over in February, said, uh, they are two quarters into a three year plan.

When you looked at the stock reaction today, I wonder how patient investors are going to be for that three year plan.

Well, that remains to be seen.

Uh, you know, the, uh there was a, uh, a takeover attempt against the company.

And you may know I was affiliated with that.

So I want to be quite open in disclosing that and management rejected that.

The stock went up, you know, on the offer.

Now it's back down, basically to where it was before.

So we've done the full cycle there, and, uh, Tony's a new CEO.

Uh, he's got some great ideas.

He's got a great track record.

We'll see whether or not he can pull it off.

But really, there's not a There's not a, you know, sort of, uh, one year issue here.

This has been going on for decades in department stores in general and Macy's specifically.