Macy's Says Consumers Are Having Financial Problems

In what could be a warning sign for the wider US economy, Macy's says it's dealing with a steep rise in the number of customers who are failing to make credit card payments. Macy's CFO/COO Adrian Mitchell told Wall Street analysts Tuesday that the company was surprised by the speed and size of the rise in delinquencies, CNN reports. He said the rate "accelerated" in June and July. "While we have seen an increase in revenues as interest rates have risen, that has been more than offset by higher bad debt assumptions and write-offs," he said, per Yahoo Finance.

"I think the credit card revenue is an indication of some of the pressures that we're actually seeing on the consumer," Mitchell said. "This is about credit card balances, this is about student loans which we know is going to come into focus in the next month or two, auto loans, mortgages." The annual percentage interest rate on Macy's Citibank-powered credit card is almost 32%, per Yahoo. The retailer says it's working with Citibank to "reduce higher risk segments to surgically reduce exposure." According to the New York Federal Reserve, American consumer credit card debt topped $1 trillion for the first time in the second quarter of this year, CNN notes.

Mitchell said Macy's credit card revenue was down 36% year-on-year. The company's stock fell 14.1% Tuesday in its worst day since June 2020, and other retailers also fell, reports Reuters. The company predicted that consumer spending would be weak over the holiday season. "It is prudent to maintain our cautious view on the consumer and their capacity to spend on the discretionary categories," Mitchell said. (More Macy's stories.)