To The Moon

The fall of high-end consumer goods?

Let's start by looking at $Macy's(M)$ which saw a drop of over 7% in its stock price before the opening on Tuesday due to its Q2 financial report, and it closed with a staggering 14% decline.

• In terms of performance, the overall revenue stood at $5.13 billion, marking an 8% year-on-year decrease, surpassing the market's expectations by $20 million.

• Physical store revenue in the second quarter of 2022 dropped by 8%, while online sales decreased by 10%.

• Meanwhile, the EPS was $0.26, surpassing the market consensus of $0.12.

However, more importantly, the company's guidance for the next quarter is quite cautious, reiterating its sales forecast for 2023 to be between $22.8 billion and $23.2 billion, with earnings per share ranging from $2.70 to $3.20.

Comparable store sales are expected to decline by 6% to 7.5%.

Macy's Inc. predominantly offers slightly higher-priced goods, including luxury items. While it performed relatively well in the few quarters before inflation, to a certain extent due to the "inflation-resistant" nature of luxury goods, the company has experienced a decline in performance due to decreased household savings and a downturn in luxury goods sales.

Despite the effective clearance of spring inventory through "surgical" discount promotions in Q2, uncertainties in the macroeconomic environment and current consumer sentiments have led Macy's Inc. to exercise caution in its expectations. A

dditionally, the worsening of household debt, including credit card debt, has started to impact the retail consumer industry. Many investors believe that the U.S. consumer spending environment will deteriorate in the short term.

While the company can manage inventory through discounts, a turnaround will likely only occur once the overall trend of weakness in high-end goods subsides. Furthermore, consumers are shifting towards "online retailers that offer better value propositions," such as $TJX Companies(TJX)$ and $Costco(COST)$ with their stores and websites.

A challenge of theft?

After the disappointing Q2 financial report, $Dick's Sporting Goods(DKS)$ stock opened significantly lower, plummeting by 24%.

Within the quarter, the company's same-store sales increased by 1.8%, surpassing the market's expected 1.1%. This growth in same-store sales can be attributed to a 2.8% increase in transaction volume, which continues to drive an expansion in market share.

The non-GAAP EPS stands at $2.82, falling short of both the market's projected $3.81 and last year's $3.68.

Attributing the less-than-expected Q2 earnings to inventory contraction, the company addresses an increasingly critical issue faced by numerous retailers. However, it's worth noting that the inventory contraction was not insignificant.

While the potential of retail theft exists, quantifying its impact on businesses and its influence on their data remains challenging and virtually unverifiable.

Another plausible scenario involves internal pilferage. Any issue where employees pilfer or mishandle goods could result in stock loss for retailers. Q2's total inventory amounts to $2.85 billion, down from $3 billion a year ago.

A sports goods retailer underscores its efforts to optimize operations, aligning expenditures with its key strategic initiatives in terms of talent, organizational design, and support, all while streamlining the overall cost structure. Additionally, the company has revised its full-year guidance.

Annual earnings are now in the range of $11.33 to $12.13 per share, a decrease from the previously announced $12.90 to $13.80. Comparable sales are expected to be within 0-2%, without diminishing its planned capital expenditure. Despite the profit loss this quarter, the full-year gross margin is still anticipated to exceed that of 2022, with an estimated reduction of approximately half a percentage point.