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“Macy’s Alerts to Surge in Unpaid Credit Card Bills Amidst Growing Consumer Financial Strain

August 23, 2023

Macy’s department store is cautioning about a notable rise in customers failing to meet credit card payment obligations, underscoring the mounting financial pressure on consumers.

The renowned retailer had anticipated an uptick in delinquencies following a post-Covid recovery phase. However, the extent of the increase has caught Macy’s management off guard.

Adrian Mitchell, Macy’s Chief Operating Officer and Chief Financial Officer, stated during an earnings call that the speed of the surge in delinquencies, both for Macy’s and across the credit card industry, was quicker than expected. This issue notably escalated in June and July.

The impact of this trend is negatively affecting Macy’s business, leading to a 36% year-over-year drop in credit card revenue and contributing to a quarterly loss. The company anticipates a further rise in ‘bad debt’ within its credit card portfolio due to deteriorating consumer leverage metrics.

Macy’s attributes the rise in delinquencies to broader financial pressures faced by consumers and increasing debt levels.

Mitchell highlighted, ‘I believe that credit card revenue indicates some of the pressures that consumers are currently experiencing. This extends to credit card balances, student loans – which we know will come into focus in the coming months – auto loans, and mortgages.’

Macy’s is collaborating with its credit card partner, Citibank, to strategically minimize exposure to ‘higher risk segments.’ Following these developments, Macy’s shares experienced a 14% decline as the company maintained a ‘cautious’ stance on consumer trends.

Although resilient consumer spending has contributed to the US economy avoiding a long-feared recession, there are indications of rising financial stress among certain Americans.

During Q2, consumer credit card debt crossed the $1 trillion mark for the first time on record, as reported by the New York Federal Reserve.

More concerning is the fact that new delinquencies in credit card and auto loans have exceeded pre-Covid levels, according to Moody’s Investors Service.

This situation disproportionately affects smaller banks. According to a Wells Fargo report released on Tuesday, credit card and auto loan delinquencies at banks not among the top 100 in assets have surged to record levels, surpassing both the Covid-related spike and the one during the Great Recession.

In another instance, Foot Locker shares dropped more than 30% to a 13-year low on Wednesday following the company’s warning of ‘consumer softness.’ The retailer also lowered its outlook and temporarily suspended its dividend.

Source: CNN”

 

 

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