Messi warns that inflation-stricken consumers may choose travel over shopping

A man walks past a Macy’s store in Heathsville, Maryland on February 22, 2022.

Stephanie Reynolds | AFP | Getty Images

As inflation threatens to weigh on consumer demand, especially among low- to middle-income consumers, Messi said more buyers may face a consequential choice: go to the mall or go on summer vacation.

“Our biggest challenge when it comes to managing early 2022 is where the demand will come from,” said Adrian Mitchell, Massey’s chief financial officer, during a presentation at JPMorgan’s annual event on Thursday morning. Retail round-up event.

“We believe there is demand,” he said. “We believe consumers are going to spend. But are they going to spend on the discretionary items we sell, or are they going to spend more on airline tickets to Florida, or travel, or restaurants?”

This is creating a level of unpredictability that needs to be carefully planned around Messi, Mitchell said. For example, retailers may not want to order too many beach cover-ups or suitcases if buyers do not during the summer months.

The department store chain will be far from alone in navigating a complex dynamic where more recessionary signs are emerging. Economists at Deutsche Bank said this week that rising inflation and the rise in interest rates needed to fight inflation are likely to push the United States into recession in 2023. The bond market also recently released a classic bearish index, with the 2-year Treasury yield rising above the 10-year note.

Some Americans, especially those with low-wage jobs, are expected to give up some expenses to spend elsewhere. They may prefer a long-awaited vacation or concert ticket over a new swimsuit or handbag.

Some initial inflation trade-offs are already happening, according to a report. Consumers are spending an average of 59% more on gas and convenience stores than a year ago, according to the latest data from the Number Shopping Behavior Index. Growth is most pronounced for lower-middle income levels, it says. Alternatively, prudent departments, including home improvement and beauty, are seeing the biggest weekly drop in single sales across income levels, figures show.

Chip Berg, CEO of Levi Strauss & Co., told CNBC on Wednesday that denim retailers have not yet noticed that consumers have chosen less expensive products under inflationary pressure and that demand remains strong. To be sure, Berg says some consumers are starting to sink into their savings accounts for extra cash – a trend Levy is closely monitoring. “We don’t have heads in the sand,” he said.

Levy was confident enough to reiterate his full-year outlook, while Messi still failed to adjust to the 2022 fiscal forecast he returned in February, calling for sales to level up to 1% compared to the 2021 level.

Massey said on Thursday that it had recently tracked the cooling of demand for some household goods and casual wear related to the epidemic. At the same time, however, it says weddings are picking up fast and is predicted to drive sales of clothing, cosmetics and men’s clothing.

Nevertheless, Mitchell insisted that Messi be careful.

“While consumers are healthy, we see inflation rising more than we expected in a year,” he said. “And we also acknowledge that supply chain disruptions are not the answer.”

Nordstrom also noted at a JPMorgan retail event this week that its typically wealthy customers do not spend more or less because the price of base gas ebbs and flows. The stock market continues to be more closely linked to its business performance, says CEO Eric Nordstrom.

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