Massey warns that inflation-shrinking consumers could spend on travel

Inflation threatens to weigh on consumer demand, especially among lower-middle-income consumers, Massey said, adding that 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 Thursday morning at JPMorgan’s annual retail round. – Up event.

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

These questions are creating a level of uncertainty 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 don’t during the summer.

Far from being alone in navigating this complex dynamic of the department store chain, there have been some signs of a recession. Deutsche Bank economists said this week that continued inflation combined with regular interest rate hikes could 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 10. Note of the year.

These pressures are fueling the expectation that some Americans, especially those in low-paying jobs, will be forced to choose between a long-awaited vacation or concert ticket in 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.

According to the report, the increase is most pronounced for lower-middle income levels. 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. But Berg added that some consumers have just begun 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 about his current business to reiterate his full-year outlook, when Messi failed to adjust to the 2022 financial forecast in February when it called for sales to flatten by 1% over the previous year.

Massey said on Thursday that it had recently tracked the cooling of demand for some household goods and casual wear related to the epidemic. On the plus side, it says weddings are picking faster, which will boost sales of clothing, cosmetics and ready-made clothing for men.

Nevertheless, Mitchell insisted that Messi be careful.

“Even though 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, which also attended JPMorgan’s retail event this week, noted that its generally wealthy customers tend not to spend more or less amid base gas price volatility. CEO Eric Nordstrom says the health of the stock market is more closely related to its business performance.

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