BENGALURU: Macy’s Inc on Thursday cut full-year sales and profit forecasts, hurt by a slowdown in demand for high-end products and increased discounts due to persistently high inflation, sending shares of the department store chain down 7%.

The company said it would need to discount further in the second quarter to clear out spring and early summer stocks as consumer spending weakens. This was in contrast to Macy’s expectations last quarter to rein in promotions.

Higher rental and food prices have pushed upscale retailers such as Macy’s lower on customers’ list as they now prefer to buy from discount stores and off-price retailers that offer products at cheaper prices.

Last week, peer Kohl’s Corp, which caters more to lower to middle-income customers, also flagged a weaker consumer spending after posting a bigger-than-expected drop in quarterly sales.

Persistent strength in the labor market has spiked worries of a further hike in interest rates to control inflation, a move that could lead to restrained spending by consumers focusing more on essential purchases.

Major US companies including Target and Home Depot have also issued cautious outlook as American consumers’ disposable income remains pressured.

Meanwhile, upmarket department store Nordstrom Inc posted a surprise first-quarter profit on Wednesday on better inventory control and demand from wealthy shoppers.

Macy’s expects 2023 sales between $22.8 billion and $23.2 billion, compared with its prior forecast of $23.7 billion to $24.2 billion.

It sees adjusted full-year profit per share between $2.70 and $3.20, compared with $3.67 to $4.11 per share it had forecast previously.