Retailers are noting that consumers are falling behind on their credit card payments, which could be an indicator of more financial pressure that they are feeling, especially as we get closer to restarting making student loan payments again, or it could be another red flag that turns out to not be as serious as expected, which has happened a number of times in the past year or so.
A spike in credit card delinquencies at Macy’s sent the company’s share price tumbling when it was announced and the company’s management even went as far as to admit it was caught offguard by how quickly delinquency and default rates on its credit cards were climbing. Revenue at the company fell by 36% in the second quarter of 2023, compared with the same quarter last year, and the increase in credit card delinquency rates was cited as the primary reason for the drop.
“I think the credit card revenue is an indication of some of the pressures that we’re actually seeing on the consumer,” said Adrian Mitchell, Macy’s chief operating officer and chief financial officer during a call with analysts. “This is about credit card balances, this is about student loans which we know is going to come into focus in the next month or two, auto loans, mortgages.”
Overall, consumers have held up surprising well during the past year or two, when inflation rates have accelerated and everything has become more expensive. Perhaps that’s because more people were paying for things with plastic and now those chickens have come home to roost. Foot Locker also warned of “consumer softness” and slashed its financial outlook for the remainder of 2023.