Macy's Inc. set off fresh fears about the health of the U.S. retail sector, after the country's largest department-store chain reported its worst quarterly sales since the recession.

The company's poor results and downbeat comments Wednesday triggered a selloff across apparel makers, mall owners, luxury brands and rival chains. Macy's shares had their biggest drop since 2008.

"We are not counting on the consumer to spend more," Chief Executive Terry Lundgren said Wednesday. With saving rates high, wages growing and employment data steady, Macy's executives were at a loss to explain why consumers weren't spending in its stores. "We're, frankly, scratching our heads," said Chief Financial Officer Karen Hoguet.


Sales at Macy's stores--excluding locations that were opened or closed over the past year--fell 5.6% in the April-ended quarter, the fifth straight decline and its worst quarterly performance since the second quarter of 2009.


Discount chains like T.J. Maxx and fast-fashion retailers such as H&M, which can offer jeans as cheap as $17 and polo shirts for $10, are grabbing foot traffic and hurting demand for the $50 jeans and $80 polo shirts that Macy's sells.


Nondiscretionary spending on health, insurance, education and housing has taken an extra 4% out of personal-consumption expenditures in 2015 compared with 2000, according to Craig Johnson, president of consulting firm Customer Growth Partners. That has reduced the discretionary spending available for traditional retailers by $500 billion--more than the combined annual U.S. sales of Wal-Mart Stores Inc. and Costco Wholesale Corp., Mr. Johnson said.


Shares of Amazon.com Inc. rose slightly, reinforcing the view of Cowen & Co. analyst John Kernan that Amazon will unseat Macy's as the largest apparel seller by next year.

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