Another leg down for retail earnings? Macy's reported a beat on earnings and revenues and slightly raised its full-year guidance, but the raise (there's only one quarter left in retailers' fiscal year) was less than the beat announced. Still, following on a poor report from Target Wednesday, that is welcome news. But it doesn't negate the main story for retailers this year: earnings estimates have been coming down hard since the summer. Take Macy's. For the all-important holiday quarter, analysts at the end of July anticipated Macy's would make $2.15, according to FactSet. That estimate is long gone. Macy's is now expected to earn $1.82 in the fiscal fourth quarter. Same with full year earnings. After topping out at $5.31 in earnings in the banner year of 2021, earnings are expected to fall to $4.08 this year, and $3.96 in 2023. This has happened to all the retailers. Beginning in June and July, analysts began aggressively cutting retail earnings estimates for the all-important holiday season. The assumption: the Fed's aggressive rate hikes would, by the end of the year, significantly slow consumer spending and likely start a recession. As a group, retailers have already had earnings cut: earnings for the group as a whole were down 9.3% year-over-year in the third quarter, and are now expected to plunge by a whopping 41% for the fourth quarter, according to Refinitiv. Now, the concern is that another wave of cuts are coming. The reason: Target is the classic middle American consumer. If that end is seeing concerns on discretionary spending, it has widespread implications. "We have not seen the worst of the cuts in estimates for the retailers or the overall S & P 500," Nick Raich at The Earnings Scout told me. High inventory levels are a particular problem for retailers, David Swartz, an analyst at Morningstar who covers apparel and department stores, told me. "The apparel market is challenged because inventory levels are very high, so there is a concern that there will be markdowns at the Christmas season at a time when spending may be slowing," he said. Still, the data does not paint a consistent picture, Swartz noted. "It is too early to draw conclusions, it's possible the Christmas season could be strong," he told me. Indeed, yesterday's retail sales numbers were strong, and other recent reports by Mastercard also indicate the consumer is strong. This has left the analyst community scrambling to figure out a very complicated retail picture. Joe Feldman, a retail analyst at Telsey Group, told me that, "From a profit standpoint, there's a lot of things that should get better [in 2023]: inventory should improve, and other supply chain cost pressures should unwind, like domestic shipping freight costs and fuel costs." But he admits that it all still depends on whether the the consumer stays strong: "Is next year a snap back or a situation where numbers have to get taken down even more?"