STORY: Business is slowing at Macy’s. Thursday the retailer cut its annual sales and profit forecasts. Higher rental and food prices have led shoppers to trade down to cheaper items or cut back on purchases.

The CEO said consumers pulled back more than anticipated and put that money into food, essentials and services.

Macy’s said it will need to discount more in the current quarter to clear out excess spring and summer inventory. The company had managed to control promotions which along with lower costs helped it beat profit expectations in the first quarter.

Rival department stores including Nordstrom and Kohl’s maintained their outlooks though one analyst tells Reuters he thinks Macy’s is being more conservative which is the right move in this macroeconomic environment.

Shares fell 3 percent in morning trading.