Macy's stock has its worst day in history

American stores had a great holiday. So why are their stocks getting killed?Macy's (...

Posted: Jan 11, 2019 12:49 AM
Updated: Jan 11, 2019 12:49 AM

American stores had a great holiday. So why are their stocks getting killed?

Macy's (M) stock plunged close to 18%, its worst day in history, after the company reported sluggish sales for November and December and trimmed its guidance.

Companies

Macy's

Business and industry sectors

Business, economy and trade

Consumer products

Holiday retail

Seasonal retail

Kohl's Corp

Banking, finance and investments

Financial markets and investing

Wall Street

Department stores

Retail and wholesale trade

Company activities and management

Sales and selling

Sales figures

Securities trading

Stock markets

Target Corp

Holidays and observances

Amazon.com Inc

Electronic commerce

Online and home shopping

The company has been shrinking its store sizes, adding more discount Backstage locations, and rolling out buy online, pickup in store capabilities. But those investments fell short as more shoppers gravitated to discount chains like TJX (TJX) and Amazon (AMZN). Amazon's holiday sales grew 17% this year, according to Rakuten Intelligence.

"The holiday season began strong -- particularly during Black Friday and the following Cyber Week, but weakened in the mid-December period and did not return to expected patterns until the week of Christmas," said Macy's CEO Jeff Gennette. Macy's reported weakness in areas like women's sportswear and jewelry.

Despite early signs of retail's best holiday in six years, investors were disappointed by a flurry of other sales results on Thursday.

Retailers make an outsized chunk of their sales during the holidays and the season brings heightened expectations. Pressure is even higher than usual this year because unemployment is low, wages are rising, and gas prices are cheap.

Kohl's (KSS), which had a strong 2018 under new CEO Michelle Gass and launched partnerships with Amazon and Aldi, reported a 1.2% increase in holiday sales compared to last year. Kohl's has benefited from its off-mall footprint and expansion into athletic brands like Under Armour and Nike.

CEO Gass said she was "delighted" with the holiday season, but Wall Street was not. Kohl's lost close to 5%.

Macy's and Kohl's weakness dragged department store peer Nordstrom (JWN) down 4% and JCPenney (JCP) close to 5%. JCPenney said on Tuesday that its holiday sales decreased 3.5% from last year and it would close stores this year. New CEO Jill Soltau faces the difficult task of reviving the struggling chain, which fell below $1 a share briefly last month.

Big box retailers

Target's holiday sales increased 5.7% from last year, putting the company on track for its best year since 2005.

Target's sales were driven by growth in toys, baby, and seasonal gifts, it said. Target's strategy to buy up toys in Toys "R" Us' absence paid off. It also got a lift from its investments in buy-online, pickup in store. Holiday pickups grew 60% from last year and made up a quarter of Target's digital sales during the period.

"This performance demonstrates the benefit of placing our stores at the center of every way we serve our guests, including both in-store shopping and digital fulfillment," CEO Brian Cornell said.

But Target (TGT) dropped close to 3% on Thursday. Investors were discouraged that Target did not raise its guidance and worried about its profit margins. Target dropped its minimum order requirement for the first time during the holidays, which could weigh on profitability.

Big box rival Costco (COST) ticked up slightly, despite a 7.1% increase in US sales during December. Costco and Target are able to use their vast size and buying power to keep prices down on a broad variety of merchandise. Wall Street analysts believe they are in a stronger position to compete against Amazon and the rapid growth of dollar stores.

Macy's, Kohl's, and Victoria's Secret parent L Brands (LB) were the three worst performers on the S&P 500 Thursday.

Although it turned to heavy promotions, Victoria's Secret sales fell 6% in December. Victoria's Secret is heavily exposed to malls and has been undercut by brands like Aeire and ThirdLove projecting more natural-looking advertising.

Barnes & Noble (BKS) posted a surprise 4% increase in sales compared to last year, but said profit would fall by as much as 10% from higher promotions and advertising costs. That sent shares tanking more than 15%.

Difficult year ahead

Some winners emerged from the wreckage Thursday. Dollar and value stores like Dollar General (DG), Five Below (FIVE), and Ollie's Bargain Outlet (OLLI) gained. Investors believe these chains are poised to continue taking market share as retail consolidates and consumers search for value.

The holidays played out against the backdrop of once-dominant retailer Sears' bankruptcy and its potential liquidation, as well as fears about higher tariffs on imported goods from China and an economic slowdown in that country. Although some chains have proved their ability to make the transition to online shopping, fulfilling online orders is costly. Wall Street is wary of challenges ahead for stores as they continue to battle Amazon and face tougher economic conditions this year.

Apple's warning about a sales shortfall in China last week rattled retail stocks. Apple (AAPL) is a top supplier to Best Buy (BBY), while brands like Nike (NKE) and Lululemon (LULU) depend on the market for growth.

Other factors could carry risks this year too. Retailers have raised wages for their workers and transportation costs are up sharply.

"2019 will likely be a more difficult year for retail stocks," RBC Capital Markets analyst Scot Ciccarelli said in a research note.

Minnesota Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 57162

Reported Deaths: 1660
CountyConfirmedDeaths
Hennepin18197820
Ramsey7047261
Dakota4049103
Anoka3410113
Stearns284220
Washington193843
Nobles17496
Olmsted163523
Scott141017
Mower10842
Rice10028
Blue Earth8595
Wright8205
Carver7922
Clay75240
Kandiyohi6771
Sherburne6577
St. Louis45319
Todd4202
Lyon4163
Freeborn3551
Steele3331
Nicollet32013
Benton3103
Watonwan2990
Winona24916
Crow Wing21313
Martin2045
Le Sueur2021
Beltrami2000
Chisago1821
Otter Tail1793
Goodhue1778
Cottonwood1730
Becker1471
Pipestone1439
McLeod1400
Unassigned14040
Polk1353
Itasca13412
Douglas1320
Waseca1300
Pine1280
Carlton1260
Dodge1230
Murray1221
Isanti1100
Chippewa991
Brown852
Faribault840
Meeker832
Morrison821
Wabasha820
Sibley802
Rock750
Koochiching743
Pennington731
Jackson700
Mille Lacs683
Cass622
Fillmore610
Renville605
Lincoln540
Swift521
Grant511
Yellow Medicine490
Roseau460
Pope450
Houston390
Norman370
Hubbard320
Redwood320
Marshall290
Kanabec281
Wilkin283
Aitkin270
Mahnomen241
Wadena230
Big Stone220
Red Lake200
Lake180
Stevens160
Clearwater150
Traverse100
Lac qui Parle60
Kittson30
Cook20
Lake of the Woods10

Iowa Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 46100

Reported Deaths: 887
CountyConfirmedDeaths
Polk9781203
Woodbury365651
Black Hawk302262
Linn214587
Johnson195915
Dallas179635
Buena Vista178612
Scott161512
Dubuque154929
Marshall139424
Pottawattamie122723
Story111714
Wapello85032
Muscatine83048
Webster7366
Crawford7213
Sioux6022
Cerro Gordo57917
Tama53929
Warren5341
Jasper45825
Wright4441
Plymouth4438
Louisa37814
Dickinson3754
Clinton3213
Washington28810
Hamilton2411
Boone2312
Franklin2256
Bremer1927
Clarke1883
Carroll1821
Emmet1812
Clay1711
Shelby1691
Hardin1660
Marion1550
Allamakee1504
Poweshiek1508
Benton1451
Jackson1411
Des Moines1392
Mahaska13617
Floyd1312
Guthrie1285
Jones1242
Cedar1201
Hancock1172
Butler1152
Buchanan1141
Henry1143
Pocahontas1141
Lyon1060
Madison1052
Clayton993
Cherokee981
Harrison980
Lee973
Taylor930
Humboldt921
Delaware911
Iowa901
Monona900
Winneshiek861
Mills830
Calhoun822
Fayette810
Sac810
Palo Alto800
Kossuth780
Osceola780
Jefferson770
Winnebago770
Mitchell760
Page760
Grundy741
Union721
Monroe677
Worth610
Chickasaw510
Davis501
Lucas504
Howard490
Cass481
Montgomery453
Appanoose433
Greene380
Fremont350
Van Buren331
Keokuk311
Ida290
Audubon281
Decatur220
Adair210
Ringgold211
Wayne181
Adams160
Unassigned00
Rochester
Clear
58° wxIcon
Hi: 74° Lo: 58°
Feels Like: 58°
Mason City
Clear
63° wxIcon
Hi: 74° Lo: 59°
Feels Like: 63°
Albert Lea
Scattered Clouds
61° wxIcon
Hi: 72° Lo: 59°
Feels Like: 61°
Austin
Clear
61° wxIcon
Hi: 73° Lo: 59°
Feels Like: 61°
Charles City
Few Clouds
61° wxIcon
Hi: 74° Lo: 59°
Feels Like: 61°
Rain returns for Wednesday
KIMT Radar
KIMT Eye in the sky

Latest Video

Image

Sean's Weather 8/5

Image

A closer look a the Graham Park testing site

Image

Temporary rental assistance available in Olmsted County

Image

Gold and Silver Prices Going Up

Image

Memorial Bicycle Ride

Image

MSHSL votes to postpone football and volleyball

Image

Rochester Public Schools survey parent opinions about options

Image

Waterloo hands Rochester 13th straight loss

Image

Mason City Fire Department burn training

Image

Coronavirus impact on the 2020 census

Community Events