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.

Huntsville
Overcast
67° wxIcon
Hi: 72° Lo: 61°
Feels Like: 67°
Florence
Overcast
69° wxIcon
Hi: 79° Lo: 63°
Feels Like: 69°
Fayetteville
Overcast
67° wxIcon
Hi: 78° Lo: 61°
Feels Like: 67°
Decatur
Overcast
67° wxIcon
Hi: 72° Lo: 61°
Feels Like: 67°
Scottsboro
Overcast
68° wxIcon
Hi: 73° Lo: 61°
Feels Like: 68°
WAAY Radar
WAAY WAAY-TV Cam
WAAY Temperatures

Alabama Coronavirus Cases

Confirmed Cases: 134231

Reported Deaths: 2357
CountyConfirmedDeaths
Jefferson19441349
Mobile13271291
Montgomery8778179
Madison775480
Tuscaloosa7496119
Shelby584951
Lee582961
Baldwin516550
Marshall390944
Calhoun346641
Etowah342047
Morgan325428
Houston278123
Elmore263247
DeKalb239120
Walker228483
St. Clair227837
Talladega212728
Limestone206120
Cullman188519
Dallas177426
Franklin175529
Russell17442
Autauga173825
Lauderdale168233
Colbert163626
Blount159415
Escambia158425
Jackson154611
Chilton153531
Dale135444
Covington134427
Coffee13078
Pike11879
Chambers115142
Tallapoosa114685
Clarke107717
Marion95729
Butler91339
Barbour8577
Winston73712
Marengo70820
Lowndes65327
Pickens65114
Bibb64210
Randolph63713
Hale62828
Lawrence60922
Geneva5995
Bullock59814
Cherokee59115
Monroe5818
Clay5707
Washington55613
Perry5407
Conecuh53111
Crenshaw53132
Wilcox53111
Henry4865
Macon48020
Fayette4438
Sumter43419
Lamar3632
Choctaw34612
Cleburne3396
Greene30315
Coosa1673
Out of AL00
Unassigned00

Tennessee Coronavirus Cases

Confirmed Cases: 187690

Reported Deaths: 2312
CountyConfirmedDeaths
Shelby30460452
Davidson26252298
Hamilton928791
Knox918175
Rutherford915088
Williamson516536
Sumner475896
Wilson341844
Putnam320139
Montgomery302244
Out of TN296825
Unassigned29145
Bradley289317
Madison280061
Sevier257015
Blount247723
Maury230923
Washington223935
Robertson219035
Sullivan212133
Hamblen188525
Tipton178118
Trousdale16517
Gibson160922
Hardeman154826
Wayne14905
Bedford132017
Dyer131813
Dickson123515
Cumberland117518
Fayette117418
Coffee116613
Weakley115719
Anderson115312
Henderson115322
Carter114728
Obion11389
Loudon11356
Greene112943
McMinn110025
Jefferson109714
Macon103520
Warren10267
Monroe102217
Lawrence101211
Hardin100516
Lauderdale95915
Haywood95418
Franklin9518
Lake9142
Roane8724
Carroll85819
Bledsoe8494
McNairy84218
White8139
Cheatham80610
Rhea79812
Hawkins78316
Cocke7419
Marshall7415
Overton7135
Smith69810
Johnson6752
Henry6139
Chester60910
Lincoln6031
Giles58017
Hickman5585
DeKalb55213
Crockett52919
Marion5187
Decatur5037
Fentress4713
Claiborne4405
Campbell4314
Polk38210
Grainger3633
Union3471
Benton3349
Jackson3175
Morgan3113
Unicoi2831
Cannon2800
Grundy2685
Humphreys2443
Sequatchie2293
Meigs2233
Clay2205
Houston2083
Scott2072
Stewart1902
Lewis1851
Moore1641
Van Buren1600
Perry1490
Pickett1102
Hancock1063

Community Events