Department store stocks are feeling the heat amid Macy’s Inc.’s dismal second-quarter earnings results.
The retailer posted adjusted earnings of 28 cents per share on profits of $86 million — a wide difference from the 45 cents a share forecasted by Wall Street. The numbers, along with a lowered outlook, sent Macy’s stock down more than 17% to $16.04 at the opening bell.
On the heels of the news, shares for big-box names including Walmart Inc. and Target Corp., as well as fellow retailers Nordstrom Inc., Kohl’s Corp. and TJX Companies Inc. were also down in morning trading.
Investors expressed concerns that Macy’s disappointing figures were emblematic of larger problems in the retail sector, which has been struggling to keep up with changing consumer preferences and the strength of major online players like Amazon.
Barneys New York’s recent bankruptcy filing has also shed light on department store troubles, as skyrocketing rents continue to weigh heavily on margins. Many American mainstays have been hit particularly hard in the past couple years, with back-to-back store closures complicating business for Saks Fifth Avenue, Lord & Taylor and more retail veterans.
Meanwhile, Wall Street remains anxious about the overall health of traditional brick-and-mortar. According to the U.S. Census Bureau, annual sales at department stores sank 20% from 2017 to 2018, and they appear on track for a steeper drop in 2019. Last month, Coresight Research reported that U.S. retailers have announced 7,062 store closures this year — already exceeding the total recorded for the full year in 2018, when closures totaled 5,864. The firm predicts that the number could reach 12,000 by the end of 2019.
Separately, President Donald Trump’s trade war with China has been top of mind, as major fashion leaders have vocally opposed further duties on their businesses. Yesterday, the U.S. Trade Representative announced that the White House would postpone its 10% levy on some of the $300 billion worth of Chinese products, but industry execs continued to rally against a tax that they said could also hurt American consumers and the U.S. economy.
As of 11 a.m. ET, Macy’s shares had plunged 16% to $16.27. Walmart had seesawed back into the green by 0.44% to $107.84, while Target was still in the red 2.29% to $82.30. Nordstrom declined 10.74% to $26.02, Kohl’s dipped 10.52% to $45.33 and TJX fell 3.32% to $51.78.
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