January 10, 2019 / 11:29 PM / 11 days ago

Breakingviews - Investors stop giving U.S. retailers an inch

Macy's balloons are carried down 6th Avenue during the 92nd Macy's Thanksgiving Day Parade in New York City, New York, U.S., November 22, 2018. REUTERS/Carlo Allegri

DALLAS (Reuters Breakingviews) - Investors aren’t giving U.S. retailers an inch. Macy’s shares fell by nearly a fifth on Thursday after weak December sales prompted it to cut forecasts. Target and Kohl’s also felt the downdraft despite more upbeat numbers. Online disruption and the decline of old stalwarts Sears and J.C. Penney have made investors justifiably jittery.

The 160-year-old retailer said comparable store sales during the holiday season were up only about 1 percent from a year earlier, a tepid figure considering Mastercard estimated overall retail sales rose some 5 percent over the period. A fire in a distribution center in West Virginia snarled some deliveries during the gift-giving time crunch. The company lowered guidance for full-year sales, but only slightly, to 2 percent from as much as 2.5 percent previously.

Still, Macy’s shares plummeted more than 18 percent, knocking nearly $2 billion off the company’s market value. Target reported holiday sales growth nearly doubled from a year earlier, to almost 6 percent, yet its stock fell more than 3 percent. Kohl’s posted reasonable sales, and raised the lower end of its earnings guidance, but its shares slid more than 6 percent.

The specter of Sears and J.C. Penney hurts Macy’s. The three have some 400 years of collective retailing history, but their experience didn’t help them transition to e-commerce fast enough. Sears is on the brink of liquidation and J.C. Penney is a virtual penny stock.

Macy’s has fared better – its digital sales have grown by double digits in recent quarters. But it also operates in many of the same malls as the other two veterans. Their store closings are both an omen and a detriment. Empty real estate doesn’t attract shoppers.

Shares of Macy’s and other retailers had risen last year on hopes they would benefit from buoyant consumer spending. In today’s climate of growing economic uncertainty, though, investors harshly punish any failure to meet or exceed expectations. They did just that to consumer-sensitive airline stocks on Thursday after American Airlines cut its forecast. Like airlines, retailers have to go above and beyond to calm investors’ jitters.

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