Amid YTD Rally, Retail Stocks Miss Out

Stocks are up modestly to start the year, but based on Thursday’s trading action, the retail sector is escaping investors’ favor (to put it mildly), as company after company is bringing dismal news to light.

Turns out the holiday shopping season was no salve for the lingering woes bedeviling retail giants ranging from Macy’s to Kohl’s and others.

And, en masse, the shares are getting slammed.

Exhibit A, after a fashion, would be Macy’s, which saw its shares trade down as much as 19 percent intraday. Per numerous news sources, such as CNBC, it’s the worst trading day for the stock.

The culprit lies in a warning that holiday sales were weak and that 2018 results would be below expectations. The commentary from Macy’s seemingly bodes ill for the sector.

Said the retail giant: Activity weakened “in the mid-December period and did not return to expected patterns until the week of Christmas.” That’s per a management statement released ahead of the Thursday trading session. The numbers show that online sales and brick-and-mortar locations were up just over 1 percent in November and December.

So, perhaps predictably, the investor rush toward the exits commenced. The fact remains that Macy’s did not sell as much as it had thought it would, across a broad swath of categories ranging from sportswear to jewelry. The malaise was and is enough to spur the company to ratchet down its sales forecasts for the fiscal year, as same-store sales are slated to grow by about 2 percent for the year, down from a previous view of 2.3 to 2.5 percent.

The broad brush of headwinds, across holiday shopping in general and across any number of categories as noted above, helped send down shares of peers. Guidance from other firms did not help, as Kohl’s sank 7 percent on its own alert that same-store sales growth was up 1.2 percent. Target seemed to buck the trend, with same-store sales through the holiday season up a relatively stellar 5.7 percent. No matter, as the stock was off 4 percent as of this writing.

The rough retail numbers do not seem to dovetail with data that has marked the macro landscape, with low unemployment and (somewhat) rising wages. But the bifurcation is in evidence: Target, as noted The Wall Street Journal, has been on an eCommerce tear, where online sales were up 29 percent year on year. Bits and bytes help take the bite out of what might be termed tepid same-store visits of the brick-and-mortar kind. And, of course, it’s a lesson that takes on urgency as investors flee.