Commentary

Macy's Had A Bad Holiday Season After All -- And Retailers' Stocks Dive

It was all downhill for Macy’s after a promising Black Friday weekend, Macy’s CEO Jeff Gennette disclosed yesterday, sending many retailers’ share prices tumbling southward with its own — even if, as with Target and Costco, they had a positive story to tell.

“Macy's stock plunged close to 18%, its worst day in history, after the company reported sluggish sales for November and December and trimmed its guidance,” Nathaniel Meyersohn writes for CNN Business

“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 Target and Amazon. Amazon’s holiday sales grew 17% this year, according to Rakuten Intelligence,” he adds.

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“The update came just two months after Macy’s said 2018 would end strong,” Alexander Coolidge writes for the Cincinnati Enquirer. “The retailer now expects earnings per share to range between $3.95 to $4.00, down from the previous range of $4.10 to $4.30. Total annual sales are now expected to be flat versus a previously expected 0.3 to 0.7% uptick. The company also said its gross profit margin will shrink, rather than grow.”

Those numbers will be reported on Feb. 26.

In a Bloomberg Opinion piece, Sarah Halzack suggests  that “Macy’s comparable sales figure isn’t as ghastly as the nosedive in the stock would indicate. But that’s not the biggest issue: Even more alarming is the volatility in Macy’s business that is suggested by the details of its report.”

To wit: what derailed all that optimism the company expressed in November?

“Now that its view has darkened so notably in such a short time frame, it is fair to wonder whether executives really have a handle on what it needs to do to be competitive in a cutthroat retail environment, and whether its turnaround initiatives have as much long-term promise as they’d thought,” Halzack says.

“Traditional department stores are fighting for their lives in an Amazon era and even if Macy's does everything right, it may not be enough,” consultant Gerald Storch, who was CEO of Toys 'R' Us and Saks Fifth Avenue-parent Hudson's Bay as well as vice chairman of Target, said yesterday on CNBC’s “Closing Bell.”

“That can be reflected in the performance of what he calls the ‘vastly larger and more significant retailers,’ like Target and Costco. Target said its holiday sales grew 5.7%, topping its 3.4% growth the prior year. Costco reported its sales, excluding gas and foreign exchange, grew 7% in the five weeks ended Jan 6,” CNBC’s Michelle Fox reports.

In short, “anybody who makes a living by selling somebody else’s widely available product, they are not going to be able to make their margin,” Storch believes.

“Thursday’s retail results were a ‘mixed bag’ that showed consumers came out in force over the holidays but were choosy in where they actually shopped, said Neil Saunders, managing director of research firm GlobalData Retail. Target in particular ‘pulled out all the stops to create a compelling and engaging holiday experience,’ Saunders said, and saw that investment pay off,”  Rachel Siegel writes for the Washington Post.

“Ahead of the holidays, Target announced free two-day shipping, with no minimum purchase or membership required, from Nov. 1 to Dec. 22. The company also pledged same-day delivery in 46 states with Shipt and expanded drive-up services to nearly 1,000 stores by the end of October,” Siegel points out.

“‘This is further evidence that the rising tide of the economy is not floating all retail boats,’ Saunders said. ‘It is only helping those retailers who put effort into making their vessels seaworthy.’”

Echoing that observation, Customer Growth Partners president Craig Johnson tells the Wall Street Journal’s Sarah Nassauerthat "traditional department stores’ days are numbered unless they change radically.”

Nassauer goes on to point out that “Target and Costco, as well as larger rival Walmart, have reported strong sales in recent quarters as they have benefited from low unemployment and U.S. wage gains. Their success suggests that those retailers that worked to attract more shoppers online or invested in store operations were able to harness robust consumer spending over the holidays, even as a stock-market swoon and a government shutdown led some investors to worry about an economic slowdown.”

Indeed, the “wells are now dry” for many of the 800,000 federal workers  who “have been living off their savings, credit cards and the last paychecks that landed in their accounts,” as the New York Times’ Jack Healy, Kirk Johnson and Kate Taylor point out. No matter how innovative you get, and how seaworthy your vessel may be, you won’t make a sale to a lot of someones who are broke.

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