Retail stock under pressure: Macy’s Inc (NYSE: M)

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Macy’s Inc (NYSE: M) stock fell 17.66% on January 11th, 2019 and continued its bearish momentum falling over 1% this morning (as of 10:46 am GMT-5; Source: Google finance) after the company reported weak holiday sales and cut its 2018 earnings outlook, saying its sales momentum during the holidays weakened in mid-December. Shoppers have been turning away from department stores in favor of buying directly from individual brands like Nike. While Macy’s has tried to lure consumers with initiatives like in-store pickup and a loyalty program, those pushes have not directly translated into sales.

The fourth quarter is usually Macy’s strongest, boosted by holiday shopping. But while the department store had a strong Black Friday and Cyber Monday, CEO Jeff Gennette said sales weakened in mid-December and didn’t fall in line with the company’s estimates until the week of Christmas

Meanwhile, Comparable sales will grow about 2 percent, down from a previous outlook of at least 2.3 percent. Macy’s revised its sales forecasts for the fiscal year 2018, saying it expects no growth in net sales, instead of its previous projection of an increase of 0.3 to 0.7 percent. It’s now calling for diluted earnings per share to fall within a range of $3.95 to $4, compared with a prior range of $4.10 to $4.30. Analysts were calling for earnings of $4.23 a share, according to a survey by Refinitiv.

Macy’s says same-store sales during November and December were up just 1.1 percent. Macy’s also has now reported four consecutive quarters of same-store sales growth, meaning it’s facing tougher comparisons heading into 2019. The company’s been investing in its mobile app, building out a loyalty program and growing its discount store vertical known as Macy’s Backstage to keep the momentum going. But that might not be enough

Bank of America changed its rating for Macy’s stock from “neutral” to “underperform” after the department store chain reported disappointing holiday sales and lowered its revenue and profit forecasts for 2018.

Slowing sales and more pressure on profit margins will no doubt increase the divide between the winners and losers in the retail industry. Over the past two years, a slew of bankruptcies, including high-profile chains such as Toys “R” Us Inc and Sears Holdings Corp, had some calling this era a “retail apocalypse”. But those struggles occurred during a frothy environment – 2017 and 2018 was the best two-year stretch for retail sales during the economic recovery.

With today’s slide, the company erased its entire gain in 2018. Macy’s cited underperformance in categories such as women’s sportswear, fashion jewelry and cosmetics. It also said it had some issues fulfilling orders after a fire at its West Virginia distribution center.

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