Retail Sector Plunges After Macy's Disappoints

Macy’s disappointed investors Wednesday with earnings that were far below expectations, while also lowering their guidance for the remainder of 2019. The news sent shares of the retailer plunging as much as 17% and also dragged down rival department store shares as investors punished the entire sector.

Analysts had expected earnings to fall 22% to $0.46 a share, but investors were shocked when Macy’s reported earnings per share of just $0.28. They also cut their full year earnings per share estimates from $3.05-$3.25 a share to $2.85-$3.05 a share, and said they expect revenue and same store sales to remain flat.

Rival Nordstrom, which reports on August 21 saw its shares fall 10.5% following the earnings, while Kohl’s, who report on August 20, had their shares cut by 11%. Shares of Dillard’s and J.C. Penney also tanked, with the former down 3% and the latter falling 5.9%.

The declines came with a backdrop of a falling broader market as the Dow opened the day with a 450 point loss. Big box retailers weren’t hit nearly as hard, with shares of Target falling 3.1%, while Walmart, who reports on Thursday saw its shares losing 0.7%.

Macy’s said that excess spring inventory caused them to cut prices, which weighed on profits for the quarter.

The entire department store sector has been under pressure for several years now as consumers turn increasingly to online portals such as Stitch Fix and Gilt to shop for clothing. 2019 has been especially difficult as they also deal with increased tariffs on clothing and shoes