COST Costco Wholesale Corporation

By Sarah Nassauer 

The strong U.S. economy wasn't enough to boost all retailers during the key holiday season, with Macy's Inc. and other mall-based stores continuing to lose customers to discounters and e-commerce.

Shares of Macy's Inc. were down almost 19% in morning trading Thursday as the department store lowered its full-year guidance following weak December sales. Rival Kohl's Corp. and mall stalwart Victoria's Secret owner L Brands also posted tepid holiday sales, triggering a broad-based sell off in retail stocks.

"The holiday season began strong -- particularly during Black Friday and the following Cyber Week, but weakened in the mid-December period," said Macy's Chief Executive Jeff Gennette.

The negative sentiment even weighed on discounters like Target Corp. and Costco Wholesale Corp., which reported strong holiday sales. Those chains, which are less dependent on apparel, and Amazon.com Inc. have been taking market share from department stores. Target cited strong demand for toys and baby products along with seasonal gifts.

"The rising tide of retail sales hasn't floated all boats," said Neil Saunders, managing director of research firm GlobalData. "What we are seeing is a polarization between winners and losers.

Macy's said comparable sales, including licensed departments, rose 1.1% during November and December. The chain lowered its sales-growth and profit forecasts for the full year, which ends in February.

The retailer has been investing in a group of stores it calls magnets, adding new lighting, fixtures, a better assortment of merchandise and technology, while trying to shrink less-promising locations. But the changes weren't enough to accelerate growth through what was expected to be one of the most successful holiday seasons in years.

"It's almost as if Macy's is two companies," Mr. Saunders said, adding that the magnet stores have been doing well but the rest of the chain has struggled. "The other stores are dispiriting and crammed with stock, " he added. "That is the issue that Macy's has got to get to grips with."

Kohl's comparable sales rose 1.2% in November and December but the growth was slower than the gains it reported last year. The company sells similar merchandise to Macy's but its stores typically aren't located in enclosed malls.

Target's store and web sales rose 5.7% between Nov. 4 and Jan. 5, the company said Thursday. Sales rose 3.4% during the same period last year. The results put Target on track to have its best full year of sales growth in 13 years, the company said.

At Costco, sales climbed 7%, excluding gasoline and currency fluctuations, during the five weeks ended Jan. 6, the company said Wednesday. Both retailers said more shoppers visiting stores drove growth over the holidays.

Both Target and Costco, and the biggest retailer Walmart Inc., have reported a string of strong sales figures in recent quarters as they have benefited from low unemployment and U.S. wage gains.

Their results suggest retailers that have worked to attract more shoppers online or invested in store operations benefited from 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.

Like Walmart, Target has shifted its focus toward growing online, offering more options to receive web orders at home or pick up those orders in stores. Target said Thursday online sales grew 29% over the holidays. Costco has worked to keep prices for its bulk goods low and added a wider product selection online.

Bed Bath & Beyond also reported encouraging results, saying Wednesday it was ahead of schedule on improving profit margins. Same-store sales at the home-goods retailer continued to decline, but the report sent its stock up by as much as 20% in after-hours trading.

Some retailers have continued to struggle as shopping shifts online and away from department stores. On Tuesday, J.C. Penney Co. said sales fell 3.5% during the nine weeks ending Jan. 5 and that it planned to close more stores this year, continuing a stretch of weak sales figures.

L Brands said comparable sales for its Victoria's Secret brand declined during the holiday season and margins suffered, sending shares down more than 7% in morning trading Thursday.

Overall holiday shopping continued to shift online. Traffic to physical stores fell 3% between Nov. 18 and Dec. 29, according to ShopperTrak, which uses cameras to track shoppers in stores.

On Thursday Target also said chief financial officer Cathy Smith will retire. Target said it has hired a search firm to find her replacement and is considering internal and external candidates. Ms. Smith, who joined the company as CFO in 2015, will stay in her role until a successor is named and act as an adviser until May 2020, said the company.

The company left its financial guidance unchanged. Target still expects fourth quarter 2018 comparable sales to grow around 5% and full-year earnings to be between $5.30 and $5.50 per share.

--Micah Maidenberg, Kimberly Chin and Suzanne Kapner contributed to this article.

Write to Sarah Nassauer at sarah.nassauer@wsj.com

(END) Dow Jones Newswires

January 10, 2019 10:59 ET (15:59 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.