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.
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