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Macy’s shares tanked by 19 percent Thursday, on pace for their worst day ever, after the department store chain reported weak holiday sales and cut its 2018 earnings outlook.
While the holiday season started strong during Black Friday weekend, it “weakened in the mid-December period and did not return to expected patterns until the week of Christmas,” said CEO Jeff Gennette, in a statement released before the markets opened. Online sales in November and December as well as at stores operating for at least 12 months were up a combined 1.1 percent, the company said.
The news set off broader alarms across the industry as other retailers reported their holiday sales Thursday morning. L Brands and Kohl’s were both down by about 9 percent, and J.C. Penney and Nordstrom fell around 7 percent.
Macy’s didn’t sell as much women’s sportswear, sleepwear, fashion jewelry, fashion watches and cosmetics as executives hoped, according to Gennette. He said that weakness overshadowed overall sales growth.
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.
Macy’s said it now expects same-store sales to rise by roughly 2 percent in fiscal 2018, down from a prior forecast of 2.3 to 2.5 percent.
The bar was high for Macy’s heading into the holiday season, as many investors have been unsure if there’s still room for growth for the retailer, or if its best years are already behind it. Macy’s shares had rallied more than 80 percent over a 12-month period ahead of Thanksgiving.
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.
“The weak holiday performance now raises a big question mark over Macy’s recovery strategy,” GlobalData Retail Managing Director Neil Saunders said.
“This had been gaining traction, but it has been let down by Macy’s inability to get the basics of retail right across all parts of its business,” he added. “These numbers underline the fact that it needs to work harder at creating a much more compelling and engaging retail experience in 2019 and beyond.”
Faced with these challenges, Gennette said Thursday that Macy’s “will continue to take the necessary steps in January to ensure a clean inventory position” this year.
Moving items like apparel and home goods off of shelves is something department store chains have struggled with, as more and more shoppers are going directly to brands like Nike and Coach to make purchases. The result is a pileup of inventory, where companies like Macy’s and J.C. Penney must slash prices, impacting profits.
As of the market close on Wednesday, Macy’s shares were up a little more than 28 percent over the past 12 months.