Stocks of major retailers dipped Thursday on the heels of their 2018 holiday-season sales reports.
Macy’s shares were down more than 18 percent after the company slimmed its earnings outlook for 2019. In November and December, sales at stores operating for at least a year — including online sales — climbed 1.1 percent.
The holiday season started on a strong note for the retailer, particularly during Black Friday and through the rest of Cyber Week, Macy’s chairman and chief executive, Jeff Gennette, said in a statement. But that momentum fell off in mid-December “and did not return to expected patterns until the week of Christmas,” Gennette said.
While Macy’s saw strong sales in fine jewelry, women’s shoes, dresses and outerwear, for example, that growth was offset by underperformance in other categories, such as women’s sportswear, cosmetics and seasonal sleepwear.
Kohl’s stock was down nearly 10 percent Thursday morning, but regained some losses later, after the company said sales at stores and websites open for at least a year, on a shifted basis, rose 1.2 percent in November and December. The previous holiday season, the company reported nearly 7 percent growth.
Kohl’s chief executive Michelle Gass said customers embraced the company’s investments across multiple digital shopping platforms, which prompted double-digit digital growth. “We are delighted with our 1.2 percent shifted comparable sales increase for the holiday period, which builds on the positive momentum we have achieved throughout the year,” Gass said.
For its part, Target said comparable sales grew 5.7 percent in November and December, though its share price was down almost 5 percent at opening bell. My midafternoon shares had pared some losses, down 3.4 percent. This year’s growth was largely driven by traffic, the company said, combined with a small uptick in the average ticket price. The retailer saw the strongest growth in sales of toys and baby and seasonal gifts.
Target also reported strong results from its store pickup and drive-up options, which grew more than 60 percent from one year ago, the company said. The service accounted for a quarter of the company’s digital sales in November and December.
Thursday’s retail results were a “mixed bag” that showed consumers came out in force over the holidays but were choosy in where they actually shopped, said Neil Saunders, managing director of research firm GlobalData Retail. Target in particular “pulled out all the stops to create a compelling and engaging holiday experience,” Saunders said, and saw that investment pay off.
Ahead of the holidays, Target announced free two-day shipping, with no minimum purchase or membership required, from Nov. 1 to Dec. 22. The company also pledged same-day delivery in 46 states with Shipt and expanded drive-up services to nearly 1,000 stores by the end of October.
“This is further evidence that the rising tide of the economy is not floating all retail boats,” Saunders said. “It is only helping those retailers who put effort into making their vessels seaworthy.”
Still, early holiday season sales figures put the industry overall on track to break records. Just after Christmas, MasterCard SpendingPulse — which tracks retail spending trends — said holiday sales had seen the strongest growth in the past six years, surging 5.1 percent to more than $850 billion. And Amazon.com touted strong sales on millions of Amazon Devices and widespread use of free holiday shipping perks.
As for Macy’s, poor holiday results in 2018 “is definitely a marker for a poor 2019,” said Mark Cohen, director of retail studies at Columbia Business School. “This holiday in total was excellent but clearly a tale of two cities,” Cohen said.
As Sears announces more store closures, and JCPenney and Macy’s risk the same fate, Cohen said the closures “will be a potential death knell for hundreds of secondary and third-level malls throughout the U.S.” Those three retailers have served as longtime anchor department stores for shopping malls.
Sucharita Kodali, an analyst at Forrester, said retailers this year will have a series of macro-level challenges to contend with, from tariffs to talks of a possible recession. And given how cyclical retail is, Kodali said, the industry can’t be expected to see 2018-level growth this year.
Macy’s in particular could reel in stronger growth if it reassessed chronically soft or dying categories and reallocated space in stores to make room for higher-selling items. To increase its edge digitally, Macy’s could look into apps that help shoppers locate specific items in specific stores — services that already exist at some of the company’s big-box competitors.
Still, Kodali said Macy’s has made strides in other ways. Those include its Growth50 plan, which takes test projects, like mobile checkout, from one store to 50 locations. Plus, its holiday season growth shouldn’t be discounted altogether, Kodali said.
“It’s tough, so I think we’ve got to frame it from the standpoint that so long as they’re holding their own, I don’t know there’s much more we can ask for,” Kodali said.