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Retailers struggled during boom times. What happens if there’s a recession?

Analysts expect the gulf between winners and losers to widen, as illustrated by the latest earnings season

Shares of Macy's stock have fallen 21 percent since it posted disappointing earnings last week. (Julio Cortez/AP)
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High-profile bankruptcies and store closures have gutted some of the nation’s biggest retailers — and that’s during good economic times.

Now, amid fears that the United States is headed toward recession, analysts say another reckoning might be in store as a slowing global economy, volatile stock market and new tariffs are likely to take their toll on American consumers in coming months.

There is little middle ground left in the retail industry: Companies are either doing brisk business or struggling to hang on, analysts say — a trend that is likely to become even more pronounced if the economy sours.

“If there’s another recession — and I think there will be soon — everyone gets knocked down,” said Mark Cohen, director of retail studies at Columbia Business School and the former chief executive of Sears Canada. “The strong get back on their feet. The weak don’t recover.”

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Analysts say the gulf between the sector’s winners and losers is expected to widen in coming months, as illustrated by the latest earnings season. Walmart, Target and Lowe’s all posted better-than-expected profits in the past week, boosting shares of their stock and reassuring investors that U.S. consumers are still opening their wallets. Target’s stock surged 20.4 percent Wednesday to close at an all-time high of $103 after it posted a 17 percent increase in profits and raised its expectations for the rest of the year.

Not as fortunate: department stores and apparel retailers. Macy’s and J.C. Penney posted disappointing earnings last week, causing their share prices to drop by double digits and dragging down the entire retail sector. J.C. Penney has lost $196 million so far this year and expects sales to dip nearly 10 percent in 2019. The company’s stock — trading at about 60 cents a share — is at risk of being delisted from the New York Stock Exchange. Macy’s shares have fallen 21 percent since last week.

Luxury chain Barney’s New York, meanwhile, filed for bankruptcy protection this month, after years of struggling to compete with online retailers. The parent companies of Ann Taylor, Victoria’s Secret and J. Crew also have struggled in recent months. Urban Outfitters this week reported a 35 percent drop in quarterly profits, which executives attributed to declining store traffic and softening demand for its women’s apparel.

So far this year, retailers have announced the closures of more than 7,500 stores, according to data from Coresight Research. By comparison, 5,500 stores were shuttered in all of 2018. A number of national chains, including Payless ShoeSource, Gymboree and Things Remembered, have also filed for bankruptcy protection citing declining sales and mounting debt.

“It’s a real mixed bag of results we’re seeing,” said Neil Saunders, managing director of GlobalData Retail. “The retailers that are doing well are seeing great returns, while the weaker ones are being left behind. The real concern is: What happens if the economy slows down? Polarization is going to become even more of an issue."

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The coming months will be crucial for retailers as they brace for the Trump administration’s new tariffs on $300 billion worth of Chinese imports — including toys, televisions and clothing — that will go into effect in mid-September. President Trump said last week that he would push back some of those tariffs to Dec. 15 “so that they won’t be relevant for the Christmas shopping season,” but retailers say the constant uncertainty is already changing how they prepare for the busy holiday period.

Home Depot this week lowered its sales expectations for the rest of the year, citing “potential impacts to the U.S. consumer arising from recently announced tariffs.”

The sector’s winners — which include Target, Walmart, Lowe’s and Dollar General — have spent the past decade investing in their stores and websites to keep up with consumers’ changing priorities. Walmart and Target have spent millions building up new private-label brands and adding in-store pickup and delivery services in recent years, as they compete with Amazon for a larger share of the market. (Jeff Bezos, founder and chief executive of Amazon, owns The Washington Post.) Analysts say those investments are likely to pay off during an economic slowdown, as Americans trade down to lower-priced retailers to save money.

Target’s chief executive, Brian Cornell, said Wednesday that the company had benefited from the demise of certain competitors in the current “volatile environment.”

“As we sit here today, it’s quite evident that there are retailers in the United States that continue to build share, build momentum,” Cornell said in a call with reporters this week. “There are other retailers that have been cutting stores and cutting expenses. They are helping our position."