Published: Sun, January 13, 2019
Finance | By Loren Pratt

Macy's shares plunge as weak holiday sales prompt forecast cut

Macy's shares plunge as weak holiday sales prompt forecast cut

Brian Cornell, CEO of USA department store retailer Target, says the company is very pleased with its holiday season performance, which saw a 5.7% rise in comparable sales in the combined November/December period, on top of 3.4% growth in the same period previous year.

Shares in Macy's plunged almost 20 percent, while nearly every major retailer was pulled down as well.

With low unemployment, rising wages and consumer confidence high, there had been optimism about holiday sales receipts.

Target reaffirmed its full-year earnings and sales forecast, putting it on track for the strongest full-year comparable sales growth since 2005.

Department stores fell sharply before the opening bell Thursday, with bellwether Macy's down almost 19 percent after posting worse-than-expected holiday sales. Consumers had more money to spend.

It was supposed to be a great holiday shopping season.

At the same time, these companies also have spent heavily to improve the in-store experience, hiring consultants to help beautify the surroundings and in many cases employing more workers during the peak festive season.

"We know expenses are always a problem as more and more stuff moves online because people simply will not pay for you shipping it to them", said retail industry consultant Jan Rogers Kniffen. "That's just the way it is".

Digital growing pains continue in the retail sector, with department store chain Macy's reporting weaker than expected holiday sales on Thursday and slashing its 2018 earnings outlook. Many investors had expected department stores to enjoy robust sales in light of a US economy buoyed by low unemployment, higher wages, strong consumer confidence and cheap gas. "This sales growth was largely offset by underperformance of other categories- specifically women's sportswear, seasonal sleepwear, fashion jewelry, fashion watches and cosmetics- temporary fulfillment challenges following the fire in our West Virginia distribution center and underestimation of the impact of changes to our pre-Christmas earn and redeem promotional event".

The holiday season started off strong during Black Friday and Cyber Week, but weakened in the middle of December and did not return to expected patterns until the week of Christmas, CEO Jeff Gennette said. Analysts have called for fiscal 2018 adjusted earnings of $5.39 per share and fourth quarter year-on-year comparable same store sales growth of 5%, based on figures compiled by Thompson Reuters. Its comparable sales over the critical November and December months rose 1.1 percent.

Analysts said the declines were exacerbated by expectations that earnings growth will be tough in 2019 after a strong 2018 following the United States tax cut enacted in late 2017.

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