EC What Ails Macy's And The Other Department Store Stocks?

The earnings focus this week is exclusively on the Retail sector as traditional brick-and-mortar retailers, including department stores, come out with their quarterly results. The earlier Walmart (WMT) earnings release and Friday morning’s October Retail Sales report reconfirm that the consumer spending backdrop remains favorable.

That is certainly positive news for the retailers. But it is hardly a new development, as strength in household spending has been helping sustain U.S. economic growth in recent quarters even as manufacturing and other trade-exposed parts of the economy have been struggling.

Not all retailers have been able to capitalize on this favorable consumer spending environment. The stock market performance of traditional retailers shows this divergence in stark terms.

You can see this in the chart below where we have shown the year-to-date performance of four traditional retailers – Walmart, Dollar General (DG), Home Depot (HD) and Macy’s (M). It is perhaps fair to see each of these companies as proxies for their respective space in the broader Retail landscape.

Of these four companies, Walmart has already reported strong results, while Home Depot and Macy’s are on deck to report results on Tuesday and Thursday this week, respectively.

As you can see in the chart above, three of the four stocks have been stellar performers this year, but Macy’s appears to be in a league of its own. Most of the other department store stocks are not that far off from Macy’s performance lately. So, what’s driving the Macy’s underperformance?

The issues plaguing Macy’s are longstanding and not new. These include the company’s struggles with adjusting to the changed retail landscape characterized by consumer dollars steadily shifting to the online medium. Macy’s and other department stores have made good progress in recent years through their so-called omni-channel offerings that integrates the brick-and-mortar infrastructure with the digital offering. For Macy’s, store pickups accounted for 7% of total online sales in Q4, reflecting consumers’ growing embrace of the company’s omni-channel capabilities.

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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Seth Golden 7 months ago Contributor's comment

Title of the article doesn't find the article itself answering or lending itself in any way toward answering the question. Clearly, "online" is not the only problem, but thanks for spending 2 sentences on it sir.