Weak sales at department stores catch many off guard

Macy’s head says holiday sales didn’t follow through on strength of Black Friday

Unemployment hasn’t been so low in years, wages are rising, consumer confidence is high and gasoline is cheap, all creating high expectations for department stores this holiday season.

That’s not what investors got in sales numbers released Thursday. Department stores fell sharply before the opening bell, with bellwether Macy’s down nearly 19 per cent after posting worse-than-expected sales in the period leading up to the holiday. The Cincinnati company also cut its full-year earnings and sales forecasts after saying that same-store sales rose about1per cent during November-December. Chair and CEO Jeff Gennette said in a prepared statement that things started out strong during Black Friday and Cyber Week, but sales fell off noticeably until the week of Christmas.

Macy’s Inc. lowered its fiscal 2018 earnings outlook to $3.95 to $4 per share from its prior per-share earnings for $4.10 to $4.30 per share. That’s well below the per-share projections of $4.23 from industry analysts.

Shares of Kohl’s plunged as well after reporting holiday sales fell sharply from a year earlier. Comparable-store sales rose 1.2 per cent, compared with 6.9 per cent in the previous year. Shares of Kohl’s Corp., based just outside of Milwaukee, fell 10 per cent. Earlier indications had been fuelling optimism about the performance this year during the holiday.

In late December, Mastercard SpendingPulse, which tracked spending online and in stores across all payment types, said its numbers showed a 5.1 per cent jump in retail sales between Nov. 1 and Dec. 24. And it said online sales continued to grow, up more than 19 per cent from a year ago.

The ongoing rebound expected from department stores has apparently not materialized as expected, and the S&P sector that tracks them quickly became the worst performer of the day.