The Retail Apocalypse Returns!

By Greg Guenthner

Greg Guenthner

The retail apocalypse is back with a vengeance this earnings season, decimating shares of some of the most recognizable names in the sector.

Nordstrom Inc. (NYSE:JWN) is this week’s latest victim. The stock is tumbling double-digits early this morning after reporting a horrific earnings miss. The upscale mall shop missed top -line estimates and slashed guidance, triggering a wave of after-hours selling that will push the maligned stock to new eight-year lows at the opening bell.

Even before its latest earnings debacle, Nordstrom shares were already feeling the heat. The stock was down almost 20% year-to-date as of Tuesday’s close. An even bigger breakdown looms large this morning…

JWN

Nordstrom isn’t the only retail disaster we’ve witnessed this week.

Kohls Corp. (NYSE:KSS) also failed to impress investors with its first-quarter earnings report, sending shares into a tailspin yesterday. The discount retailer that many analyst hailed as “Amazon proof” just a few short months ago saw its shares tank 12% on Tuesday.

The stock is now down 25% from its April highs.

KSS

In an effort to retain customers, Kohl’s partnered with Amazon to accept returns from the e-commerce king late last year. The chain also dedicated more space to Nike and Under Armour apparel. But neither of these efforts looks to be paying off. As a result, management slashed its full-year outlook after the slow start to the year.

Kohl’s is latest retail chain threatening to join the ranks of sinking mall anchors JC Penney Co. (NYSE:JCP) and Macy’s Inc. (NYSE:M). But at least most Kohl’s locations aren’t stuck in dilapidated malls. In fact, the deterioration of many low-end American malls continues to push traditional anchor stores to the brink of extinction.

Speaking of JC Penny, the once-mighty retailer continues its long march to digital-age irrelevancy as management decided to stop selling appliances in its stores earlier this year. That, predictably, hasn’t helped sales, reports CNBC. The company lost 38 cents a share in the first quarter and shares tanked 7% toward year-to-date lows yesterday.

On the other hand, Macy’s is doing a bit better this quarter. Sales are up a breathtaking 0.7% and the chain profited a full penny per share, reports The Wall Street Journal.

But don’t get too excited for Macy’s. Shares are down almost 30% year-to-date. Following a rough 12 months, Macy’s and JCP remain locked in a race to zero:

JCP

But maybe the writing was already on the wall.

When we last checked up on these stocks during the holiday shopping season, Cyber Monday hoopla wasn’t translating into a win for many big-name retail giants.

As Black Friday dies a slow death, Cyber Monday sales surged last year. Adobe Analytics said the 2018 online shopping festivities generated $7.8 billion in sales. That’s an 18% increase over the previous year’s numbers.

Many of the old-school retailers like Macy’s tried to get in on the action by offering “cyber week” deals. But Amazon remains ground zero for Cyber Monday shopping sprees. In fact, Amazon’s takeover of major shopping events is complete now that the online retailer can boast that its Cyber Monday sale generated its biggest shopping day ever, beating out its Prime Day record from earlier last year.

With Amazon continuing to dominate the industry, the “retail apocalypse” theme that dragged the sector lower for most of 2017 is once again becoming a danger to traditional brick and mortar chains.

While more than a few viable opportunities remain in the retail space, it might not be a bad idea to lighten up your exposure to the sector before it can inflict any more damage.

[Ed. Note: Send your feedback here: askgreg@sevenfigurepublishing.com – and follow me on Twitter: @GregGuenthner]
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