Macy’s, Kohl’s Fall on Concern About Slow Department-Store Sales

  • Nordstrom Anniversary sale may be fizzling, analysts say
  • Companies report their quarterly earnings later this month

Shares of Macy’s Inc., Nordstrom Inc. and Kohl’s Corp. fell on Tuesday after reports about weak summer sales reignited fears of a department-store slump.

Macy’s, the biggest department-store company, suffered a sales downturn in July, following improving trends in late May and June, Cleveland Research said in a note. The slowdown has forced the retailer to be more aggressive with markdowns, the firm said. Nordstrom, meanwhile, is getting less of a bump from its famous Anniversary sale, according to Detwiler Fenton.

While the National Retail Federation is predicting a rise in back-to-school budgets this year, Commerce Department data from June showed that households are dipping into savings to fuel their spending. That could mean current levels can’t be maintained.

“It’s not sustainable, and items like clothing are among the first things that are going to get cut out of that spending,” said Bridget Weishaar, an analyst at Morningstar Investment Service.

Stocks Tumble

The retailers suffered their biggest intraday declines since May, with Macy’s dropping as much as 5.9 percent. Kohl’s fell 6.8 percent, while Nordstrom slid 6.9 percent.

At Nordstrom, there were early signs that its annual sale was generating strong traffic. But sales may have slowed more recently, Detwiler Fenton said in a note to clients. Nordstrom also added a sale at its off-price Rack chain. That’s the first time the two brands have run simultaneous events, a sign of increasing reliance on promotions.

Kohl’s has been working to improve its product offerings, but it’s still a challenge to get customers in the door. Lindsay Drucker Mann, an analyst at Goldman Sachs Group Inc., said in a note that foot traffic remains a concern for the chain.

Macy’s and Kohl’s are scheduled to report second-quarter earnings before the market opens on Aug. 11. Nordstrom is expected to release its results after the market closes that day.

“The fact that department stores are down more than other brick-and-mortar retailers doesn’t surprise me,” Weishaar said. “The most exposed to e-commerce are the department stores: They’re carrying the same merchandise, and the in-store experience isn’t spectacular. So they’re losing foot traffic, and they’re discounting heavily.”

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