Macy’s led a broad sell-off that wiped more than $30bn from the value of US retailers on Thursday after the department store chain cut sales and earnings guidance for its fiscal year, less than two months after upgrading it, in a move that sent shares tumbling by nearly one-fifth.
Down 19.4 per cent in morning trade at an 11-month low of $25.58, the Cincinnati-based retailer was eyeing its biggest one-day drop on record as investors digested the underwhelming holiday trading update.
While its holiday season began with a strong Black Friday, Macy’s said things weakened in the middle of December and did not recover until the week of Christmas.
As a result, the retailer now projects comparable sales growth, a key industry metric, of just 2 per cent in fiscal 2018, down from the range of 2.3 per cent to 2.5 per cent it had been bumped up to in mid-November.
Earnings are expected to come in the range of $3.95 to $4.00 a share, compared with mid-November guidance of $4.10 to $4.30 a share.
The disappointment weighed on rivals, prompting some companies like Target, which reported solid holiday sales, to swing to losses from gains in pre-market trading. Kohl’s tumbled more than 8 per cent while JC Penney shed 6 per cent.
The S&P 500 retail index was down 2 per cent, on track for its biggest one-day drop since December 21, with an overall decline in market capitalisation of about $32bn. Macy’s shed about $1.9bn in market value.
Jeff Gennette, chief executive, said in an update that there was a strong performance during the holiday period across categories including fine jewellery, women’s shoes, fragrance and dresses, among others, but this was “largely offset” by underperformance in areas such as women’s sportswear, fashion watches and cosmetics.
“We are revising the guidance we provided in November and will continue to take the necessary steps in January to ensure a clean inventory position as we enter fiscal 2019,” Mr Gennette said.
Macy’s said comparable sales rose 0.7 per cent from a year ago during the November-December period, marking a second consecutive year of positive holiday comparable sales. It also pointed out that even its revised guidance for full-year comparable sales was still double that given in February 2018.
Still, investors were unimpressed and thumped the stock as much as 19.6 per cent lower in morning trade. At these levels, the stock is on track for its biggest one-day drop since it listed in 1992, eclipsing its previous record tumble of 17.5 per cent on October 10, 2008.
