What's going on?
Thursday saw a troop of Christmas updates from US retailers. The runt of the litter was department store chain Macy’s: its stock dropped 18%, swooping like a Black Friday price tag.
What does this mean?
Weaker-than-anticipated sales growth in the last two months of 2018 led to Macy’s slashing its annual sales and profit target. The company wasn’t alone: shares of rival Kohl’s fell 5%, thanks to disappointing holiday results of its own.
There were a couple of gifts for investors, however. Retailer Target’s sales grew by 6% compared to last year’s holiday period (if it’s good enough for Beyoncé…), and the company told investors it’d meet its planned, er, targets. And things really clicked at Bed Bath & Beyond: shares rose 17% after it announced strong improvements in profitability that offset weaker-than-expected sales growth.
Why should I care?
For markets: Retail’s shakedown shook US stocks.
As investors sold Macy’s shares, they also ditched several other retailers – including some which didn’t give an update this week – weighing on the US stock market overall. Last quarter’s likely to have been tough for retailers everywhere, partly thanks to aggressive discounting; even Amazon’s revenue growth forecast for the all-important holiday quarter wasn’t as prime as investors had come to expect. Airlines may also be showing symptoms of cooling consumer spending: American Airlines warned investors on Thursday that its quarterly profit would be lower than predicted, and others may follow suit.
The bigger picture: It’s a similar story across the Atlantic.
This Christmas was the worst in a decade for UK retailers. Sainsbury’s – Britain’s second-biggest grocery chain, and currently looking to bulk up further with Walmart’s large UK arm – reported a decline in quarterly sales on Wednesday. And at British department store Debenhams, holiday sales fell by more than 3% – leaving it scrambling to hash out a turnaround plan with its lenders in a bid to avoid being sheared like Sears.