What's going on?
Macy’s, the huge US department store chain, reported another set of poor results and the stock dropped 15% to hit its lowest level in 4.5 years. And everyone is blaming millennials!
What does this mean?
Very simply, fewer people are shopping in department stores – and that’s largely down to a change in the shopping patterns of young people. When we want something fresh, we go to Zara or another “fast fashion” outlet that brings in a new style every few weeks. When we want something standard, we buy it off of Amazon. And when we want something really cheap, we head to a discounter like TJ Maxx (known as TK Maxx in Europe). While that is, of course, a big generalization, it is a decent summary of what’s squeezing out big, traditional retailers (in Europe and the US).
Why should I care?
For stocks: The news hurt other retailers too. Macy’s slashed its expectations for total profit this year. Investors took that as a negative sign for the whole sector and companies like Nordstrom and Kohl’s (which both report earnings on Thursday) saw their stocks sell off about 6%. The real problem appears to be that e-commerce is growing while “traditional” retail isn’t – and Amazon accounts for about 50% of e-commerce growth in the US.
For you personally: You win, businesses lose. Lots of things are getting cheaper – and that’s often due to technology. E-commerce players can offer very competitive prices because they don’t need to pay for physical shops. Similarly, entertainment is also going down in price (i.e. streaming is cheaper than traditional cable TV). It’s no coincidence that both Macy’s and Disney’s stock prices are suffering – their pricing power is getting depleted. And you’re benefitting!