Retail Between Its Legs

Macy's results

Image source: Alizada Studios - Shutterstock

What's going on?

American department store chain Macy’s may have bagged itself strong earnings last quarter – but overall US retail sales figures for April disappointed investors on Wednesday (tweet this).

What does this mean?

Macy’s reported profit on Wednesday that was well ahead of investors’ expectations, drastically lowered following a black Christmas. Online sales growth was particularly strong, with mobile transactions now accounting for 4% of total sales.

Nevertheless, Macy’s sales remain lower than this time last year – and the company doesn’t expect them to get any bigger this year either. Inventory remains a challenge, with even more unsold stock currently lying around than Macy’s had at the end of last year. The success of plans to overhaul systems, cut management jobs, and save $100 million is therefore crucial.

Why should I care?

For markets: Trade wars hit traders.

April’s US retail sales failed to impress – they fell 0.2% compared to the month before as American consumers tightened their purse strings, and manufacturing slowed too. That decline was unexpected, given stellar March sales growth of 1.7%. But the ongoing US-China trade dispute – and accompanying higher prices for certain goods – may have had something to do with it. Already-struggling retailers like Macy’s may not be shaking the Stars ‘n’ Stripes too vigorously…

Zooming out: Alibaba reaches the clouds.

Chinese ecommerce giant Alibaba reported blockbuster quarterly earnings on Wednesday. Unlike Macy’s (or even Amazon, which it’s now beaten back from China) the country’s biggest online retailer achieved sales growth of 51% compared to the same period last year. The bulk of profit growth, however, came from growing demand for Alibaba’s cloud computing services. And a slump in Chinese retail sales in April – which recorded their slowest growth for 16 years – will be a concern for the company; although unlikely to keep it from enthusiastically waving the Five-starred Red Flag.

Originally posted as part of the Finimize daily email.

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