*Sigh*, Its Tough Being A Traditional Retailer

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What's going on?

Major US department stores reported financial results this week and it led to some extreme moves in stocks like Macys, Nordstrom, Kohls and JCPenney.

What does this mean?

Macys and Nordstrom fared the worst (relative to investor expectations at least) with their stocks down around 15% after their results. These are both higher-end department stores that are (probably) suffering from people changing both the things they buy and how they buy them. Kohls and JCPenney have spent years underperforming stronger companies like Macys, but in the most recent quarter they have pulled up their socks. JCPenney reported a rise in sales (full results come on Friday) and Kohls beat profit expectations which sent its stock up 7%. However, Kohls profits are still declining versus previous years and JCPenney isnt even profitable at all - so its not exactly clear sailing.

Why should I care?

  1. The bigger picture: These companies are fighting over a shrinking pie. Young people are more likely to buy a $700 iPhone than splurge at a department store. When people do buy something thats sold at a department store, they often buy it from Amazon. In a struggling industry, its normal for companies to start buying each other so that costs can be cut (it gives the companies a greater ability to negotiate lower prices from suppliers, for example). Thats what might need to happen with traditional retailers before they and their profits - can recover.
  2. For you personally: Clothes (in America) are going to get cheaper! Macys said that it had lots of unsold items and that it would discount many items leading into Christmas in order to shift that inventory. That is not only bad news for Macys but also for other retailerswhowill probably be forced to discount their products as well. Thats good news for your Christmas shopping though!
Originally posted as part of the Finimize daily email.

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