Clothes piled high on tables. Clearance signs hanging from the ceiling. Promotions galore. Have you been to a department store lately? It might look something like that.
It’s been a similar story for retail stocks. There’s a growing gap between the strong and the weak — the retailers that are struggling with a buildup of inventory ahead of the holiday season, and those that have a better grip on what consumers are looking for.
Nordstrom and Macy’s shares are down more than 40% over the past year, while JCPenney shares have cratered 65%. Kohl’s shares are down nearly 30% during the same time period. The declines have weighed on the S&P 500 Retail ETF (XRT), which has fallen 12% over the past year. Meanwhile, Walmart has climbed 27%. Target is up 12%.
Retail earnings overall this quarter aren’t looking good when compared with a year ago. A drop is being forecast for the industry. For a lot of companies, the need to discount items to move out-of-season merchandise off shelves is going to end up weighing on profitability. And department store chains in particular are still struggling to grow sales, whereas Walmart and Target have found pockets of growth in grocery, through their e-commerce businesses and with their in-house brands. Walmart and Target furthermore have been able to… CNBC