Macy’s Inc. shares slid more than 8% Tuesday to their lowest level since Feb. 2011, after the company warned that gross margins will be weaker than forecast as the company struggles to shift inventory.
Macy’s made the comment at an analyst day, according to media reports. The news triggered a wave of selling of department store chains, that quickly spread across the retail sector, sweeping up Kohl’s Corp. KSS, -5.78% Nordstrom Inc. JWN, -3.63% Foot Locker Inc. FL, -4.37% and Dollar General Corp. DG, -3.79% to name a few. The consumer discretionary sector was the weakest of the S&P 500 subsectors with Macy’s M, -8.21% leading the rout.
Macy’s stock has been under pressure since the company’s weaker-than-expected earnings last month, with same-store sales falling for a ninth straight quarter.
“Don’t count us out, we’re not dead,” Karen Hoguet, Macy’s chief financial officer, told The Wall Street Journal in an interview. The company is hoping new initiatives will boost sales, including reconfigured shoe and fine-jewelry departments.
Macy’s, like its rivals, is struggling in a time of upheaval for retailers, as shoppers increasingly head online, especially to juggernaut Amazon.com Inc. AMZN, -0.83% The competition from Amazon is forcing retailers to invest in their own online shopping and delivery technology. At the same time, they are dealing with changing consumer behavior and shopping habits and pressure on discretionary spending.
A number of retailers have filed for bankruptcy in the last year, including Rue21, Payless ShoeSource, Eastern Outfitters, Wet Seal, American Apparel, Aéropostale Inc. AROPQ, +6.17% and Sports Authority. The list of retailers that are close to default or have debt that is distressed is long, and includes such storied names as J. Crew, Sears Holdings Co. SHLD, -2.51% Gymboree and Neiman Marcus.
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“The specialty retail sector is in a period of unprecedented secular change that is disruptive to traditional business models, and we believe operating conditions in our sector are likely to remain challenging for the next 12 to 24 months,” said Ascena Chief Executive David Jaffe.
Among individual stocks, Kohl’s closed down 5.8%, Nordstrom was down 3.6%, Foot Locker fell 4.4% and Dollar General was down 3.8%