Retail stocks were under serious pressure Tuesday morning after Macy’s Inc (NYSE:M) issued a profit margin warning. This continued the bad news for the brick-and-mortar space as Amazon.com, Inc. (NASDAQ:AMZN) increasingly captures consumer spending wallet share.
Furthermore, all of this comes amid an overall stalling of retail sales economy-wide as post-election ebullience and a strong job market hasn’t translated into higher sales and an acceleration in wage inflation.
The SPDR S&P Retail (ETF) (NYSEARCA:XRT) is declining to critical two-month support near $40, threatening a breakdown to levels not seen since early last year.
Here are three retail stocks to avoid amid the carnage:
Ravaged Retail Stocks: Macy’s Inc (M)
Macy’s Inc (NYSE:M) stock is falling to fresh lows, as it tests $22 for the first time since the summer of 2011, and reaches for a loss of more than two-thirds from its 2015 high of $68.82.
During its investor meeting, M management warned that profit margins for fiscal 2018 could be upwards of 0.8%, which is below prior guidance issued in February.
What’s to blame? Liquidation of excess inventory — clearance sales baby! — as product sales at planned prices are coming in too slow. Meekly, Macy’s CEO Karen Hoguet said there is a place for both Amazon and Macy’s to succeed. But M stock investors aren’t buying it.
Ravaged Retail Stocks: Target Corporation (TGT)
Target Corporation (NYSE:TGT) is falling back below its 50-day moving average as it continues to struggle with tepid traffic and sales trends, as well as a loss of momentum following the implementation of its grocery initiative a few years ago.
Management is looking to invest in store updates to generate fresh excitement in TGT, but investors aren’t interested: Shares are down more than 31% from their early 2016 high.
Target will next report results on Aug. 16 before the bell. Analysts are looking for earnings of $1.05 per share of TGT stock on revenues of $15.99 billion. Back on May 17, the company reported a 1.3% decrease in comp-store sales driven by declines in both traffic and basket size, while overall revenue fell 1.1%.
Ravaged Retail Stocks: Nordstrom, Inc. (JWN)
Nordstrom, Inc. (NYSE:JWN) shares are threatening to fall through critical support at its May lows reach closer to $40, worsening a 35% decline from its late 2016 high and a 45% decline from its early 2015 high. Watch for a drop in JWN stock to its early 2016 low near $34, which would be worth a further 15% decline from here.
Nordstrom will next report results on Aug. 10 after the close. Analysts are looking for earnings of 61 cents per share of JWN stock on revenues of $3.7 billion. Analysts at RBC Capital Markets lowered their target following the reporting of disappointing Q1 results on May 17 amid a slowdown in comp-store sales and merchandise margins.