by Mish

On Wednesday, Macy’s reported the worst quarterly sales since recession. On Thursday, Nordstrom did the same. Same store sales fell at Nordstrom for the first time since 2009. Kohls posted an 87% drop in profit and an unexpected decline in sales.

The stores struggle to explain why consumers are not spending. Analysts blame Amazon.

Is amazon the culprit?


Macy’s Reignites Retail Worries

The company’s poor results and downbeat comments Wednesday triggered a selloff across apparel makers, mall owners, luxury brands and rival chains. Macy’s shares had their biggest drop since 2008. “We’re, frankly, scratching our heads,” said Chief Financial Officer Karen Hoguet.


Nordstrom Cuts Outlook After Disappointing Quarter

Nordstrom Inc. on Thursday cut its financial projections for the year following worst-than-anticipated results for the first-quarter, as the retailer said it needed bigger discounts to clear inventory.
The retailer, struggling to revamp sales at its full-price stores, has reported lower profit in five of the past six quarters, including the three most recent quarters.


Kohl’s Posts Surprise Revenue Decline

Kohl’s Corp. on Thursday posted a 87% drop in profit in the latest quarter and a surprise decline in sales, in the latest sign of distress by a department-store retailer.
Shares of Kohl’s dropped 9.2% to $35.15, its lowest close in more than seven years and the worst performer Thursday in the S&P 500. Over the past 12 months, the stock has declined 53%. Chief Executive Kevin Mansell called the first-quarter “challenging” and said the company “took the markdowns necessary to clear excess inventory.”
In the most-recent quarter, sales at Kohl’s established stores declined 3.9%. Analysts were expecting 0.4% growth in same-store sales this quarter, according to Consensus Metrix.


Dillard’s Profit Drops on Weak Sales

The Little Rock, Ark.-based department store said sales at stores open at least a year slid 5% in the first three months of the year, marking the third straight quarterly decline and more than double the decrease analysts projected.
Chief Executive William Dillard II said disappointing sales pressured the company’s gross margin and net income, eclipsing efforts to control expenses. “Sales leverage was difficult to achieve,” he said, noting particular weakness in home, furniture and women’s categories.

Ralph Lauren

Ralph Lauren Profit Plunges Amid Higher Costs, Lower U.S. Sales


Ralph Lauren Corp.’s profit plunged in its latest quarter, hit by higher costs and lower U.S. sales, intensifying pressure on its new chief executive to outline a strategy that will return the company to growth.
Net income dropped 67% to $41 million in the three months that ended April 2, weighed down by the cost of closing stores and trimming expenses. Sales excluding newly opened and closed stores fell 6% for the period and total revenue fell 1% to $1.9 billion.
Stefan Larsson, who became CEO in November, said he spent his first months at the company doing a “deep dive” to understand how the business works. Mr. Larsson said the company hasn’t focused enough on developing its core offering, described its cost structure as inefficient and said it isn’t “nimble enough in the marketplace.”

Amazon to Blame?

Thanks to the Wall Street Journal for all the preceding links.

Here’s one more from the WSJ: Retail Slump Shows Amazon Effect.

Department stores are in a funk and executives at some of the country’s biggest chains are struggling to explain why consumers aren’t spending more time and money in their stores.
But analysts have a familiar culprit: Inc.

Blaming most of this funk or even a third of it on Amazon is a bit misguided. Simple math explains why.

In the above chart, the percentage total excluding Amazon is 41.6% of the market. Amazon is 6.7%.

How much did Amazon grow in the last year? Two percentage points? One? Spread that growth out and Amazon cannot possibly be the largest problem.

No Head Scratching Needed

Instead of scratching his head, Macy’s CEO ought this take note of this comment from the article.

Discount chains like T.J. Maxx and fast-fashion retailers such as H&M, which can offer jeans as cheap as $17 and polo shirts for $10, are grabbing foot traffic and hurting demand for the $50 jeans and $80 polo shirts that Macy’s sells.
“People are getting pickier,” said Ken Bernstein, chief executive of shopping center owner Acadia Realty Trust, in a recent interview. He said sales at his malls increased in the first quarter, but noted that shopping centers were increasingly housing services such as hair salons and fitness centers instead of stores where people buy goods.

Mish 12-Point Summation

  1. Macys, Nordstrom, Dillards, Kohls, Ralph Lauren, etc., all overexpanded mightily. Stores are in such strong competition they cannibalize their own sales.
  2. Boomers are retiring and have less money to spend. At some point they start wondering if they will outlive their savings.
  3. The Millennials and generation Z don’t make as much as the retiring boomers did.
  4. Priorities and attitudes of the millennials and generation Z are far different than that of their parents and grandparents. Relative to older generations, Millennials shun debt. Store executives still have not figured out this attitude shift.
  5. Health care costs are going up far faster than wages. This weighs on consumers’ minds.
  6. Consumers are tired of high prices.
  7. Consumers have too much debt.
  8. Women can only buy so many shoes and purses (I think).
  9. Consumers sense a recession, even if analysts don’t.
  10. It takes sales staff to run a store, overall profits decline at some point.
  11. It takes inventory to fill a store, inventory-to-sales numbers rise as a result.
  12. OK, somewhere in here blame Amazon.

Apparel Manufacturers Inventories to Shipments

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Not only are retail stores overloaded with inventory, so are the manufacturers.

Autos and department store sales have fallen. Is housing next?

Mike “Mish” Shedlock

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