Walmart, Target winning as Kohl's, Macy's stumble
'There's a shift away from the mall and towards a large discount department stores'
The U.S. retail divide is getting even wider as consumer's shift in tastes. The result is creating winners and losers across the retail landscape.
“Retail is very healthy,” Gerald Storch, CEO of Storch Advisors and former chairman and CEO of Toys R Us, told FOX Business.
“It's just there's a shift away from the mall and towards a large discount department stores like Target and Wal-Mart. And there's a shift away from bricks and mortar to the Internet.”
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Retail sales rose 0.3 percent in October, according to government data released Friday, after suffering their first monthly decline in 11 months during September. They were up 3.1 percent year-over-year.
One such winner is the off-price retailer TJX, owner of Marshalls and Home Goods, which reported net sales for the first nine months of fiscal year 2020 of $29.5 billion, up 6 percent from a year ago. The strong results boosted shares to a record and raised TJX’s market capitalization to $73.6 billion – larger than the entire department store sector combined.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| TJX | THE TJX COS. INC. | 121.45 | +1.71 | +1.43% |
A strong e-commerce business is essential in today’s retail climate, and that was on display in Walmart’s latest earnings release. The world’s largest retailer reported revenue rose 2.5 percent YoY as online sales surged by 41 percent. Rival Target will report its latest results Wednesday.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| TGT | TARGET CORP. | 130.73 | -1.66 | -1.25% |
| WMT | WALMART INC. | 92.64 | +0.14 | +0.15% |
Still, for every winner, there’s a loser.
The department store Kohl’s reported disappointing third-quarter earnings and slashed its full-year forecast, sending shares plunging Tuesday.
The results sent ripples across the department store landscape, punishing shares of Nordstrom and Macy's.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| KSS | KOHL'S CORP. | 15.57 | +0.58 | +3.85% |
| M | MACY'S INC. | 16.24 | +0.28 | +1.75% |
| JWN | NORDSTROM INC. | 22.71 | +0.09 | +0.40% |
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“Department stores are in long term decline,” Storch said.
“Kohl's is trying to fight it. But let's face it, they're a department store and then apparel sales have been losing market share to electronics and home goods and other products for a long time.”
He added that “average apparel prices have been declining,” hitting Kohl’s with a “double whammy.”
“It was a great concept 20 years ago when there was no internet,” Storch said, adding that there’s “no real reason” for Kohl’s and similar companies to exist anymore.
The market seems to agree. Kohl’s market cap hit a 2015 peak of $16 billion. It was down to $7.6 billion on Tuesday.
Department stores Macy’s and Nordstrom, both of which lowered their outlooks alongside last quarter’s earnings and have also seen their market values collapse since mid-2015, are set to report their third-quarter results Thursday.
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“It's kind of like they're selling United States coaches and somebody else invented the automobile,” Storch said. “That's where department stores are.”