Shares of traditional department stores tumble after-hours as Macy's (NYSE:M) and Kohl's (NYSE:KSS) cut earnings estimates due to weak holiday sales (I, II); Macy's also added details on its previous announcement to close 100 stores, saying the moves will result in 10K job cuts and a $575M reduction in 2017 sales.
The news causes a ripple effect across the sector: JWN -5.9%, JCP -4.8%, DDS -3.4%, SHLD -2.5%, TGT -1.8%, ROST -1.5% AH.
Apparel and accessory companies with significant presences in big box retail also are lower: KORS -2.8%, COH -2.6%, KATE -1.1% AH.
Retail transactions with a discount as part of the sales price increased 79% Y/Y, according to tracking by DynamicAction.
Separate tracking by Noumra Instinet showed 19 of 21 retailers discounted more this year during the first weekend of December, with Ulta Salon (NASDAQ:ULTA) and Athleta (NYSE:GPS) the two expections. Higher promotional activity was observed at Urban Outfitters (NASDAQ:URBN), Michael Kors (NYSE:KORS) and Coach (NYSE:COH).
The poor read on discounting cuts into the argument that the tighter inventory levels in retail would help pricing. Kohl's (NYSE:KSS), Nordstrom (NYSE:JWN) and Wal-Mart all increased sales at a faster clip than inventory piled up in Q3.
Black Friday weekend channel checks from investment firms are still pouring in. A few tidbits are posted below.
Wells Fargo: Lululemon (NASDAQ:LULU) was a traffic outperformer, while Calvin Klein (NYSE:PVH) and Carter's (NYSE:CRI) held the line on pricing amid a promotional atmosphere.
Wedbush: High-profile video games were discounted more than last year. Keep an eye out on GameStop (NYSE:GME), Activision Blizzard (NASDAQ:ATVI), Take-Two (NASDAQ:TTWO) and Electronic Arts (NASDAQ:EA).
Fung Global Retail & Technology: Shoes (FL, FINL) were identified as a hot seller, while jewelry (NYSE:SIG) sales were down.
Jefferies: Unexpected strength for the UGG brand (NASDAQ:DECK) and Gap was observed. Demand for Michael Kors (NYSE:KORS) and Coach (NYSE:COH) handbags appeared soft.
Channel checks from Piper Jaffray indicate most of the consumer action last night was focused on toys, electronics and beauty. The first two categories are business as usual for the shopping event, but strong traffic at beauty stores could be an extra boost for Ulta Salon (NASDAQ:ULTA), Sally Beauty Holdings (NYSE:SBH) and e.l.f. Beauty (NYSE:ELF).
The investment firm also cited solid demand for smartwatches at Fossil (NASDAQ:FOSL) and Michael Kors (NYSE:KORS) stores, while also calling footwear traffic (NKE, UA, FL, FINL, DECK) and conversion rates encouraging.
Michael Kors Holdings (NYSE:KORS): FQ2 EPS of $0.95 beats by $0.07.
Revenue of $1.09B (-3.5% Y/Y) in-line.
CEO John Idol: "Our results continued to be impacted by the declines in mall traffic and tourism in certain major cities, as well as our strategic decision to reduce sell-in of inventory to the U.S. wholesale channel."
Full-year fiscal 2017 revenue guidance of $4.55B vs. consensus of $4.64B; adjusted EPS of $4.37-$4.43 vs. consensus of $4.58.