US stock markets convincingly rebounded after the alarming year-end selloff, closing this week in the green, with the S&P 500 (INX) up over 2%. However, though the broader market bounced back, several retailers released bad news that could possibly cast a shadow over retail sales, consumer spending, and corporate earnings. Macy's
Department store Macy's reported weaker-than-expected sales numbers for the holiday period, with physical and online sales only up 1.1%. Specific weakness was found in sales of women's sportswear, sleepwear, fashion jewelry, watches, and cosmetics. Macy's revised its fiscal year 2018 sales forecast down to earnings per share of $3.95 to $4, compared to previous projections of $4.10 to $4.30. It also expects no net sales growth, down from a previous growth estimate of 0.3 to 0.7%. Macy's is currently investing in its mobile app and loyalty program, as well as a discount store called Macy's Backstage. But its poor holiday numbers led Bank of America
American and European automakers announced big new layoff plans. Ford will cut hourly and salaried jobs across Europe in an effort to reduce surplus labor costs and streamline its workforce. Ford currently employs 50,000 European workers and has lost a billion dollars in Europe in the last five years. Jaguar plans to layoff 4,500 employees worldwide, a 10% decrease in the firm's workforce. The job cuts are part of the British automaker's move to reduce costs and bolster cash flow. Jaguar cited Brexit worries, decreased demand for diesel vehicles, and a sales slump in China. Jaguar's retail sales have fallen 4.6% in 2018. Jaguar also suggested that it feels pressure from competitors to invest heavily in electric and autonomous automobiles.
The bad news from Macy's, Ford, and Jaguar could signal a problem at old-fashioned companies who cannot keep up with contemporary tastes and preferences. Younger consumers especially prefer online clothing stores and energy-efficient cars. However, investors fear the Macy's report could signify flagging consumer spending, a bigger issue that affects all American retail. The layoffs at Ford and Jaguar could be part of slowing global demand caused by trade wars and a weakening Chinese economy.
The author does not own any positions in any of the securities above.
- 1. https://www.cnbc.com/2019/01/10/macys-shares-crater-12percent-on-holiday-sales-results.html
- 2. https://www.bloomberg.com/news/articles/2019-01-10/from-jaguar-to-macy-s-global-gloom-spreads-across-industries
- 3. https://www.freep.com/story/money/cars/2019/01/10/ford-job-cuts-volkswagen/2534463002/
- 4. https://www.bloomberg.com/news/articles/2019-01-10/jaguar-says-it-will-cut-4-500-jobs-worldwide-amid-brexit-slump