Department-Store Shares Fall on Holiday Sales Warning

(Bloomberg) -- Christmas is more than four months away, but analysts at Credit Suisse already have a warning for investors in department stores: don’t be surprised if they start trimming their outlooks next week.

There’s “mounting evidence” that stores have “significantly lowered their inventory receipt plans ahead of holiday 2019,” analysts led by Michael Binetti wrote in an Aug. 8 note. “Expect a wave of lowered guidance” next week as companies including Macy’s Inc., Dillard’s Inc. and J.C. Penney Co. report results. And store cost structures will be under even more near-term pressure, with broad new tariffs on goods from China expected to kick in next month.

The five-member index of department stores in the S&P 1500 fell as much as 3.6% Friday to its lowest since November 2017. That was the month the basket of stocks reached levels not seen since 2009, when stocks were climbing out of their recession lows.

Macy’s, which has fallen more than 50% in the past 12 months, could be cutting inventory receipts significantly for the second half, even as some brands have started planning price increases to offset tariffs, according to Credit Suisse. The firm cut its target price on the store chain by $2 to $24, roughly in line with the average in data compiled by Bloomberg.

Binetti also lowered his price target on Nordstrom Inc., which reports on Aug. 21, to $32 from $36 -- further below the Bloomberg average of $37.

©2019 Bloomberg L.P.