Retailer stocks suffered broad and in many cases sharp declines Tuesday after a raft of disappointing earnings reports, highlighted by a tumble in Target Corp. shares to their worst stretch of losses since the Great Recession.
The SPDR S&P Retail exchange-traded fund XRT, -3.32% dropped 3.4%, with 87 of its 95 equity components losing ground. That sector ETF (XRT) suffered an 8th-straight decline, the longest losing streak since its inception in June 2006.
The negative reaction to earnings results may worry investors as it comes just days before Black Friday and the critical holiday shopping season, which many analyst have projected to be relatively strong. It may also reflect the effects of a rising inflation rate, as consumer prices increased in October at the fastest pace in nine months.
“Recent volatility has certainly not helped investors get into the holiday spirit,” Frost Investment Advisors Chief Investment Officer Tom Stringfellow and Director of Fixed Income Jeffery Elswick wrote in a research note.
The sector selloff contributed to weakness in the broader stock market, with the Dow Jones Industrial Average DJIA, -2.21% shedding 552 points and the S&P 500 index SPX, -1.82% losing 1.8%. See Market Snapshot.
Within the XRT, Target’s stock TGT, -10.52% plunged 10.5% to the lowest close since April 2, paring earlier losses of as much as 15.0%, after the discount retailing giant reported fiscal third-quarter profit and same-store sales that missed expectations. The company also reported a decline in the gross margin rate, citing higher supply chain costs resulting from increased digital fulfillment costs and expenses related to the size and timing of holiday-related inventory receipts.
Target’s stock also suffered an 8th-straight loss, which is its longest losing streak since August 2015. It has plummeted 21.2% during the losing streak, which would be the worst 8-day stretch since it shed 21.7% in the 8 sessions ending Nov. 21, 2008.
Cowen analyst Oliver Chen said not only were Target’s results below high expectations, the inventory position appeared “bloated” ahead of the holiday shopping season.
Shares of rival Walmart Inc. fell 2.7% in sympathy to a 7th consecutive loss, although the retail behemoth reported last week earnings and same-store sales that beat expectations, but revenue that came up a bit short.
A rare bright spot was Best Buy Co. Inc.’s stock BBY, +2.14% which rallied 2.1%, reversing an earlier loss of as much as 3.4% to the lowest intraday print since Dec. 1, 2017. The consumer electronics retailer reported before the open a fiscal third-quarter profit, revenue and same-store sales that beat analyst projections.
The XRT’s biggest decliner was L Brands Inc.’s stock LB, -17.71% which tumbled 17.7% after the parent of Victoria’s Secret, Bed & Body Works and other brands said late Monday it will halve its dividend as it looks to reduce debt. The company also reported earnings and same-store sales that topped expectations, and raised its profit outlook.
Kohl’s Corp. shares KSS, -9.23% slid 9.2% to a 6-month low and to extend its losing streak to 7 sessions. The shares’ slide came despite better-than-expected earnings and same-store sales, as slowing sales growth disappointed investors.
Lowe’s Companies’ stock LOW, -5.66% dropped 5.7% to a 9th-straight loss after the home-improvement retailer missed on same-store sales as gross margin declined. The company also said it was exiting its Mexico retail operations and its Alacrity Renovations Services and Iris Smart Home businesses.
Elsewhere, shares of T.J. Maxx parent TJX Companies TJX, -4.37% slumped 4.4% to a 7th-straight loss after an earnings miss and downbeat guidance, while Ross Stores Inc.’s ROST, -9.38% dropped 9.4% to suffer an 8th-consecutive decline after the off-price apparel and home fashion retailer provided a same-store sales outlook that was below expectations.
The XRT has now tumbled 15.3% over the past three months, while the Dow has lost 5.0% and the S&P 500 has given up 7.5%.
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