Macys (M) 4th quarter earnings estimate of $1.61 in doubt

Department Store stalwart Macy’s business is down between 15% and 20% in the all important womens division.

Major headwinds as we head into the all important Black Friday Holiday weekend include:

1) Stripes , Patterns , Tweeds are not working. Sweater Business is off 30% to plan

2) Better Knitwear is down 15% to plan and 22% vs. Last year

3) Outerwear as a class is not working and floor looks oversold as there is excess inventory all over floor. This excess inventory will compress margins. It’s early December as coats look horrible. Typically Macys does 50% of coat volume in December. They are currently well below plan.

Expect an announcement of very aggressive discounting as Black Friday looks bleak.

This doesnt bold well for dept store mid caps BONT and SMRT

We are bearish
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Macys a standout among Dept Stores

Macys recently indicated it would add 4% more seasonal workers for it’s Fall 1, Fall 2 and Holiday season.
Major suppliers on sweaters and other women’s clothing have indicated that most department stores are still struggling. The aspirational market is suffering while the luxury market (Saks)
are performing well.
Watch out for more hefty promotions to drive customer traffic. 25% – 40% off most items will eat into all important gross margins. Buy Macy’s but dump other big box retail Dept stores.
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Retail news for June – Stein Mart, Kohls, Bon Ton

Stein Mart (SMRT) has dropped all the price points of it’s high margin women’s apparel pieces from $49.99 (boutique type) to $19.99 in an effort

to drive top line sales. OUR THOUGHTS :  Gross margins will be eroded  substantially and competition is FIERCE at this price point. Not a good strategic move in our opinion.  stay tuned

KOHLS is accepting no new vendors as of right now in an effort to streamline operating costs for the all important “BACK TO SCHOOL holiday!