With an unprecedented 17.68 percent drop on Thursday, Macy’s may possibly fuel a short-term decline of all retailers in the United States.
Following the plunge in the stock price of Macy’s, other major retailers in the likes of Target have started to demonstrate a lack of momentum from the strong corrective rally the U.S. stock market experienced in early January.
The Macy’s Curse, Not Specific to Macy’s
What drove the abrupt plunge in the stock price of Macy’s, the largest single-day drop in the company’s history, could have been unreasonably high expectations of investors in the performance of retailers during the holiday season, from Christmas to New Year’s Eve.
Investors failed to recognize that many retailers, including major conglomerates in the U.S., often sell most of their shelved products with a heavy discount during the seven-day holiday season. Ostensibly, and on paper at least, retailers seemed to have generated substantially high revenues. But, the profit margins were extremely low.
Simeon Siegel, an analyst at Instinet, told FT:
People were saying in advance that this was going to be a great holiday season, driven by the expectation of fewer discounts and higher price points. But it appears that inventory levels have built, forcing promotions to increase. That means the consumer wins at the expense of the retailer.
On CNBC Fast Money, Guy Adami, the director of Advisor Advocacy, added that the growing consumer debt in the U.S., with credit card and overall household debt surging past all-time highs, may have also led many consumers to spend less in the past several weeks.
“I’m still in the camp that says that U.S.