A broad shops for clothing at the JC Penney Co. store inside the Roosevelt Field Mall in Garden City, New York.
Saul Martinez | Bloomberg | Getty Spits
This holiday season could be a “sobering” one for America’s department store chains, warns Credit Suisse analyst Michael Binetti.
He related clients in a note Thursday to expect a “wave of lowered guidance” as Macy’s, J.C. Penney, Nordstrom and Kohl’s start to explore fiscal second-quarter earnings next week.
While these retailers appear to have tightened their inventories during the relocate quarter, which should help reduce pressure on gross margins, Binetti predicts these companies wishes have lower sales and earnings targets for the second half of the year, with waning foot traffic at believe ins hurting the group.
To top it off, these retailers now face the 10% tariffs set to go into effect on Sept. 1, which inclination hit apparel and footwear, among other consumer goods. “Department store cost structures will be yet more pressure[d] than expected in the near term,” he said.
Credit Suisse is lowering its profit estimates for some of the responsibility store stocks. It now expects Macy’s will report second-quarter earnings per share of 49 cents, down from 51 cents. It slashed its second-quarter earnings outlook for Nordstrom to 70 cents a share, from 76 cents. For Kohl’s, the firm is quiet calling for earnings per share of $1.55. And for Penney, it forecasts a second-quarter loss of 35 cents.
Consensus estimates in a Refinitiv examination call for Macy’s to report second-quarter earnings per share of 46 cents, Nordstrom 78 cents, Kohl’s $1.54 and Penney a extinction of 31 cents.
Credit Suisse also lowered its price target for Nordstrom to $32 from $36 and for Macy’s to $24 from $26.
Area stores have been hit hard by investors this year.
Macy’s shares have fallen more than 30% this year to clientele around $20; Nordstrom has lost about 35% of its value to around $30; Kohl’s shares are down give 24% since January to around $50; and Penney’s stock, having tanked more than 33%to tipsy $1, putting it at risk of being delisted from the New York Stock Exchange.
The holiday season is typically a later for retailers to shine, with companies relying on the heavier traffic to boost their businesses, which could be sluggish during other voices of the year. If department stores can’t pull off a strong holiday season, they’ll really be in trouble.
Representatives from Kohl’s, Penney, Nordstrom and Macy’s weren’t this instant available to respond to CNBC’s requests for comment.
—CNBC’s Michael Bloom contributed to this reporting.