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Retail stocks slump after Macy's, Kohl's report 2018 holiday sales

Markets hammered U.S. retail stocks across the board on Jan. 10 after Macy's cut it full-year earnings outlook following the holiday selling period and Kohl's reported November 2018 and December 2018 sales growth that marked a slowdown from the previous year.

Macy's Inc. stock slumped 17.7% on Jan. 10 to $26.11 per share after the department store chain slashed full-year diluted EPS forecast to $3.95 to $4, from a previous forecast of $4.10 to $4.30. The company also lowered its full-year net sales growth forecast to flat, compared with its previous forecast for 0.3% to 0.7% growth. The retailer posted 1.1% overall comparable sales growth for November and December.

Kohl's Corp. shares dropped more than 6% during the day despite the retailer posting a 1.2% comparable sales increase year over year for November and December and raising the low end of its fiscal 2018 diluted EPS guidance to a range of $5.50 to $5.55 from previous EPS expectations of $5.35 to $5.55.

A difficult comparison with the 6.9% comparable holiday sales increase in the previous year tempered the Kohl's results, Moody's department store analyst Christina Boni said.

"Cycling that significant increase in performance is always a challenging hurdle," Boni said in an interview.

Shares in Kohl's closed at $66.54 on Jan. 10, down 4.8% from the previous day's closing price.

The declines dragged on other stocks across retail, Telsey Advisory Group CEO and Chief Research Officer Dana Telsey said in an interview.

"I think overall, yes, and I think part of it is it may just not be sales but where's the flow through … If you can't match the sales growth with earnings that come in on or better than expected as to what consensus is, it's leading to the weakness and the stock pressure," Telsey said.

Even retailers who posted stronger holiday sales growth were not immune from the broader stock declines of the day. Target Corp. dropped 2.9% to close at $68.29 despite posting a 5.7% year-over-year holiday sales increase.

Elsewhere, Barnes & Noble Inc. shares dropped 15.8% to $6.36 after warning that increased spending on advertising and promotions, including price markdowns, could cut the company's earnings guidance as much as 10%. The bookseller also said it boosted comparable sales 4% between Black Friday and New Year's Day, and 1.3% for the nine weeks ending Dec. 29, 2018.

Other retailers also saw their share prices fall on Jan. 10. Abercrombie & Fitch Co. dipped 8.2% to $19.26, Nordstrom Inc. dropped 4% to $47.30, J. C. Penney Co. Inc. slid 4.5% to $1.28 and Chico's FAS Inc. fell 7.8% to $5.93.