Macy's and SodaStream Post Weak Sales As Dow Drops

After two straight record-setting days to start the week, stocks fell back today on a slide led by small-cap and retail stocks. By the end of the day, the Dow Jones Industrial Average  (DJINDICES: ^DJI  ) finished down 101 points or 0.6%, while the S&P 500 fell 0.5% and the Nasdaq dropped 0.7%.

In today's economic news, the producer price index jumped last month, rising 0.6% on a surge in food prices. It was the largest monthly increase in wholesale prices in a year and a half and a possible sign that inflationary concerns may be returning as the economic recovery picks up. Analysts had expected an increase of just 0.2% following a significant uptick in March of 0.5%. Year over year, prices increased 2.1%, the biggest jump in the category in two years. Tomorrow's consumer price index release will shed light on the wholesale jump's effect on prices at the retail level, though economists believe the labor market has further to recover before consumers can support a significant increase in prices. 

Macy's  (NYSE: M  ) kicked off retail earnings this morning, posting a sales decline of 1.7% to $6.28 million, missing expectations of $6.46 billion, as comparable sales fell 1.6%. Management blamed the drop on poor winter weather, a familiar excuse, though they said growth returned in April as cold-weather regions thawed out. Despite the drop in revenue, Shares finished essentially unchanged as its profit jumped from $0.55 per share to $0.60, beating estimates by a penny, thanks to cost-cutting measures and share buybacks. Further sweetening the deal for investors was the company's announcement of a 25% dividend increase to $0.3125 a quarter, good for a 2.2% yield. Macy's also increased its share buyback authorization by $1.5 billion. While other department-store chains are struggling, Macy's commitment to returning capital to investors is just one more reason it should continue being a winner in that sector. The retailer also reaffirmed its full-year guidance of a comparable sales increase of 2.5%-3% and an EPS forecast of $4.40-$4.50, in line with estimates at $4.48, showing that the winter freeze was just a speed bump. 

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Elsewhere, SodaStream  (NASDAQ: SODA  ) delivered a mostly flat earnings report this morning, and shares finished down 1.2%. The maker of the at-home soda machine continued to see problems as earnings dove from $0.57 a share a year ago to just $0.08 a share on increased marketing expenses and weak U.S. sales. Still, that figure beat analyst estimates of just a penny profit per share. Revenue improved just 0.5% to $118.2 million, in line with expectations at $118 million. CEO Daniel Birnbaum blamed the 28% drop in U.S. sales on a weak holiday season, creating excess retailer inventory. SodaStream's guidance for the year wasn't as bad as the company sees revenue growth of 15% for the year, but just a 3% improvement in net income. Both projections were better than analyst estimates but are reflective of SodaStream's growing pains. If the company hopes to live up to its earlier promise as a transformative product, it will need to find a way to recharge U.S. sales. 

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