The stock market as a whole has performed well so far in 2017, with the S&P 500 up by about 9% since the beginning of the year. However, not all stocks have done well, especially those with connections to the retail industry.

Here are three stocks in particular -- one up-and-coming apparel brand, one department store that's been around forever, and one real estate investment trust that specializes in shopping centers -- that have been hit hard in 2017, and may now be worth a look for long-term investors.


Recent Price

Year-to-Date Performance

Duluth Holdings (NASDAQ:DLTH)



Macy's (NYSE:M)






Data source: YCharts. Prices and performance as of June 19, 2017.

DLTH Chart

DLTH data by YCharts.

1. High growth, high expenses

Specialized clothing retailer Duluth Holdings is one of my personal favorite companies in the retail space, as I'm a customer as well as a shareholder. However, the company plunged after reporting its first-quarter results in early June.

Some of the numbers looked great. Revenue grew 22% year over year, beating analyst expectations, and it was the company's 29th consecutive quarter of growth. Profit margins expanded, and retail sales grew by nearly 140% due to a surge in store openings over the past year.

However, all of this growth came at a higher-than-expected cost, which is the main reason for the adverse market reaction. Spending growth of more than 39% was simply more than the market wanted to see, considering the revenue growth rate. After expenses are considered, the company earned just a penny per share, shy of the $0.05 analyst expectation.

Despite the miss, management reaffirmed its full-year guidance and still expects to open 12 new stores in 2017. Duluth's low profits are essentially a result of management investing aggressively into the business, which could pay off tremendously for patient investors.

Stock chart falling concept.

Image source: Getty Images.

2. The best in a struggling retail business?

Department store giant Macy's has gotten crushed in 2017, and actually dropped by 20% in May alone, thanks to a disappointing quarterly earnings report. Specifically, Macys' sales dropped by 7.5% year over year, including a 4.6% drop in comparable-store sales, which resulted in a 35% earnings decline.

However, there are reasons to be optimistic over the long run. Macy's has been testing pilot programs designed to increase sales, such as a redesigned women's shoe-shopping experience. Macy's is also closing underperforming stores and investing in brand exclusivity. In addition, as my colleague Adam Levine-Weinberg recently wrote, Macy's has a large real estate asset portfolio, which the market could be dramatically undervaluing.

I like Macy's because it is one of the strongest department store retailers, and could actually end up benefiting from the carnage in its sector over the long term. Think of Best Buy and how it successfully transformed the shopping experience in its stores and was able to pick up market share from weaker competitors such as Circuit City, Radio Shack, and hhgregg, who didn't quite make a successful transition to the new retail environment. A similar situation could end up unfolding with Macy's.

3. Retail woes and a management change have hit this REIT hard

Most retail REITs have seen their stock prices fall recently, but shopping center REIT DDR Corp. has been hit worse than most. Not only is DDR the victim of perceived retail woes, but the company is currently in the midst of a management change and strategy shake-up, which has added to investors' uncertainty.

However, now could be a great opportunity to get in. The company has made significant progress over the past few months, including streamlining its operations, finalizing a property disposition list, and lengthening its debt maturities. After its asset dispositions, it will have lower-than-average leverage and an even better debt maturity profile.

In addition, DDR thinks that retail isn't quite as "doomed" as many of the naysayers seem to believe. The company says that there is a "healthy list" of high-quality replacement anchors looking for new space, and that it expects to sign 475,000 square feet of anchor leases within the next two to three months, well above its recent quarterly average.

While 2017 is certainly shaping up to be a challenging year for retail and for REITs that invest in it, DDR is taking prudent steps to mitigate any negative impact and to be able to take advantage of opportunities the current retail environment creates.