What happened

Shares of Macy's (M -1.52%) have tumbled this year as the company has reported consistently downbeat results. As of July 25, the stock has lost 34%, according to data from S&P Global Market Intelligence. 

The exterior of Macy's Herald Square

Image source: Macy's

As the following chart shows, the stock fell sharply on two separate occasions, the first when it reported holiday-season guidance and then when it reported first-quarter earnings.

M Chart

M data by YCharts

So what

Macy's has been the poster child for the collapse in department-store stocks, and unsurprisingly, the company's holiday-season sales update sent stocks across the sector plunging. Macy's shares dropped 14% on Jan. 5, when it said comparable sales declined 2.1% on an owned plus licensed basis and dropped 2.7% on an owned basis. The company also reduced its 2016 earnings guidance to a range of $2.95-$3.10 from previous guidance of $3.15-$3.40, which pushed the stock downward. 

Management noted challenges across the broader retail sector and said sales were particularly weak in handbags and watches.

Shares tanked again in May, as comparable sales fell 5.2% on an owned basis and 4.6% on an owned plus licensed basis. Overall revenue was down 7.5% to $5.34 billion, missing expectations at $5.47 billion as the company closed stores. On the bottom line, adjusted earnings per share dropped from $0.40 to $0.24, well below the consensus at $0.35.  Nonetheless, the company stuck with its guidance for the year, calling for adjusted EPS of $2.90-$3.15, excluding the sale of its San Francisco men's store. Shares fell 17% that day and have traded sideways since.

Now what 

Macy's is sitting on a trove of valuable real estate, which it has been slowly selling off, but the market seems to have been ignoring that. Even so, the company needs to find a way to stabilize its business. While it's focused on digital initiatives and expansion of its off-price Backstage chain, the recent plunge in comparable sales and earnings is disconcerting. The stock offers value if earnings and sales stabilize, but with the changing retail landscape it seems that many of Macy's traditional advantages are disappearing.