What happened

Shares of Macy's (NYSE:M) were diving today, in sympathy with J.C. Penney (NYSE:JCP) after that retailer gave weak guidance for its third and fourth quarters. Both department store stocks have plummeted this year as shoppers turn to e-commerce and mall traffic is falling.

As of 11 a.m. EDT, Macy's stock was down 6.1%, while J.C. Penney was 15.3% lower.

Macy's flagship store at Herald Square

Image source: Macy's.

So what 

Penney said that aggressive discounting in women's apparel and the decision to accelerate liquidation of inventory caused a wider loss than expected. The company expects a loss per share of $0.45 to $0.40 in the third quarter, which compared to analyst expectations of negative $0.18 for the quarter and a loss of $0.21 in the year-ago period. 

Penney also said that comparable sales in the quarter were up 0.6%-0.8%. The aggressive discounting likely took sales away from peers like Macy's, and investors see the weakness on the bottom line as a reflection of the overall struggles in the department store sector, which have affected Macy's as well.

Now what  

This is not the first time that bad news from one department store chain has brought other operators in the sector down. Kohl's shares were also off today.

Macy's is in a better position than J.C. Penney as it still has ample profits and a strong real estate portfolio. Yet its comparable sales have been trending negative, down 4% through the first half of the year, which is a big reason the stock has lost 44% since the beginning of the year.

Lord & Taylor's recent sale of its flagship store to WeWork for $850 million may offer insight into Macy's next steps in unloading its own real estate, but J.C. Penney's guidance indicates Macy's profits are likely to continue falling as well. Macy's reports third-quarter earnings on Nov. 9.

Jeremy Bowman owns shares of J.C. Penney. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.