Please ensure Javascript is enabled for purposes of website accessibility

Why Retail Stocks Were Slipping Today

By Jeremy Bowman - Updated Oct 2, 2019 at 5:06PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Fears about a recession again pushed sector stocks lower.

What happened

Shares of retail stocks were falling again on Wednesday as the specter of a recession spooked investors once again. A number of economic data points pushed stocks lower, including a weak ADP payroll report for September. That followed a report on Tuesday from the Institute of Supply Management that showed manufacturing activity contracting for the second month in a row, hitting a 10-year low. Both reports added to fears of a potential recession and a trade war with China.

Retail stocks, already among the most vulnerable on the market, took a hit since they are sensitive to consumer spending and macroeconomics, especially heading into the holiday season, the most important time of the year for the industry.

On a day when the S&P 500 lost 1.8%, the SPDR S&P Retail ETF (XRT -3.84%) gave up 2.8%. Among individual retail stocks, some notable losers were Best Buy (BBY -2.80%), which lost 4.3%; Macy's (M -6.66%), down 5.8%; Kohl's (KSS -5.66%), which gave up 5.7%; Nordstrom (JWN -8.03%), which closed down 5%; and Michaels Companies (MIK), which fell 10.7%.

A blurred image of shoppers moving up and down an escalator in a mall

Image source: Getty Images.

So what 

All the retailers listed above are directly threatened by the rise of e-commerce, and most of them have struggled this year, especially the group of department store stocks.

This morning, ADP, the country's biggest payroll processor, said that employers added 135,000 jobs in September, below estimates at 152,000, and the company also reduced its estimate for August, saying that just 157,000 jobs were added, down from the earlier report at 195,000. 

That news, which precedes the official employment report from the Labor Department on Friday, combined with the weak manufacturing numbers and other data -- including a decline in car sales -- showing a weakening U.S. economy to cause the retail sell-off.

Retailers like the ones above are already struggling to generate sales growth even in one of the strongest economies on record. Slowing manufacturing growth also led some investors to believe that the trade war is starting to have a measurable effect on the economy, and will trickle down to the consumer level. Meanwhile, retailers are vulnerable to an increase in tariffs and any retaliation from China.

As far as company-specific news about the retailers above, there was little today. Best Buy recently announced a new focus on healthcare, specifically for seniors. Macy's shares approached a 52-week low today, following news from a few days earlier that the company will close its downtown Seattle location after the holidays and sell the building, in keeping with its real estate optimization strategy.

Kohl's stock is also near 52-week lows, though investors are hopeful that its newly companywide partnership with will help drive growth. Nordstrom is prepping for the big opening of its new flagship store in Manhattan, and Michaels had been on the upswing following improving trade news at the end of August, but today's sell-off shows that the stock's volatility isn't going away.

Now what 

The retailers above won't report earnings until November, so investors won't get an update for a number of weeks. But other retail earnings reports do come out at odd intervals. Bed Bath & Beyond (BBBY -14.20%) posted its second-quarter report after hours, saying that comparable-store sales fell 6.7%. The home goods retailer has been notoriously troubled, but nonetheless that news is not a good sign for the broader retail industry, especially its struggling peers.

With the official labor report set for Friday and the market already feeling jittery, expect the volatility in retail stocks to continue.

Jeremy Bowman owns shares of Nordstrom. The Motley Fool recommends Nordstrom and The Michaels Companies. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SPDR Series Trust - SPDR S&P Retail ETF Stock Quote
SPDR Series Trust - SPDR S&P Retail ETF
$66.66 (-3.84%) $-2.66
Best Buy Co., Inc. Stock Quote
Best Buy Co., Inc.
$76.34 (-2.80%) $-2.20
Macy's, Inc. Stock Quote
Macy's, Inc.
$17.53 (-6.66%) $-1.25
Kohl's Corporation Stock Quote
Kohl's Corporation
$29.68 (-5.66%) $-1.78
Nordstrom, Inc. Stock Quote
Nordstrom, Inc.
$21.89 (-8.03%) $-1.91
Bed Bath & Beyond Inc. Stock Quote
Bed Bath & Beyond Inc.
$9.79 (-14.20%) $-1.62
The Michaels Companies Stock Quote
The Michaels Companies

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.