NEW YORK (AP) — While investors may be unnerved by the broad sell-off in the retail sector Thursday, a closer look at the industry shows it may merely be contending with issues it's dealt with for quite some time.
A range of retail shares, including Kohl's Corp., J.C. Penney Co. and Target Corp., are falling as most other markets were posting gains. The sell-off comes a day after the Commerce Department reported that retail sales were unchanged in April after rising 1.1 percent in March. But sales have edged up 0.9 percent over the past year amid numerous factors weighing on the sector.
Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors, says that the recent financial results from Kohl's, J.C. Penney and Macy's Inc. — which all had softer-than-expected revenue — suggests consumers will need attractive deals in the spring and summer to push them to make purchases.
The executive also said retailers' profits have been weighed down by the decision by many companies to reinvest in their businesses, whether that be new stores, new technology or something else.
Burt Flickinger III, a managing director with Strategic Resource Group, doesn't view Thursday's sell-off as a reason to be concerned, calling it an overreaction.
He thinks shoppers' spending was impacted by several factors, such as tax refund delays due to short staffing at the Internal Revenue Service. Flickinger believes that when consumers receive their refunds it will allow them to spend on clothing and other retail goods in the second and third quarters.
The executive said that other issues include the West Coast port dispute — which led to delays in merchandise arrivals — and harsh winter storms that brought about expensive home repairs and high electric bills for some consumers.
Flickinger said that the savings people were getting from lower gasoline prices wound up going toward those repairs and bills, but once those matters are resolved consumers will be able to use their gas savings for retail spending.
Luckily consumers can likely anticipate gas savings for some time, with the Energy Department announcing on Tuesday that it expects the price of gasoline to average $2.55 between April and September, which would be the lowest since 2009.
In afternoon trading, Kohl's shares dropped $8.95, or 12 percent, to $65.56. Target shares were down $2.89, or 3.6 percent, to $76.92; J.C. Penney shares lost 46 cents, or 5.3 percent, to $8.25 and Macy's Inc. shares slipped 13 cents to $63.60.