Macy’s Warning Triggers Retail Sector Selloff



Macy's finance chief Karen Hoguet cautioned analysts that the department store's gross margin might continue to erode in February, triggering renewed panic in the already struggling retail sector.

Hoguet warned that gross margins of the retailer would decline by around 1 percent in its current quarter compared to the same period a year prior. She added that it will drop less than 1 percent for the full fiscal year.

In February, the firm said it expected margin declines but did not specify the level of the drop. It assured that it is not downgrading its sales and profit targets and looks to make up the difference via cost-cutting and efforts to enhance the performance of its stores.

The executive said margins are under pressure because Macy's is taking a longer time than expected to get rid of surplus inventory. She also noted that Macy's was experiencing the impact of increased promotions of beauty products and stagnant watch sales.

The comments caused Macy's shares to tumble 8.2 percent to trade at $21.90, the company's lowest close in over six years. The remarks also triggered a selloff in the sector, underlining the sector's fragility. Other retailers were dragged down by the dim guidance, as J.C. Penney Co., Kohl's Group, Nordstrom Inc., Target Corp. and Wal-Mart Stores Inc. all experienced declines during the session.

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