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Retail stocks get crushed as Macy's, Kohl's holiday sales numbers disappoint

Julia La Roche

Retail stocks were trading lower on Thursday as holiday sales numbers from some big names disappointed investors.

Macy’s (M) shares dropped around 18% after the department store lowered its full-year guidance to a range $3.95 to $4.00, down from $4.10 to $4.30. The department store giant reported holiday comp-store sales growth of 0.7% at its owned stores and 1.1% including its licensed stores. The department store said it expects full-year comp stores sales growth of approximately 2%, down from the 2.3% to 2.5% range it previously gave.

“The holiday season began strong — particularly during Black Friday and the following Cyber Week, but weakened in the mid-December period and did not return to expected patterns until the week of Christmas,” Macy’s Jeff Gennette said.

Meanwhile, Kohl’s delivered comparable stores sales growth in November of 1.2%, a slow-down from last year’s 6.9% growth in the same period. Shares of Kohl’s (KSS) dropped around 9%.

Elsewhere, L Brands (LB), the parent company of Victoria’s Secret and Bath & Body Works, reported flat holiday sales growth. Breaking those results down further, Victoria’s Secret’s holiday sales were down 6%, driven by a decline in lingerie and its Pink brand.

Macy's reported disappointing holiday sales.

The shopping season between November 1 and December 24 was strongest in six years, with sales growing 5.1% to more than $850 billion, according to the Mastercard SpendingPulse report released on December 26.

According to that report, online shopping jumped 19.1% compared to 2017. Some areas of strength included apparel growing 7.9% and home improvement gaining 9% from last year’s holiday season. Some areas of weakness included department stores, which declined 1.3% from 2017. However, online sales growth for department stores rose 10.2%.

A bright spot for holidays sales was Target (TGT), which is on track for its strongest full-year comparable sales growth since 2005. For the months of November and December, Target said its comp store sales grew 5.7% on top of the 3.4% growth it saw during the same period last year.

"We are very pleased with Target's holiday season performance, which came on top of really strong results in the same period last year,” CEO Brian Cornell said. “This performance demonstrates the benefit of placing our stores at the center of every way we serve our guests, including both in-store shopping and digital fulfillment.”

In February 2017, Target unveiled a $7 billion investment the retailer would make over the next three years in revamping its fleet of stores and investing in digital infrastructure.

Target said its digital sales in November and December were up 29%. For the full year, they expect digital to be up 25%, the fifth year of consecutive growth. A big driver of digital sales was the store’s pick-up and drive up-offering, accounting for a quarter of digital sales. Pick-up and drive-up grew more than 60% during the holiday period.

For the holidays, Target said it was strong across its merchandising categories, especially in baby and toys. In the wake of the Toys ‘R’ Us bankruptcy, Target upped its toy offering by adding 2,500 new or exclusive items.

Shares of Target were last off about 4.5%.

Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter. Send tips to laroche@oath.com.