Why Department Store Stocks Move Inversely to Reliance on Holiday Shoppers

It’s been a terrible year for department store stocks. While not all brick-and-mortar retail has been in the dumps for 2015 — see Costco Wholesale Corp. (NASDAQ: COST) which just hit all time highs — this year has been the worst on record for the big department chains, besides 2008.

There are some interesting insights from the sector’s collapse we can take away though. Using data from the past four quarters, we find that in many cases, each respective stock has fallen in proportion to the company’s reliance on the holiday shopping season. The more heavily reliant a department store is on the holidays, meaning the higher the percentage of its bottom line from that critical quarter, the worse the stock is doing. Conversely, the more even and less seasonal a store’s earnings are quarter to quarter, the better its shares are doing.

This pattern can be seen using the examples of Dillard’s Inc. (NYSE: DDS), Nordstrom Inc. (NYSE: JWN), Macy’s Inc. (NYSE: M), Kohl’s Corp. (NYSE: KSS) and Bed Bath and Beyond Inc. (NASDAQ: BBBY). All these companies are way down year to date, but some less than others. Gauging each stock from its 52 -week high to current price, we see that each decline is proportional to reliance on the holidays.

The worst three in terms of seasonal reliance are Macy’s, Kohl’s and Dillard’s. Macy’s, which had 56% of its earnings over the past four quarters come from the final quarter of 2014, is down 47% from its 52-week high. Kohl’s saw 48% of its bottom line from the same quarter, and it is down 43% from its own high of $79.60. Dillard’s is also very holiday-top-heavy at 40% of its earnings, down 48% from highs.

The two that are relatively more balanced of the five are Nordstrom and Bed Bath & Beyond. Nordstrom had 35% of earnings come from the holiday quarter last year, and it is down only 33%. Same story with Bed Bath & Beyond, which also saw 35% of its earnings from the holidays but is only down 32% from highs.

ALSO READ: Macy’s and Nordstrom Struggle to Adapt to Changing Retail Trends

Why the inverse relationship? As holiday shopping shifts more and more toward online venues, it is the companies most heavily reliant on brick-and-mortal holiday shoppers that are taking the biggest hits. You can look at reliance on the holidays in two possible ways: Either the company is especially good at the holiday season, or it is unacceptably weak during the other three quarters. These stock movements hint at the latter being the correct interpretation.