Shares in department store giants J.C Penney Company Inc and Macy's Inc (NYSE:M) took a hit on Monday as analysts got their red pens out.
Citigroup downgraded Macy's to 'sell' from 'hold' at a target price of US$16 each.
Analyst Paul Lejuez described Penney as 'nearing death', which was a symptom of a sickness that was affecting the whole department store space.
Structurally disadvantaged..
"In the current retail environment, we believe department stores are structurally disadvantaged to win," he reportedly said.
"We don't believe M has found the right tools to offset negative store traffic and margin pressures."
He reckons Macy's would generate an operating margin of only 2.4% this year and negative 2% in 2018 because of weak comparative sales, which have decreased up to 4% in each of the past two years.
Lejuez also downgraded JC Penney.
BMO and Jefferies join in
Analysts from BMO Capital Markets and US house Jefferies did the same.
"While we acknowledge the positive work JCP is doing to become less apparel reliant, the sector faces intense secular headwinds as mall traffic wanes and the shift to e-comm should also continue to weigh on profitability," Jefferies analyst Randal Konik wrote.
Last week, Penney's shares tanked over 26% as it was forced to cut profit forecasts amid declining demand for its stock.
Ahead of the holiday season, the store, like many others, has been selling unmoving stock at a discount so it can freshen the shelves up for Christmas.
The group now expects an adjusted loss of 40-45 US cents per share in the quarter ending October 28 - far bigger than analysts’ average estimate of a loss of 18 US cents.
The company also cut its full-year adjusted earnings forecast to 2-8 US cents per share, from 40-65 US cents a share.
Macy's shares are down 3.76% on the day, while J C Penney shed 8.81% to US$2.84.