DEUTSCHE BANK: Investors have given up on department stores

Count this as another bad sign for brick and mortar stores.

In a note to clients January 6, a group of Deutsche Bank analysts led by Paul Trussell wrote that investors view the entire department store sector as “unownable” due to the weakness among leading retailers.

That’s right. Stock analysts, who are in the business of recommending stocks to investors, are basically saying that those investors think the entire sector is uninvestable. Ouch.

Deutsche Bank said:

“We believe investors are viewing the dept. store sector on a whole as unownable given a lack of mall traffic, a structural inability to expand margins given the promotional environment and the ongoing need to invest in omnichannel (including shipping), and little perceived hope for top-line initiatives to meaningfully benefit 2017.”

“We have been especially disappointed by 4Q weakness despite dept. stores entering the quarter with relatively clean inventories and facing very easy compares,” they added.

Six of the retailers under his team’s coverage reported holiday/December same-store sales that missed expectations. They included American Eagle Outfitters, L Brands, and Macy’s, which just recently announced it is shutting down 68 stores. As a result, it is cutting estimates for Target, Nordstrom, DSW and Abercrombie & Fitch.

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