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Market Update

Bargain or Bust for Department Stores?

Many question whether beaten-down retailers like Macy's and Kohl's can overcome the e-commerce threat.

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January is always a tough month for retailers, as consumers hold back on spending after blowing the bank on holiday shopping. But it's been an especially difficult few weeks for department stores. While we're only a few weeks into a new year, stores like  Macy's (M),  Kohl's (KSS), and  Nordstrom (JWN) have seen their stock prices drop significantly. The former two, which are the third- and fourth-worst performing stocks on the S&P 500 year-to-date as of this writing, have fallen by 17%.

The sector has been on a downward spiral for a while, with the S&P 500 Department Store subindex plummeting by about 45% since peaking in August 2015. While it did climb by 52% between May and December last year, those gains, which were the result of these companies beating ultralow expectations during one quarter, have mostly been given back. The index is down 30% since Dec. 8.

Bryan Borzykowski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.