Macy's and J.C. Penney both reported 2017 holiday sales results that outpaced analysts' expectations and topped performances from the year prior, but Wall Street has a hard time forgetting the underlying troubles that still plague the industry.
Retailers are being forced to reimagine how they operate and what they sell: faster fulfillment, less apparel inventory, a loyal customer base, and easy-to-navigate websites and mobile apps are becoming the new norm.
Macy's shares closed down more than 3 percent Thursday. J.C. Penney's stock was down around 6 percent at one point before regaining some ground to end modestly lower Thursday in spite of the retailers' largely positive results. Earlier in the week, department store stocks were rallying in anticipation of a healthier holiday across the board. But the uptick was inevitably short-lived.
"Good holiday sales are a plus for the industry and are most welcome, but when you look at retail earnings expectations they are still uninspiring — Amazon will continue to put pressure on all segments of the industry [and] e-commerce margins are unlikely to expand anytime soon as more transactions move online," Retail Metrics founder Ken Perkins told CNBC.
"Investments in logistics and the build-out of e-commerce, which are vital for survival, will continue to be a drag on earnings," Perkins said.
Both Macy's and J.C. Penney are still expected to report a drop in revenue and negative same-store sales for fiscal 2017 in light of Thursday's results. Although Macy's raised its annual outlook, citing a bump from federal tax reform, it won't be enough of a boost to get the company back to positive, like CEO Jeff Gennette aspires to do longer term.
"A healthy store base combined with robust digital capabilities is Macy's recipe for success," Gennette said Thursday in a statement, speaking to future initiatives.