The U.S. retail sector took a hit on Jan 10 after Macy’s M shares slumped 17.7%, marking its worst day ever. The department store chain came up with weak holiday sales and reduced its 2018 earnings outlook.

Online sales of Macy’s in November and December as well as sales at stores operating for at least 12 months increased just 1.1% as the momentum achieved in the Black Friday weekend faded in the mid-December period and could not reach the expected high until the week of Christmas. In 2017 holiday season, the company posted 1% comps growth.

Macy’s now expects no growth in net sales, in place of its prior projection of an increase of 0.3% to 0.7%. It now sees earnings per share to be within the range of $3.95 to $4, compared with the prior guided range of $4.10 to $4.30. Bank of America, on Jan 10, downgraded Macy’s stock from “neutral” to “underperform”, forecasting lower profits if the company fails to boost sales materially.

Kohl’s same store sales rose 1.2% in the holiday shopping season compared with growth of nearly 7% during the same time a year before. With these lackluster reports, investors got a lead to doubt the overall retail industry including Target TGT (down 2.9%), Kohl’s KSS (down 4.8%), Nordstrom JWN (down 4%) and J.C. Penney Company JCP (down 4.5%). SPDR S&P Retail ETF XRT lost 1.6% on Jan 10 and retreated 1.4% after hours.

Is Everything Worrisome About the Industry?

Notably, Target lost despite reporting upbeat comparable sales growth of 5.7% in the November and December shopping period. This jump came on top of last year’s 3.4% comps expansion. Also, Kohl’s muted comps growth for 2018 came on a tough comparison.

Per the MasterCard Advisors' SpendingPulse, total U.S. retail sales, excluding automobiles, rose 5.1% year over year between Nov 1 and Dec 24, the best in six years with an e-commerce bonanza and surge in last-minute shopping (read: Holiday Sales Strongest in Six Years: ETFs Set to Surge).

As far as Macy’s share price is concerned, it skyrocketed more than 80% over a 12-month period ahead of Thanksgiving. This made the stock pricier and a little bad news was enough to hurt shares badly. The company has been striving hard to strengthen its online service as well as loyalty program and expand its discount store vertical known as Macy’s Backstage, per an article published on CNBC.

ETFs & Stocks in Focus

Against this backdrop, we believe that retailers having online exposure the most should perform better in the coming days. Moreover, Macy’s greater focus on discount stores indicates growth potential in the segment. So, here we highlight a few ETFs and stocks from these fields.