A glum outlook from Macy’s Inc. renewed concerns about the broader retail industry, contributing to a stock rout for consumer companies such as Wal-Mart Stores Inc., Michael Kors Holdings Ltd. and Ross Stores Inc. on Wednesday.

Macy’s cut its profit forecast for this year and posted first-quarter revenue that missed analysts’ estimates -- a sign that slow foot traffic at shopping malls continues to take a toll on the largest U.S. department-store company.

Shares of Macy’s plunged as much as 14 percent to $31.91 in New York, their worst intraday decline in six months. And it wasn’t alone. Wal-Mart, the largest U.S. retailer, slid as much as 4.6 percent to $65.61. Target Corp. fell as much as 5 percent to $76.01, its biggest intraday drop since November.

Macy’s is spooking investors with the message that consumers just aren’t spending, said Ken Perkins, president of Retail Metrics. And the chain doesn’t see that changing soon.

“It’s beginning to feel like a new world,” Perkins said.

Companies that stock retailers with goods also got hit. Nike Inc. tumbled as much as 4 percent. VF Corp., owner of the North Face, Lee and Wrangler clothing brands, dropped as much as 5.7 percent. Michael Kors, meanwhile, plummeted as much as 13 percent.

Gap Inc., the largest specialty chain focused on apparel, also reported weak results this week. It posted a 7 percent decline in Gap’s same-store sales last quarter. Analysts had predicted a gain of 1.1 percent, according to Retail Metrics.

Gap’s evaporating sales may force the retailer to rely more heavily on real estate deals and other cost-cutting moves to maintain profit, said Fitch Ratings, which cut its long-term issuer default rating to junk status on Wednesday.

The retreat for U.S. retailers takes some of the shine off of what had been a strong year for the stocks. Even with Wednesday’s drop, the group has surged 19 percent from mid-February, when the Standard & Poor’s 500 Index fell to a 22-month low. It’s the sixth-best performer of 24 industry groups in the three months, though much of the rally can be attributed to a 41 percent jump in Amazon.com Inc., which makes up more than a quarter of the retailing index.

David Fuller's view

I am surprised the hammer did not fall sooner because the biggest disruptor in Western retail – Amazon – makes up more than a quarter of the retailing index, according to the article above. 

Amazon is not going away so retailers face a tough period ahead.  Nevertheless, successful retailers are very good at reinventing themselves so they will come up with attractive policies which attract the missing buyers.

Meanwhile, value investors will be increasingly attracted by the retail sector’s current underperformance.  Macy’s currently sells at an estimated p/e of 8.69 and yields 4.77%, according to Bloomberg. 

When Macy’s charismatic Chairman/CEO Terry Lundgren is a frequent guest on Bloomberg and CNBC, as was certainly the case in 2014 and the first half of 2015, you can probably guess that the share has been on an amazing run.  If so, one should watch the price chart closely because the next significant event will most likely be profit taking by the crowd of holders.