For many retailers, it wasn't a December to remember

In the latest sign of the wrenching transformation in retailing, Macy’s (M), Sears Holdings (SHLD), Kohl’s (KSS), Victoria’s Secret parent L Brands (LB) and Barnes & Noble (BKS) have all reported disappointing holiday sales as consumers shift to shopping online. Shares of most of them went into tailspins, some falling by double-digit percentages.

Speaking to Wall Street analysts during Macy’s third-quarter earnings conference call last year, Chief Financial Officer Karen Houget noted “some positive trends” heading into the holidays. However, the largest department store operator’s modest expectations proved unrealistic. Macy’s yesterday slashed its 2016 earnings per share guidance to a range of $2.95 to $3.10 from $3.15 to $3.40. It also provided details on its previously announced store closure plan that will shutter 68 locations and cut 10,000 jobs.

Sears Holdings, which recently got a financial lifeline that could be worth as much as $500 million arranged through CEO Edward Lampert, who’s also a billionaire hedge fund tycoon, unveiled plans to close 150 locations. The cash-strapped parent of Sears and Kmart also announced plans to sell its Craftsman tool business to Stanley Black & Decker for $900 million, as it continues to unload assets to bolster its finances.

The Craftsman announcement helped Sears shares buck the downturn among retailers, pushing its stock up 1.35 percent, or 14 cents, to $10.50 in Thursday afternoon trading. Still, Sears shares have been hammered down nearly 50 percent over the past year.

Kohl’s CEO Kevin Mansell was caught off-guard by “volatile” holiday business, noting “strong sales on Black Friday and during the week before Christmas were offset by softness in early November and December.” The Menomonee Falls, Wisconsin, company reduced its fiscal 2016 profit outlook to a range of $2.92 to $2.97 per share from $3.12 to $3.32.

Same-store sales (a key metric of measuring activity at locations open a year or more) at L Brands slumped a worse-than-expected 1 percent. Barnes & Noble blamed a drop in adult coloring book sales and a lack of a hit record album for the company’s disappointing holiday results. 

Barnes & Noble’s same-store sales during the holidays plummeted more than 9 percent. However, the New York-based company expects its fiscal 2016 operating profit to increase on a year-over-year basis.

“Although books outperformed the company as a whole, we were not pleased with our results,” said CEO Len Riggio in a statement. “Fortunately, post-holiday traffic and sales have improved, and we are optimistic for the remainder of the fiscal year, and we believe this most unusual retail season may be behind us.”

Unfortunately, Wall Street isn’t so optimistic.   

Shares of Barnes & Noble fell nearly 5 percent in late Thursday trading to $10.85. Kohl’s, however, fared worse, plunging nearly 19 percent to $42.18, while Macy’s dropped about 14 percent to $30.89. L Brands was down about 7 percent to $62.46.  

Things aren’t getting any easier. Nearly 1 billion square foot of retail space will be “rationalized” in the coming years through store closures and conversions to other uses, according to real-estate market research firm CoStar. The level of “’overstoring” is expected to get worse in coming years, and more stores and malls are expected to close.

“They’re still stuck with all these brick-and-mortar stores, and now they’ve got the overhead of running an online business,” said Howard Davidowitz, the head of Davidowitz & Associates, which provides consulting and investment banking services to retailers. “The whole thing isn’t working.”

The picture for the holiday season isn’t entirely bleak. The National Retail Federation forecast holiday sales would rise 3.6 percent to $655.8 billion, higher than the 10-year average of 2.5 percent increases. Dollar stores and off-price chains such as Ross Stores (ROST), TJX (TJX) and Burlington Stores (BURL) are gaining business at the expense of the department stores. Amazon (AMZN) recently described the 2016 holiday season as its “best ever.”

“You’re seeing a shift in consumer spending,” said Brian Yarbrough, a retail analyst at Edward Jones, adding that the department stores have been in decline for the past few years. He said consumers “are shifting toward value. The off-price channels are taking tons of market share away from department stores.”

Wealthier consumers discovered the off-price and dollar stores during the Great Recession, he said, and they’ve kept shopping there even as economy has rebounded.

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    Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.