JC Penney fades, Walmart is in full swing. Here is a retail overview today

Clothes piled high on tables. Clearance panels suspended from the ceiling. Promotions galore.

Have you been to a department store recently? It might look something like this.

The same goes for retail stocks. The gap is widening between the strongest and the weakest – retailers who are struggling to accumulate inventory in anticipation of the holidays and those who are more in control of what consumers are looking for.

Shares Nordstrom, Macy's and J.C. Penney are down more than 40% this year. Kohl's shares are down more than 30%.

Meanwhile, Walmart has climbed 20%. The target is up 33%. The S & P 500 Retail ETF (XRT) has grown about 3% this year.

Overall, retail profits for this quarter are not satisfactory compared to a year ago. A decline is expected for the industry. For many companies, the need to save money on items to take out-of-season products from the shelves will ultimately weigh on profitability. And department store chains, in particular, are still struggling to increase sales, while Walmart and Target have found growth areas in grocery stores, through their online business and their in-house brands.

In addition, Walmart and Target were able to compete with Amazon by giving customers the ability to purchase items online and retrieve them from stores the same day. They have outpaced many other retailers with this approach. It boosts digital sales and in-store traffic. Walmart's online sales increased 37% in the last quarter. Target's digital sales grew by 42%.

Overall, the retail sector posted earnings growth of 1.7% in the first quarter, according to Retail Metrics, which monitors the financial reports of approximately 150 retailers. For the second quarter and the current quarter, earnings are expected to fall by 4.2%, said Ken Perkins, president and founder of the retail research firm. And if that happened, it would be the biggest quarterly decline in retail profits since falling 4.5% in the first quarter of 2014.

"The industry is in great need of innovation," said Craig Johnson, president of retail consulting firm Customer Growth Partners. With "the Amazons of the World" gaining market share, which means "you can find almost everything online somewhere, cheaper," said Johnson – the margins of some retailers are going to be under pressure "up to the end. to what people [working there] come with a new product. "

Spending on clothing is also expected to decrease this year and next year, with consumers shrinking more and more in their clothing portfolio. Total clothing sales in the United States totaled $ 216.4 billion in the 12 months to May 2019, according to the NPD Group's Consumer Monitoring Service. The firm predicts that total spending on clothing will fall by 1% to 3% this year. And a rebound is not expected until 2021, said NPD.

If the majority of your business is dedicated to selling clothing, you may have problems. Department store chains are much more dependent on the apparel category than Walmart and Target, which have major electronics and food companies.

Fashion alternatives that consumers are turning to clothing are also beginning to distract retail chains from department stores. This includes Stitch Fix online styling service, rental packages such as Rent the Runway, and trendy start-ups The Real Real and Revolve. More and more spending on clothing is also moving online. RBC Capital Markets has estimated that approximately 30% of clothing in the United States is purchased online today, but will be 40% by 2023.

Meanwhile, the next shopping season, which may be a good barometer of business performance during the holiday season, does not seem to be giving much impetus, especially to department stores.

UBS retail industry badysts said this week in a note to customers that their spending forecast for softlines in the United States, which predicts sales of clothing and accessories in stores retail in the United States over the next 90 days, are calling for a decline of 0.9% per year. in August and September and a drop of 0.5% in October.

"Many specialty stores and department stores very exposed to the United States, such as Macy's, Kohl's, Nordstrom, etc. [price-to-earnings] base, "said Jay Sole, an badyst at UBS.

"However, we do not see any buying opportunities in these names.These actions are likely to improve sales growth rates to catalyze price increases and we believe that this scenario is unlikely during the course of the year." next three months. "

All of this could end up being a disaster recipe for some retailers, even more so for those who are already struggling to give buyers a reason to look for them. With brands such as Nike and Coach investing more in their own physical stores and websites, the need for an intermediary, such as that of a department store, to sell their bras and handbags. sport is reduced.

Faced with these challenges, Penney, with his shares of less than $ 1, hired advisors to deal with the debt and "improve [its] capital structure. "(The company stated that she had not hired any companies to prepare for a court restructuring or bankruptcy, as some had suspected.)

Barney's, a high-end department store operator, is currently preparing a bankruptcy filing that could happen as early as this month, familiar people told CNBC. Hudson's Bay Company, owner of Saks, plans to move to the private sector after the fall of nearly 50% of its shares this year until June.

Nordstrom, which is known in the industry for its stronger merchandising activities and better customer service than its peers, is even falling apart. Its shares are trading at $ 20 per share, which is lower than a $ 50 buyback offer per share that it rejected two years ago as too low.

Wall Street sees many reasons to stay away from space.