If disappointing holiday sales weren't enough to make retailers shudder, imagine how they must feel with the broader stock market in seeming freefall.
On Monday, Real Money spoke with Macy's (M) CEO Terry Lundgren and The Container Store (TCS) CEO Kip Tindell at an event hosted in New York City by the National Retail Federation in conjunction with their annual conference.
While both retailers have had to contend with their share of recent bad news, as well as bad news in the broader markets, neither appeared to think the economy is heading into a recession.
Even so, they both sounded cautious tones.
Earlier this month, Macy's announced that it would be closing 40 stores over the next year. It also lowered its fourth-quarter earnings to a range between $2.18 and $2.23 from a range between $2.54 and $2.64. Macy's is due to report earnings in late February.
Meanwhile, The Container Store reported disappointing earnings earlier this month. Analysts predicted earnings of $0.05 per share, instead the company reported losses of $0.04 a share. Since reporting earnings, shares of the company are down 41% so far in 2016 and are down 87% from its IPO price.
Despite the negative early start to 2016, Lundgren does not see a recession brewing. He told Real Money that he has noticed that with U.S. growth hovering around the 2% annually there appears to still be some weakness in the economy. He said it is better for retail when the economy is posting growth in the 3.5% to 4% range. The last time the U.S. GDP growth hit that range was in 2005, according to data provided by the World Bank.
In recent years, Macy's has also been hurt by the growth in auto sales, which is a move that Lundgren characterized as "cyclical," as he noted pent-up demand few new autos. To combat some of their sales weakness, Lundren spoke of the recent growth in Macy's furniture business as well as the strength of their online business.
With respect to Macy's' recently-announced store closures, Lundgren acknowledged the balancing act needed to have a strong online business coupled with brick-and-mortar stores. The U.S. currently has 24 square feet of retail space per person, whereas the figure is nearly half that in Europe, Lundgren said. While he didn't say that the U.S. needed to get down to European levels, he did acknowledge that there may be room for further cuts in the broader brick-and-mortar retail industry.
As for The Container Store, the company has struggled since it's IPO in late 2013. The retailer of storage products and closet solutions has a cultish fanbase that is not reflected in its stock price, which currently trades around $4.60.
The Container Store is unique in that it follows a conscious capitalist model, which means that the business operates with a higher purpose in mind which seeks to improve lives at all levels of the company's operations. Whole Foods (WFM) is another example of a company that follows the conscious capitalist model. Although, Whole Foods CEO John Mackey and Tindell were college friends, Tindell joked that conscious capitalism wasn't on their minds then.
With the broader market falling early this year and shares of The Container Store falling even faster, Tindell acknowledged the difficulty of being mission-driven when the stock is trading down. While his company vision is for the long-term shareholder, responding to quarterly -- or daily -- market swings can be difficult. It is something Tindell said he discussed with Costco's CEO before deciding to take The Container Store public.
Tindell did not sound alarm bells about a recession, but he acknowledged that several days of triple digit-losses was troubling.
Recession or not, both Macy's and The Container Store are so far looking at a difficult 2016.