Some stocks just aren’t worth owning. This is especially true when the company has fallen on hard times, lost its competitive edge, and is trying to turnaround its business. While investors might be attracted to the stock of a company that is in turnaround mode, especially if that company is a storied brand that was once dominant in its sector, it’s worth heeding the words of Warren Buffett who said “turnarounds seldom turn.”
If a company is consistently missing its earnings targets, issuing weak forward guidance, and losing ground to its competitors, then the best approach is to sell the stock or avoid buying it in the first place. It doesn’t matter how cheap a stock looks or how far the share — and usually does. Here are three toxic stocks to ditch from your portfolio now.
Nordstrom (JWN)
On the day of this writing, shares of Nordstrom (NYSE:JWN) are down 15% after the department store chain issued a weak outlook for the year ahead. The guidance overshadowed what was otherwise a strong print from Nordstrom. The company reported earnings per share (EPS) of 96 cents versus 88 cents that was expected among analysts who cover the company. Revenue in the fourth quarter of 2023 came in at $4.42 billion compared to $4.39 billion that was forecast on Wall Street.
Unfortunately, the company gave downbeat forward guidance, sending its share price lower. Specifically, the company said it expects full-year revenue will range from a 2% decline to a 1% gain compared with the previous year. Earnings of $1.65 to $2.05 are anticipated for all of this year. Both the top and bottom line guidance fell short of analysts’ expectations. Management said it continues to see soft demand as consumers remain price-conscious. The company is also seeing lagging sales at its off-price retailer, Nordstrom Rack, and struggling with bloated inventory levels.
JWN stock has now declined 60% over the past five years, making this a toxic stock to ditch.
Macy’s (M)
Macy’s (NYSE:M) is another department store chain that has been a long-term disappointment for its shareholders. M stock is down 6% over the last year and has declined 12% through five years. The company recently announced plans to close 150 stores as its financial results continue to deteriorate. The store closures were announced alongside earnings that showed the company’s sales fell nearly 2% during Q4 2023. Overall, the latest earnings print was mixed, though the guidance was disappointing.
The company is positioning the store closures as part of a turnaround strategy at Macy’s under new CEO Tony Spring, who took the helm of the company in February of this year. In recent months, Macy’s has announced staff layoffs and entertained sales offers for its vast real estate holdings. Analysts and investors seem underwhelmed by the strategy so far. In terms of guidance, Macy’s said that it expects sales to remain stagnant this year at about $22.90 billion. Wall Street was looking for 2024 sales of $23.09 billion.
Levi Strauss (LEVI)
We’ll end with yet another retailer, Levi Strauss (NYSE:LEVI). The company famous for its blue jeans is another toxic stock that people should ditch from their portfolio. While LEVI stock is up 12% this year, the share price is down 17% over the last five years. The company has been in long-term decline as people shop elsewhere for blue jeans and other casual clothing. This decline has been reflected in a string of subpar earnings prints from the company.
Most recently, Levi Strauss announced plans to cut 10% of its global workforce as it undertakes a restructuring plan and warns of weak sales for 2024. The job cuts will take place in this year’s first half and could impact 15% of corporate staff. The company had more than 19,000 employees at the end of last year. The cuts were announced as Levi Strauss reported mixed financial results and gave weak guidance, saying it expects revenue to rise 1% to 3% this year, which is lower than the 4.7% analysts estimated.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.