Retail giant Macy’s (NYSE:$M) recently made an announcement that made the stocks of many strong retail companies go down. However, analysts at Seeking Alpha have reason to believe that some of the dive these companies took were unwarranted — creating some good opportunities for investors to buy.

Macy’s announcement was made at its annual shareholder’s meeting recently: CFO Karen Hoguet warned analysts and traders that gross margins for this quarter may be lower than what had been expected back in February. As such, investors should be expecting gross margins to drop down to 40.1-40.3%. Compared to last year’s figures, basis points have decreased by around 60-80 points. Macy’s is also behind the gross profit margin for the first quarter by a full percentage point, showing just how much the company has been struggling.

After the announcement, Macy’s stocks went down 8%, closing at $21.90. As of June 13, Macy’s stock price is at a five-year low.

However, if you’ve been keeping a close eye on Macy’s, the company’s news shouldn’t come as much of a surprise. This is because Macy’s was already showing some of its struggles. Following poor FY2016 results, the company failed to meet the EPS and revenue expectations for Q1 of 2017. Expectations for EPS was $0.34, but the reported EPS was $0.24. Similarly, expectations for the net venue was $5.47 billion but the reported revenue was $5.34 billion. In addition to weak performance results, Macy’s shut down 100 brick-and-mortar stores last year.

Shocking the Retail Industry

For the market, Macy’s news is the prime example of how much the retail sector has been struggling in recent years. One of the biggest reasons for the retail industry struggle is e-commerce. Thanks to the internet, consumers can now easily compare prices of different stores and purchase their goods from the cheapest vendor. Because we all want the cheapest prices possible, retail brand loyalty has been shown to be at its lowest. As a result, a lot of consumers have shifted to cheaper ways to purchase products, like Amazon.com (NASDAQ:$AMZN).

As expected, similar retail stores like Sears (NASDAQ:$SHLD) and Kohl’s (NYSE:$KSS) were most affected by Macy’s announcement. Following Macy’s drop, Sears stocks went down by 3.6% and Kohl’s stocks went down by 4.3%. What struck investors was the fact that other unrelated retail companies — like Walmart (NYSE:$WMT), Kroger (NYSE:$KR), and even Foot Locker (NYSE:$FL) were affected by Macy’s news. Walmart’s stocks fell by 1.7%, while Kroger’s stocks fell by 1.4%. Foot Locker’s stocks dropped the most, surprisingly, by 4.4%.

Macy’s apparent effect on Foot Locker was especially unexpected, given Foot Locker’s profitable deals with its big-name athletic companies and the exclusive rights it holds for popular athletic shoes.

Are The Stocks Really Moving That Closely Together, Or Is This Just Coincidence?  

To see just how tightly the retail industry is moving, analysts at Seeking Alpha calculated the statistical correlation between two relatively unrelated and dissimilar companies: Macy’s and Foot Locker. Daily prices of both the stocks were compared to see if the two companies have always been correlated, or if the correlation is a recent development.

The resulting data showed that last year, the correlation of the daily stock prices of Foot Locker and Macy’s were only at 7%. The low percentage means that the companies were moving independently of each other — if one company’s price changed, it was unlikely that the other company would follow. In the last month, however, the correlation of the daily stock prices of Foot Locker and Macy’s changed dramatically to 60%. The high percentage means that the stock prices of the two companies moved together quite closely — explaining why Macy’s news had such an effect on Foot Locker’s stocks.

Explaining The Sudden Change

Retail companies’ stocks have been moving closely together — even when the companies don’t seem to be similar at all — because as a whole, the retail industry has been suffering. While the products being sold might not be the same, negative net incomes or income statements have been a common characteristic across the board. As such, Macy’s announcement affecting so many across the industry is pretty understandable. With many investors having growing concern, fear, and skepticism for the stocks in the retail industry, external factors like Macy’s shareholder’s meeting as well as slight misses in expectations could be detrimental on any of these stocks.

Still, some analysts believe that for some companies, the negative sentiments are only temporary — making the down time for these stocks a good opportunity to buy. However, investors must be able to handle temporary volatility.

In such a time where the retail industry is experiencing such high amounts of uncertainty, it may be difficult to see which companies to avoid and which ones to keep an eye on. As such, some suggestions are made below.

Retailers You May Want to Avoid

Due to the upper-hand that e-commerce is starting to gain in the retail industry, it may be best to avoid investing in companies that sell products that could easily be sold online at a cheaper price. Walmart, Sears, Staples (NASDAQ:$SPLS), and Williams-Sonoma (NYSE:$WSM) are just examples of such companies.

It should be noted, however, that Walmart and Williams-Sonoma have been working to gain growth in their online operations. As such — like always — you should always do thorough research on a company before deciding whether or not you think they are worth investing in.

Retailers You May Want to Keep an Eye On

Companies that could have a competitive edge over online retail may be good to keep track of during this time. Foot Locker is one example of what could be a good buy opportunity after Macy’s drove its shares down. As mentioned previously, the athletic-footwear company has some pretty profitable deals with big-name athlete brands as well as exclusive rights to sell specific shoes. Foot Locker’s deals help drive costs down, allowing it to compete with other retailers. What gives Foot Locker the real edge, however, is its rights to certain shoes — it means that consumers won’t be able to find such products elsewhere, no matter the cost. Foot Locker is also quite active in e-commerce through its Eastbay website.

Other companies one may want to consider are Home Depot (NYSE:$HD) and Costco (NASDAQ:$COST). Both companies have done something that is now arguably quite rare in the industry, which is building a loyal customer base. For Home Depot, professionals in the trade industry like builders, carpenters, and plumbers have come to rely on the hardware company’s products. This allows the company to have a recurring revenue stream, which helps Home Depot from being affected by any major shocks to their revenue. For Costco, membership renewal rates are extremely high thanks to its low-cost bulk groceries. Besides groceries, Costco also sells things that aren’t readily available everywhere, like pharmaceutical drugs.

To Conclude

The retail industry is experiencing some significant changes to its competitive landscape. A lot of stocks have gone down dramatically in the past year — the effects of the rise of Amazon.com and other online retailers finally showing. This has made slight expectation misses as well as lower earnings projections from one retail company result in some drops in other companies’ stocks. But not all retailers’ stocks will stay down for long, creating some good buy opportunities should investors research thoroughly and invest smartly.

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