The deterioration of the middle class in America is decimating department stores.

Shares of Macy’s, Dillard’s, Kohl’s, and JCPenney spiraled as much as 15% this week after the companies reported weak quarterly sales.

The retailers were hammered despite all four showing signs of modest improvement following years of steep declines in traffic and sales.

Investors’ response indicates there’s little faith left in the long-term value of retailers that target mid-tier customers.

Investors are instead putting more faith in companies like Walmart, Amazon, TJ Maxx, and dollar stores, which target customers on opposite ends of the income spectrum.

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Operating income growth forecasts signal more trouble for department stores, while dollar stores and off-price retailers are expected to thrive.

Moody’s Investors Service

The middle class used to be a…