|Re Macy's service - imho almost all retailers suck at service, especially around holidays. Except perhaps Saks Fifth Avenue. ;)|
Re ROST - no, I was not going to make the case that they can't sustain 20% ROE. I find it amazing that they can but, cool - more power to them. I do buy some retailers like AEO with expectations of ~20% ROE, so I may buy ROST too. I was just indicating why they also may crash in the future.
Re brands - you have something there, but I am not sure you are totally right. Most brands do have a loyal customer base. There are two problems that may happen: there is a general slowdown in spending and the loyal customers shop less frequently (or for smaller amounts). This is temporary and the brand may recover without any changes when the slowdown passes. But there is also a side risk: the brand may decide that the slowdown is not general but due to its product line and decide to change the products alienating the loyal core. (They may do that even without slowdown.) This can kill the brand. So there is definitely risk whenever slowdown occurs. :)
Re concretely CWTR, from what I've seen anecdotally they do have a loyal customer core. They are somewhat mid-upscale priced, which is potentially the reason of their slowdown in current economy. They have been offering pretty good quality merchandise, so the brand is not all hot air. But will they recover... who knows. If they decided to sacrifice quality to change the image, they would lose their core customers. Hopefully they won't.