Encouraging signs for department stores as holiday season kicks off
It’s not hard to find knowledgeable retail industry watchers who will cast doubt on the long-term viability of U.S. department stores. Heck, Michael Ward, chief of Harrods, recently said his American department store counterparts were in the process of committing “suicide” as they seem unable to come up with new ideas or products to appeal to consumers.
While much of the shade directed at department stores is deserved, Kohl’s, J.C. Penney and Macy’s have seen some encouraging signs for their businesses in the days since Thanksgiving, according to reports.
Kohl’s entered the holiday season with a sense of optimism. The chain, which managed to post a 0.1 percent increase in same-store sales despite having to shut some 100 locations temporarily due to hurricanes in the third quarter, has already raised its full-year outlook ahead of the Black Friday weekend. Kohl’s said sales on Thanksgiving set records both in its stores and online. The chain is gaining traction with its buy online, pickup in-store (BOPIS) service with about 40 percent more orders fulfilled on Black Friday this year compared to 2016.
J.C. Penney reported increased traffic to jcp.com with visits to the site reaching their highest single-day level on Thanksgiving. Store traffic was aided by the appeal of Sephora shops, according to a note by Cowen and Co. analyst Oliver Chen, reported by CNBC.
Macy’s, which took some heat in social media as some customers were unable to have their credits cards processed, benefitted from cold weather in the Northeast as consumers went online and visited stores to buy winter clothing. The chain expects to sell more than one million coats during the holiday season.
- Black Friday boosts battered department stores, some of which are claiming a ‘record’ weekend – CNBC
- US department stores are killing themselves by not innovating, Harrods chief says – CNBC
- Kohl’s Foot Traffic Crushed It This Weekend – Forbes
- J.C. Penney delivers good Black Friday news – Dallas Business Journal
DISCUSSION QUESTIONS: Do you expect department stores, as a whole, will perform better this holiday season than they did in 2016? If so, to what do you attribute the improved performance? Which chains give you the most reason for optimism?
Take Our Instant Poll
Loading ...
Join the Discussion!
19 Comments on "Encouraging signs for department stores as holiday season kicks off"
You must be logged in to post a comment.
You must be logged in to post a comment.
Managing Director, GlobalData
Department stores will perform better this holiday season. However, before anyone gets too excited, there are two caveats.
First, demand over the Black Friday period was up across all of retail. A rising tide floats all boats, but it does not stop ones with holes in them from sinking. And department stores still have plenty of holes to plug.
Second, last year’s comparative numbers were very weak. A modest rise after a big fall does not mean you’re anywhere nearer the summit of the mountain, And boy, do department stores still have a mountain to climb!
Some credit has to go to Kohl’s for the creative things they have done with ranges and store layouts. And J.C. Penney was really onto something when it put Sephora in stores. And Macy’s has made some strides in departments like footwear.
All that said, the model for most of these players remains broken and it will take more than a reasonable Black Friday to fix it.
President, Integrated Marketing Solutions
The very label “department stores” is an interesting artifact reflecting a heritage of traditional brick-and-mortar retailing. Many of the positive statistics quoted for Black Friday/Cyber Monday have more to do with significant gains in online and click and collect sales than store performance. The “department stores” that will do well and survive are the ones that provide a better experience when, where and how customers want to shop. Consumers consume products and services, not formats. And today’s consumers want consumption to be on their terms — in fact they demand it.
Vice President of Marketing, OrderDynamics
Black Friday seems to have been a success for most retailers. It’s a breath of relief, given the doom and gloom of early 2017. The economy is bounding forward, and retailers are starting to promote BOPIS at a growing pace (see Kohl’s). All told, yes, I expect this holiday season to be a success and an improvement over 2016.
Overall, my bets are on omnichannel retailing. As we approach Dec 24th, I think the value of a BOPIS order pickup will rise exponentially. The chains with in-store pickup services will win the sales, and the hearts/loyalty, of those shoppers who find themselves in a bind on Dec 22nd, 23rd and the 24th at noon.
Managing Director, Regency Analysis
Strategy & Operations Delivery Leader
The department store segments are certainly benefitting significantly from increased demand and improved overall economic optimism. However, now is not the time to celebrate and slow down their concentration on improving the overall customer experience, and innovations, which are key to the department store’s evolution.
It’s too early to celebrate as the retail industry is up against some weak comparable sales numbers from last year.
As we move beyond Black Friday, Cyber Monday and the remainder of the holiday season, department stores have to do everything in their power to make their stores a key shopping destination once again. Curating your assortments, driving in-store innovations, experimenting with new brands products and overall focusing on the experience side of retail have provided dividends.
The department store segment must provide a compelling reason for customers to return to their stores, as the world of commerce is literally at their fingertips.
President, founder and CEO Interactive Edge
As we all know, New York City is not indicative of the rest of the country but I walked into Macy’s and could not wait to get out due to the crowds. I was in a mall in the Washington, D.C. area and it was also very crowded and was anchored by not one but two Macy’s stores. There was an article in The New York Times last weekend that stated Macy’s real estate was worth way more than Macy’s, especially stores in urban areas where they own very desirable properties. You could have fooled me with the crowds. Lord & Taylor on the other hand was a pleasure to shop because it was not crowded at all. So my guess is that if Macy’s can get though the credit card issues, and continue to close some stores as there are just too many, they may be able to make it.
As Neil indicates, it may be too little too late for department stores.
Director, Retail Market Insights, Aptos
As the saying goes, “A rising tide lifts all boats.” So yes, as retail is widely expected to have a strong season, I do believe department stores will fare better, but there are still systemic issues that they need to overcome if they hope for long-term stability and growth.
Managing Director, StoreStream Metrics, LLC
While the retail industry touts improved performance I, for one, am not convinced that department stores will survive the seismic shift in retailing. The physical store as we know it is a dinosaur — enjoy it before it goes extinct. Any improvement is relative. The store continues to transform and evolve to meet the equally dynamic expectations of the digital shopper. It’ll be interesting to see what event and/or defining technology historians will look back on as the one that finally killed the store as we know it.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Kohl’s “is gaining traction with its buy online, pickup in-store (BOPIS) service with about 40 percent more orders fulfilled on Black Friday this year compared to 2016 … J.C. Penney reported increased traffic to jcp.com with visits to the site reaching their highest single-day level on Thanksgiving … [at Macy’s] consumers went online and visited stores to buy winter clothing.” Enough said.
Without online the ugly trend will continue.
Principal, Retailing In Focus LLC
Most of the anecdotal evidence and reports from retailers suggests that foot traffic was down, especially on Friday, but overall sales volume was good. This suggests that stores’ omnichannel strategies are working to drive total sales, instead of the “silo” effect of looking at e-commerce and brick-and-mortar as two separate businesses.
There is also a sense of higher discretionary spending, which will tend to benefit department stores along with off-pricers specializing in apparel. Early cold weather doesn’t hurt, either.
Editor-at-large, RetailWire
The lead in the discussion article says it all. There is definitely doubt about the long-term viability of U.S. department stores. Indeed, they face only a challenged future, and any performance gains are really just a blip. Consumers are growing less interested in large, complex stores. Online selling is growing and it’s growing in many of the categories on which department stores depend. Corporate sales for all three chains mentioned in the article are down this year anywhere from 1 to 6 percent despite some comp store increments. While Kohl’s is profitable, J.C. Penney is not and a sizeable chunk of Macy’s earnings stem from gains in sales of real estate. This is not the profile of an industry blazing a trail to new heights. These are beautiful stores, but they don’t have much of a future.
Holiday is forecast to be up 3.7 percent to 4.5 percent. I’d call that a high tide and that will float even department stores. Generally the economy is growing, however regional growth is not enjoyed by all. Rural areas continue to struggle.
Therefore those retailers with a greater share of their store portfolio in those affected trading areas will underperform. Dillards, BonTon, Belk and Macy’s are in this bucket.
Kohl’s is up against flat comps, enjoy “value” position, have a strong loyalty program and extra top-spin with the Amazon partnership. I think they will out-perform.
J.C. Penney could surprise us too. However the aggressive immigration policy impact could be a sea anchor on topline and an unknown, raising doubt. My mall walks indicate that J.C. Penney invested fewer dollars in store holiday environmentals vs. LY, which suggests it is less bullish on its expectations.
Retail Transformation Thought Leader, Advisor, & Strategist
EVP Thought Leadership, Marketing, WD Partners
As an old retailer once said to me, “all boats are floating this year.” I believe that’s going to be true this Holiday season. People are out, weather seems ok, there’s so many easy ways to buy, etc, etc. — it’s going to be a good one, you can smell it.
However, that doesn’t mean that department stores are out of frying pan. Their footfalls are down and their e-com still isn’t up enough (due their own slow-footed-ness over the last decade) to make this what it should be: a GREAT Holiday season. To me, they’re stuck in survival mode for the foreseeable future and first quarter will bring that to light.
Independent Board Member, Investor and Startup Advisor
CFO, Weisner Steel
I hate to begin a comment with “so what,” but really, so what? So what if department stores make some kind of token improvement over last year, then what? They are still in a decades long decline that recent changes in income and shopping patterns (i.e. online) have only accelerated. The real question is — as was the case with movie theaters — “will the decline eventually reach some bottom point and the species soldier on” (albeit in a much diminished state) or will it continue until flagships become like Disneyland (one or two in the whole country … or maybe none at all)?
VP of Strategic Growth, Deck Commerce
The department stores that are providing a unified experience for their customers between the in-store and online experience will win this holiday season. Many retailers have done a better job this year compared to last at expanding their omnichannel capabilities and this has played a role in the success that is being seen.
As we get closer to the crunch time of holiday and last minute shoppers need their gifts fast, the retailers that effectively utilize their stores as distribution points will win. This includes both BOPIS and fulfilling online orders with store inventory for faster delivery.
Senior Retail Writer
If I answered this question this morning, I would have said absolutely not. Department stores will perform better than last year, but only because retail as a whole is performing better this holiday season. Numbers are up across the board. But I don’t think department stores will take a larger chunk of the pie.
BUT — NRF just released their Thanksgiving weekend shopping data including stats showing that 50% of 25-34-year-olds shopped department stores online and in-store over the five day period from Thanksgiving to Cyber Monday. So, now I am not so sure.