What’s wrong with department stores?
The price of Dillard’s shares fell earlier this week after the department store chain announced its same-store sales declined four percent last quarter. The hit put Dillard’s in the company of other department store chains, including J.C. Penney, Macy’s and Nordstrom, that have recently posted sales and/or earnings that disappointed investors. While each of these chains and others, including Sears, have their challenges, the channel’s apparent slump raises questions about the overall health and relevancy of the department store sector.
Nordstrom, which has long been the darling of the department store group, recently cut its sales and profit forecast after its third-quarter numbers came in below expectations. While the chain’s total sales were up 6.6 percent in the quarter, its same-store figure nudged up only 0.9 percent. The company blamed its sales slowdown on fewer customers shopping in its stores for clothing. As a result, Nordstrom has found itself marking down merchandise to move excess inventory.
Macy’s also cautioned about its inventory levels following a decline in its third quarter same-store sales. The chain, which has seen that key figure drop for three straight quarters, has announced plans to close up to 40 of its full-line stores while ramping up expansion of its new, off-price Backstage concept.
Even good news within the department store sector hasn’t been good enough for investors of late. J.C. Penney saw its share price fall after the company posted a total sales gain of 4.8 percent while its same-store number improved 6.4 percent during the third quarter. Unfortunately, the chain continues to lose money, $137 million in the latest period, and is not expected to return to profitability until 2017.
- Dillard’s Becomes Latest Victim of Department Store Slump – Bloomberg
- Nordstrom Earnings Fall Sharply – The Wall Street Journal (sub. required)
- Why aren’t shoppers paying full price for Macy’s merchandise? – RetailWire
- J.C. Penney cuts its 3rd quarter loss, but investors have turned tepid on Christmas – The Dallas Morning News
Are the recent declines in share prices within the department store group a reflection of weakness in the retailing model or the herd mentality playing out among investors? How do you think the department store model will need to change to remain relevant over the next decade?