Department stores may be headed for a turnaround

By

Rebecca Taras

Published
Aug 23, 2017

 Despite copious news reports detailing the demise of department stores, including Bon-Ton’s recent announcement that they’re shuttering five stores and Macy’s cutting more jobs as a part of a restructuring strategy, a recent report from Moody’s cites that department stores business as a whole has made progress in terms of declining sales.

Moody’s analysts attribute the slight improvement to customer loyalty programs instituted by key players like Kohl’s and Nordstrom — both of which are leading in terms of quarter two earnings. Along with its loyalty program, Nordstrom is more than surviving due to its off-price Rack chain, with the brand's net sales rising nearly 9.8 percent — 3.1 percent for same-store sales —  in Q2. It is likely that this is why perpetually struggling Macy’s is planning to launch a loyalty program in October.

Despite an abundance of store closures and liquidations, J.C. Penney also managed to report a 1.5 percent increase in net sales from last year. But while the report may shed a ray of sunshine on a situation that’s generally been plagued with stormy weather, retailers are still closing brick-and-mortar stores while leveraging the gain from ecommerce sales. According to Moody’s analysts, “the focus remains on securing brands and categories that resonate with the customer as inventory management remains critical to success.”

On the topic of inventory, Moody’s analysts note that due to the fact that Dillard’s operating income plummeted a whopping $46 million along with a decrease in gross margins by 235 basis points, the retailer “was forced to clear excess inventory,” an obvious fact to analysts who visited various Dillard’s locations.