American department stores are trying to remain relevant in a new era of consumer behavior.
While consumer preferences have moved to low -cost convenience players such as Amazon (AMZN), Walmart (WMT), TJX (TJX) and Ross Stores (ROST), inherited department stores are confronted with a critical junction.
“There are all these other alternative retailers [that] Had not used to exist as Walmart and Target, … in Hardware Home Depot and Lowe’s, and in beauty like Ulta, and, of course, online like Amazon, “Morningstar’s analyst David Swartz, told Yahoo Finance.” The department stores were created for a completely different customer. “”
While Macy’s (M), Nordstrom (JWN) and Kohl (KSS) persist with their recovery attempts, department stores of brick and mortar have slowly lost sales while younger and technological consumers turn to online players. Since 2010, the retail value of department stores has decreased by 44%.
Many have turned to storage closures for rod loss and as part of their recovery plans. Macy plans to close 66 non -profitable stores this year and 150 in total over the next three years, while Kohl announced its intention to close 27 stores this Saturday. JCPENNEY, now private, recently shared plans for store This year after closing several hundred stores in 2020 in his recovery attempt.
Efforts to revitalize department stores are faced with growing opposite winds while US consumers are starting to show signs of stress from stubborn inflation and higher interest rates. From now on, the effects of inflation prices, consumer behavior and retailers’ costs will be another joker analysts.
The CEO of Kohl said that discretionary expenses were limited for consumers who earn less than $ 100,000 per year and in particular for those earning less than $ 50,000.
“It is definitely a difficult operating environment,” said World Director of S&P Amanda O’Neill in Yahoo Finance. “Amazon is a winner, Walmart is a winner. Costco is a winner. … Then, as a retailer, you have your brick and mortar locations. Then, you must also be transparent via omnichannel. It’s very difficult to do.”
People walk near a Macy store in Brooklyn after the company announced that it closed the store with more than 60 other people on January 13, 2025 in New York. (Spencer Platt / Getty images) ·Spencer Platt via Getty Images
Macy’s, Nordstrom See the green shoots, but the challenges remain
Recovery efforts at Macy, Nordstrom, Kohl and others show divergent paths while department stores seek to bring customers.
Macy’s continues to be the largest company in the United States and an important channel for brands like Ralph Lauren (RL) and Tommy Hilfiger, said Swartz. But he has weaknesses to face.
In the fourth quarter, which is crucial for retailers given the holiday season, Macy’s increased sales in comparable stores by 0.2%. It’s compared to Retail sales in the United States overallwhich increased by 0.7% of months in months in December. Macy’s has also warned that the profits will take a hit because the prices of President Trump will take effect and that consumers rely on the value.
But while Macy tries to take up the growing challenges, investors’ patience is thinning. The shares are down 33% in the past year and are currently negotiating about $ 13 each, well below the fully capillary buyout offer by Arkhouse Management and Capital Management Brigade in December 2023, which estimated the company at $ 24 per share.
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Macy’s may have a way to follow, the general manager of Globaldata Retail, Neil Saunders, told Yahoo Finance: “As long as investors can see the light at the end of the tunnel.”
Some of his efforts are starting to bear fruit. The retailer experienced 1.2% sales improvement in the first 50 stores where she invested in more marketing, staff and assortment.
“Macy’s is in a reinvention process,” said Saunders. “There are signs that some of the things they do are starting to work.”
For Nordstrom, a recovery plan will continue on the private markets.
In December, the foundation of the Nordstrom family, which held a participation of approximately 33% in the company, joined forces with Retail operator and real estate El Puerto de Liverpool to ensure that private enterprise. The two will acquire all the actions in circulation within the framework of an all-reference agreement worth 6.25 billion dollars.
Going private allows a company to “repair the company for long -term growth” because it can promulgate the necessary changes without being “under this public examination,” O’Neil told Yahoo Finance.
The next private Nordstrom has outperformed its results in the fourth quarter. Nordstrom’s Sales with comparable stores jumped by 4.7% while sales in the northern namesake company and Nordstrom Rack activity at destroyed prices increased by 5.3% and 3.5% respectively.
“Nordstrom has managed to obtain brands that are fashionable,” said O’Neil. She noted that these brands and the lower prices resonated with Gen Z.
Nordstrom’s decision to become private could become a gaming book in a way. Swartz noted that colorful department stores could be nonexistent over the next five to 10 years. At the same time, he does not think that Macy or Kohl “will be sold anytime soon because the evaluations are too low at this stage”.
A different story for Kohl’s and JCPENNEY
Kohl’s is what Saunders called the “Last Chance Fair with investors” after its sales with comparable stores fell 6.7% in the fourth quarter.
Kohl CEO Ashley Buchanan, who joined the company in January, is now the third CEO of the retailer in three years. Buchanan previously managed the Michael private craft store chain and worked at Walmart and Sam’s Club.
He quickly took measures with the intention of reducing around 10% of Kohl’s work and shutter stores.
Kohl has undergone previous reinventions, but “nothing worked,” said Saunders. With shares down more than 65% in the past year, investors will be impatient to see quick results.
However, “you can’t expect [Buchanan] To do miracles overnight, “added Saunders.
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Buchanan will have to reverse the share of many kohl’s missteps, such as moving away from private brands and to names like Under Armor (AU), which are often excluded in coupons and “removed the opening price” for the main customers, said O’Neil.
Kohl now plans to invest in an assortment of categories like Fine Jewelry, small apparent and intimates, said Dana Telsey, CEO of Telsey Advisory Group. He also tried to build “the momentum in the main areas of growth” as its Sephora partnership and its interior decoration.
Dillard (DDS) based in JCPENNEY and Arkansas also worked quietly.
JCPENNEY has not yet published results in the fourth quarter, but the third quarter results were dark, net sales decreasing by 8% from one year to the next to 1.4 billion dollars.
Since Kohl and JCPENNEY share a similar audience, Swartz said Kohl would have taken advantage of if JCPENNEY had spent less than five years. However, JCPENNEY advances with his $ 1 billion Reinvestment plan announced in 2023.
Meanwhile, Dillard also had trouble with the same problems as the others. But this has not been reflected in the course of action, which is negotiated at more than $ 360, almost 20 times its peers.
Although Swartz does not cover the stock, he said it was a business “people had more or less struck off as dead” because the family has a majority of actions.
While Dillard began to improve the margins, “investors started jumping there,” said Swartz.
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Brooke Dipalma is a senior journalist for Yahoo Finance. Follow it on x at @Brookedipalma Or send him an email at bdipalma@yahofinance.com.
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