A shopper checks on goods at J.C. Penney Department Store in North Riverside, Illinois.
Kamil Krzaczynski | Reuters
For department stores, there can be no time left for subtlety. It's time to reinvent.
A number of retail revenues over the past two weeks indicate that while the Americans continue to trade, they are increasingly not ringing registers at the warehouses. JC Penney, Kohl and Nordstrom were all disappointed in the quarter, despite strong earnings from Walmart and Target.
Sales in Kohls stores for at least 1
While each department store chain is facing its own set of obstacles, everyone shares a large store base that is a burden when shopper traffic is falling. These brands have been declining in complaint, among other things in the rise of electronic brands such as clothing retailers Reformation and Untuckit. All have made varying degrees of touch and improvement in recent years, but none have evolved as completely as dealers like Walmart and Target.
Walmart paid $ 3 billion to buy internet dealer Jet.com, building a coterie of electronic brands such as Bonobos and ModCloth. It adds veterinary clinics to its stores and now runs a webstore. The dealer also changed its geographical team, making a multibillion dollar effort in India as it seems to move away from England. Investments have been made in the same day in the United States, transforming some of their stores into distribution centers.
Goals, meanwhile, have turned from discount store to an elegant, one-stop destination. It is rebuilding its stores to make clothes like a boutique, its makeup department as Sephora and its grocery stores more modern.
But whether it's loyalty to the brand, fear of losing customers or just business restrictions – the US warehouses today remain what they were decades ago.
Location, Location, Location
Department stores are partly limited by geography. Many, except for Kohl, are still in the mall, even though the traffic is slowing down. It is unlike dealers such as Target and Walmart, which are rarely located in malls.
This means that it is more difficult for the department stores to change their e-commerce business through actions such as "click and collect", where shoppers have all the practical opportunities to choose goods online and instant gratification to pick up their goods quickly in shop. This option has been a boost for both Walmart and Target's businesses, but it's less convenient when shoppers have to go to the mall to get their purchases. Target's e-commerce sales in the quarter increased by 42%, mainly due to its online order acquisition service.
Product warehouse also sells impact on how the companies perform. While Macy, Kohl and Nordstrom are somewhere between discount and ultra high end, Target and Walmart can cater directly to dealers, without worrying about damaging the image of the higher ends sold in their stores.
Department stores also can't turn to the retailer's trick of selling more groceries to bring in customers. Soda would look difficult beyond a rack of clothes.
Grocery and retail products have helped to increase Walmart's growth. The results of Walmart's store-branded grocery stores helped drive its fiscal performance in the first quarter, peaking analysts' expectations, executives said earlier this month.
With these restrictions, the warehouses have still tried to develop in a temperate manner. Macy has introduced rotating marketplaces for popular brands and mobile cases. Kohls collaborates with Amazon for return and adds partners such as Aldi and Planet Fitness to their downsized stores, hoping it will drive foot traffic.
But for the most part, these changes have not taken into account the basic weaknesses faced by warehouses, just as Target and Walmart have been able to rebuild their business.
Even though Macy says it plans to start scaling down some of its larger sites, it still has one of the nation's largest merchant fleets, which acts as a pull on revenue as a sales stall. Together with the Bloomingdale brand, it owns 680 stores across the United States.
Penney's, who stopped trying to sell devices earlier this year, said it was focused on improving the basics as a product range, but gave "little guidance as it completely developed its turnaround strategy," Telsey Advisory wrote. Group CEO Dana Telsey Wednesday.
Transformation, such as expanding or buying a true digital brand, or immediately and drastically changing its footprint requires either the capital or a belly for investor backlash. It's not clear the department store has either. Having lived through the carnage of supplied dealers such as Toys R Us, Bon-Ton and Belk, most are not willing to take too much debt, which can act as a shackle when the economy goes off.
But current efforts do not win over investors.
Macy's share has fallen 35% over the past year and trades at the lowest value (business value before earnings, tax, depreciation and amortization) for a decade, according to Factset. As sales slow down, it has been focused on coping with its influence, buying $ 750 million last year.
Nordstrom shares are down 25% from the previous year. At this level, the stock trades at the lowest price of a decade, except for 2017, according to Factset. Last year, talks were interrupted to go private, partly because of financing considerations.
Meanwhile, Penney has saddled $ 4 billion in total debt, according to the Factset, and sales have fallen since 2016. The company's stock is down 55% over the past year.
At the same time, Target shares have risen by more than 9% on Wednesday and stock up over 20% over the last 12 months, while Walmart shares have reached nearly 23% over the past year. S & P 500 Retail ETF (XRT) has fallen about 7% over the same time period.
"Department stores are already severely punished by investors who fear they don't see a soft landing, so now is the time for them to be innovative and risky," said Michael Dart, a partner of A.T. Kearney and author of "Retail's Seismic Shift." "Nordstrom should also consider going private again."