The Washington Post
The nation’s major department store chains said sales fell again in the most recent quarter as they took steps to stabilize their businesses, and analysts warn there is still more work to be done as retailers head into a crucial back-to-school season.
The one outlier in the group was Nordstrom, which on Thursday said revenue was up from a year ago, as more customers shopped online. Same-store sales — a measure of sales at locations open more than a year — also rose, about 1.7 percent, exceeding Wall Street’s expectations.
Other retailers didn’t fare so well. Macy’s and Kohl’s on Thursday said sales are still falling — albeit less quickly than before — as they fight a mounting battle to get Americans into their stores. Same-store sales were down 2.8 percent at Macy’s, and 0.4 percent at Kohl’s.
On Friday morning, J.C. Penney reported declining sales in the second quarter.
“There’s been relative improvement, but this is still an uphill struggle,” said Christina Boni, an analyst for Moody’s. “The real test is yet to come, with back-to-school season and the holidays.”
Wall Street was clearly disappointed: Shares of Macy’s fell more than 10 percent after results were announced, while Kohl’s stock was down about 6 percent. Penney also posted a deeper loss than analysts expected — hurt by clearance sales — sending the shares down as much as 17 percent. Shares of Nordstrom, however, were up about 3 percent in after-hours trading.
Macy’s profit was up, to $113 million, compared with a year ago, at $9 million, in a quarter when it closed stores and took other cost-cutting actions. Kohl’s profit was $208 million, up 49 percent from a year ago.
Same-store sales at J.C. Penney fell 1.3 percent in the period, which ended July 29. That compared with the 1.2 percent decline projected by analysts, according to Consensus Metrix. The loss was 9 cents a share in the second quarter, excluding some items. Analysts estimated a 4 cent deficit on average. Still, overall revenue came in a bit above projections. The company posted $2.96 billion in net sales, compared with an estimate of $2.85 billion.
Nordstrom’s profit was $110 million, down 6 percent from a year ago.
The results renewed fears that there’s no end in sight for the department-store industry’s drought.
“These department stores have put forth a huge effort — but in spite of that, they’re still losing market share,” said Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates. “If you can’t grow long-term, there’s no way you can stay in this game.”
That game, he added, is quickly changing as Americans shun shopping malls and head online instead.
Amazon is widely expected to usurp Macy’s this year as the country’s largest apparel retailer. (Jeffrey Bezos, the founder and chief executive of Amazon, owns The Washington Post.)
“Here’s the critical element: People are bopping around with their phones, looking for low prices, and none of them are going to Macy’s.com,” Davidowitz said. “Long-term, this just isn’t happening.”
As a result, department stores have announced a number of sweeping efforts to win back shoppers.
At Macy’s, that’s meant revamping the women’s shoe department and adding more fine jewelry, furniture and mattresses.
But the company says it was hurt by a 9 pecent drop in international tourist sales, as well as weak demand for cosmetics and housewares.
“We operate in an environment of intense and disruptive competition, and our customer has more shopping options than ever,” Jeff Gennette, chief executive of Macy’s, said in a Thursday morning call with analysts.
“Winning in this environment requires us to act with a great sense of urgency.”
Kohl’s, meanwhile, said it had seen benefits from a recent partnership with Under Armour, as well as growth in its Simply Vera Vera Wang and Lauren Conrad brands.
“Under Armour in particular continued a very strong performance across almost all categories,” Kevin Mansell, the company’s chief executive, said on a conference call with investors on Thursday.
“We’ve gained significant share in active apparel and footwear in the first half of the year and expect that to continue.”
Online sales, executives added, were up 19 percent.
J.C. Penney Chief Executive Officer Marvin Ellison is trying to win back customers by expanding the company’s partnership with cosmetic retailer Sephora and bolstering the assortment of high-price items, like appliances. The company is also pushing services like salons that require shoppers to come into stores. But progress has been slow.
The company also is closing about 140 underperforming stores. And the liquidation of inventory in 127 of those locations hurt profit in the period, Ellison said in a statement. “These events were isolated to the second quarter,” he said, adding that the company expects to “deliver improved results in the back half of the year.”
© Copyright (c) 2017 Valley News, source Newspapers