A Cautious Future For Department Stores In 2018
If you look at the general relief out there around department stores’ 2017 holiday performance, you might believe that there is good news ahead for these hard-hit retailers going into 2018. But there is still a long to-do list for department stores if this retail vertical is going to outlast the pressures of digitally-connected consumers. First, the holiday season for department stores was not bad. Most reversed a long trend of falling store comps (Sears, of course, continued its freefall, but they are an outlier among department stores). However, the markets did not rejoice at the news, mostly because Kohl’s was the only department store retailer to beat the average growth for retail over the season. Most department store majors, especially Macy’s, JCPenney, and Nordstrom, are in the midst of major updates to their businesses, and those updates are far from over. And some retailers, like JCPenney, Neiman Marcus, Bon Ton, and yes, Sears, are highly leveraged with a lot of debt coming due in the not-so-distant future. Even with a tax break and the expected short-term boost in consumer spending that should come with it, department stores don’t have a lot of room to make major new investments at a time when the industry is crying out for exactly that investment. Retailers are trying to navigate the gap between profits and dividends vs. staying relevant to consumers (and all of the technology investment this requires). But department stores have a special list of challenges, and they’re investing more time and effort into five areas to overcome those challenges. If they can get through this list, they have a shot at surviving 2018, and potentially even thriving in 2019. Unfortunately, it’s a long list. Read more at Forbes.
