Department Stores NAICS 455110

Jul 3, 2025 - Department Stores Lose Share to Off-Price Outlets

• According to a UBS report released in June in Retail Dive, off-price retailers had increased their share of sales by 2.1% year over year in Q1 to 66.6% on a rolling four-quarter basis. Over the last five years, the figure represents growth of 11.1% for off-price retailers. According to UBS analyst Jay Sole, “Off-price retailers have been major share gainers over department stores, in terms of both sales and EBIT dollars, over the past 10+ years.” Some traditional department stores are investing in their off-price locations like Nordstrom’s popular Nordstrom Rack, which has been a growth engine for the company. The USB data revealed that off-price inventory rose 13% year over year, compared to 1% growth at department stores. Sales in Q2 are expected to rise 6% for off-price stores compared to a projected decrease of 6% for department stores, per USB.
• The Retail Trade Industry is one of eight industries reporting contraction in May’s Services ISM Report on Business. Executives in the Retail Trade industry reported an increase in inventories and prices, faster supplier deliveries, along with a decrease in new orders, order backlogs, and employment in May. Services industries reporting growth during the period were Accommodation & Food Services; Art, Entertainment, and Recreation Services; Public Administration; Mining; Utilities; Educational Services; Real Estate, Rental & Leasing; Information; Health Care & Social Assistance; and Professional, Scientific & Technical Services. Additional industries reporting contraction during the period were Other Services; Wholesale Trade; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Construction; and Transportation & Warehousing. Overall, economic activity in the services sector contracted in May 2025, with the Services PMI registering 49.9%.

• The US department stores industry is projected to grow at a CAGR of 2.9% between 2025 and 2029, according to a forecast from Inforum and the Interindustry Economic Research Fund, Inc. The expected growth rate is slower than the overall economy‘s anticipated growth. The retail and wholesale sectors are driven by consumer spending, along with expenditure by businesses and government. A factor that may limit consumer spending is higher tariffs on consumer goods. On a positive note, lower inflation supports a moderate increase of real disposable income by about 2% in 2025 and 1.9% in 2026. Real income could suffer to an extent if average prices rise due to tariff implementation. The forecast said retail spending could soften with the growth of spending on consumer services.
• Consumer sentiment, an indicator of department store spending, was mixed in June 2025, according to two major indicators. The final index of consumer sentiment from the University of Michigan grew 15.9% in June 2025 from the previous month, as the Trump administration put some tariffs on hold against major US trade partners, according to CFO Dive. Year over year, the index of consumer sentiment was down 11.3%. An index measuring consumers’ expectations for the future was up 21.9% from the previous month, but was down 16.1% year over year. According to survey director Joanne Hsu, “Consumers appear to have settled somewhat from the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed.” Hsu noted that consumers’ views of business conditions, personal finances, buying conditions for big ticket items, labor markets and stock markets all remain below six months ago. However, the Consumer Confidence Index fell by 12.3 points in June 2025, compared to the previous month. The index dropped in June following a gain in May, according to The Conference Board, which publishes the monthly index.