Department Stores
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 16 department store companies in the US carry a variety of merchandise organized into separate departments, with no one line of merchandise dominating sales. Major product categories include women’s, men’s, and children’s apparel; cosmetics and fragrances; footwear and footwear accessories; and accessories. Other product categories include domestics (sheets, tablecloths, towels) and other textile home furnishings; fine jewelry and watches; and small household appliances.
“Retail Apocalypse”
The impact of digital retailing hit department stores especially hard.
Trends and Fads
Because apparel generates over 50% of industry sales, department store business is subject to fashion trends and fads.
Industry size & Structure
The average department store retailer employs around 60,000 workers and generates nearly $8 billion annually.
- The department store industry consists of 16 firms that employ about 960,000 workers and generate over $130 billion annually.
- The industry is highly concentrated; the top 4 companies account for over 70% of industry revenue; the top 8 companies account for over 94%.
- Large firms include Kohl’s, Macy’s, JC Penney, and Nordstrom. The largest companies have locations in almost every state
Industry Forecast
Department Stores Industry Growth
Recent Developments
Jul 2, 2024 - Prices Higher, Sales Flat
- While producer prices for department stores were 4.8% higher in April 2024 year over year, they fell to the lowest point year to date, according to data from the Bureau of Labor Statistics (BLS). Department stores have seen an 18-month stretch of higher producer prices on a year-over-year basis. Employment for department stores was flat in May 2024 compared to a year ago, per the BLS. Wages for nonsupervisory employees at general merchandise retailers, which includes department stores, were up 1.3% in April 2024 compared to a year ago. Sales for department stores were mostly flat in March 2024 compared to a year ago and were up 10.6% from the previous month, according to data from the Census Bureau.
- Kohl is expanding its in-store returns services with a new partnership with Inmar Post-Purchase Solutions and Navar, according to Retail Dive. The Return Drop @ Kohls will allow shoppers to make merchandise returns from several brands including Carhartt, Hanes, and Levi’s at Kohl’s 1,100 stores locations nationwide. Customers initiate the returns process online and choose “Kohl’s Drop Off” to receive a QR code generated by Navar before bringing the item and code to the Kohl’s location. According to Gregg Barta, Kohl’s executive vice president of supply chain and logistics, “Providing shoppers with convenient services is critical to Kohl’s ongoing commitment to the customer experience.” Kohl’s first began accepting Amazon returns at its stores in a pilot program before expanding in 2019 to all locations, with the goal of driving traffic to stores. The company said the Amazon partnership brought in 2 million new customers in 2020, with a third being millennials, per CNBC. The department store retailer is struggling to improve its sales. Kohl’s saw net sales fall by 5.3% year over year in Q12 2024, following a net-sales decline of 3.4% in its full-year results for 2023.
- The US department stores industry is projected to grow at a CAGR of -4.6% between 2024 and 2028, 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. Factors that continue to limit consumer spending are higher price levels and interest rates, though both are expected to improve in 2024. Post-pandemic, consumer spending has shown slower gains of 2.5% in 2022 and 2.2% in 2023, supported in part by savings compiled by households from federal pandemic relief programs. The report noted that consumer confidence levels are expected to improve in the forecast window, which bodes well for retail and wholesale industries. Additionally, consumer sentiment has experienced unusually low levels, though recently has shown a degree of improvement.
- A new UBS report in Retail Dive forecasts that 45,000 retail stores may close in upcoming years as online sales continue to gain share. Online retail penetration is expected to rise to 26% from 21%, with retail sales growth of 4% by 2028, as the industry focuses more on fulfillment and distribution centers. If the closures occur, USB said the total number of stores in the US will fall from 958,533 to 913,500. Another driver of store closures is a tighter lending environment, higher operational costs, and consumers spending more on services instead of goods. Department stores’ struggles will likely continue as they lose share to other channels. According to the report, “In our view, department stores continue to lose customers to off-price retailers. This dynamic will likely cause department stores sales floor productivity to deteriorate, which should lead to fixed cost deleverage and ongoing operating margin compression.”
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