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 14 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 over 34,000 workers and generates between $4 billion and $5 billion annually.

    • The department store industry consists of 14 firms that employ over 480,000 workers and generate over $65 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, Nordstrom’s, and Transformco (Sears/Kmart). The largest companies have locations in almost every state
                              Industry Forecast
                              Department Stores Industry Growth
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Nov 3, 2022 - Lower Sales Growth Rate Expected This Holiday Season
                              • Retail sales are expected to increase between 6% and 8% year over year from November 1 through December 31 to between $942.6 billion and $960.4 billion, according to the National Retail Federation (NRF). The figures exclude spending at car dealers, gas stations, and restaurants. Sales increased 13.5% year over year in 2021 and totaled $889.3 billion. Consumers, especially lower-income shoppers, are grappling with higher prices this year on a range of necessities, but they are still spending, said the NRF. Sales volume—or amount of items purchased—is also expected to increase from last year. NRF noted that some holiday shopping may have started before November, as retailers have pushed holiday deals earlier each year, in part to boost overall spending.
                              • Discretionary spending is under pressure due to high inflation, and department stores are likely to be negatively impacted. Analysts at market and investment research firm Cowen said that unit sales in retail “remain weak,” with “real sales” down from last year in sporting goods, department stores, and clothing and accessories. The sales to inventory spread for most of the retailers Cowen covers has turned negative this year, with trends worsening in Q2. Leading retailer Walmart has canceled “billions of dollars” in planned orders to align inventory with demand. Walmart Chief Financial Officer John Rainey said that the company is reducing exposure to some areas, including sporting goods, electronics, and home furnishings.
                              • Retailers are promoting their readiness to meet demand this holiday season. Experts say that the heightened readiness is partly due to higher-than-usual levels of inventory across the board as a result of delayed orders from Q1 and Q2 that have only recently arrived, compounding existing orders for the season. Current economic trends such as inflation will likely encourage consumers to spread out their shopping over a longer time period, according to Neil Saunders, managing director of GlobalData. He added that shopping earlier also mitigates the risk of order delays due to supply chain challenges.
                              • Department store chain Macy's is speeding up its plan to open smaller stores that aren't attached to suburban shopping malls. Many industry experts call the move a bid to evolve with its customers' shopping preferences coming out of the COVID pandemic. Macy's has opened five stores under the Market by Macy's banner since 2020. The stores are about one-fifth of the size of its full-line locations and offer services such as buy online and pick up in store. The count will reach eight by the end of 2022. Kohl's also aims to open 100 smaller-footprint locations over the next four years.
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