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 17 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 50,000 workers and generates nearly $8 billion annually.

    • The department store industry consists of 17 firms that employ about 950,000 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
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Mar 2, 2024 - Producer Prices, Employment Costs Up
                              • According to data from the Bureau of Labor Statistics (BLS), producer prices for department store retailers declined throughout 2023 but have grown year over year since 2019. In December 2023, producer prices increased by 2.8% from the previous year and 28.4% from 2019. Employment levels have fallen 11.8% since December 2019 due to the ongoing challenges of lower consumer spending and higher competition from online and discount retailers. Employment costs have climbed significantly in a tight labor market, with wages reaching $17 an hour in the fourth quarter of 2023 and increasing more than 19% since December 2019, according to the BLS. Additionally, consumer spending levels grew in the last half of 2023, a 3.1% increase in the third quarter and 2.8% in the fourth quarter, according to Reuters.
                              • Consumer confidence levels fell in February 2024 after increasing for three consecutive months, according to data from The Conference Board. The Conference Board’s consumer confidence index fell to 106.7 in February 2024 from 110.9 in January 2024. According to Dana Peterson, Chief Economist at The Conference Board, “The decline in consumer confidence in February interrupted a three-month rise, reflecting persistent uncertainty about the US economy. The drop in confidence was broad-based, affecting all income groups except households earning less than $15,000 and those earning more than $125,000.” Peterson added that the decline in consumer confidence was largest in householders over 55 and those under 35. Plans to purchase homes, autos, and large appliances decreased slightly on a six-month basis.
                              • A new report from the National Retail Federation and Appriss Retail shows returns for the retail industry reached $743 billion in merchandise in 2023, according to Chain Store Age. The rate in 2023 was 14.5%, lower than the 16.5% in 2022 and 16.6% in 2021. The average retailer faces $145 million in merchandise returns for every $1 billion in sales. Online sales have a higher return rate; 17.6% of merchandise purchased online is returned compared to 10% for pure brick-and-mortar returns. Over 15% of holiday gifts are expected to be returned, totaling some $148 billion. Fraudulent returns account for 16.5% of total holiday returns. Types of return fraud in 2023 included returns of used, non-defective merchandise (49%), the return of shoplifted or stolen goods (44%), returns of goods purchased on fraudulent or stolen tender (37%), and return fraud from organized retail crime organizations (20%).
                              • Consumers are more moved by free shipping than same-day delivery, according to a new Forrester report shared by Retail Dive. About 75% of US online consumers say that free shipping is among the most critical criteria they consider when deciding where to shop online, while only 20% selected next-day or same-day delivery as a key factor. Retailers such as Amazon, Target, and Walmart have invested in same-day and next-day delivery capabilities as a competitive differentiator to speed up delivery times for consumers, even though they have not cited this as a priority. Nearly 50% of consumers surveyed by Forrester said the option for same-day delivery has little impact on which retailer or brand they will buy. The average delivery time cited in the article between placing and receiving an order was four days as of April 2023. Consumers have expressed interest in buying online and picking up at a nearby store (22%), curbside pickup (27%), and drive-through pickup options (15%).
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