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
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              May 2, 2024 - Weak Growth Outlook for Industry
                              • 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.”
                              • Consumer confidence levels fell in April 2024 from March 2024, marking a third consecutive month of weakness, according to data from The Conference Board. The Conference Board’s consumer confidence index was 97 in April 2024 from 103.1 in March 2024. According to Dana Peterson, Chief Economist at The Conference Board, “Confidence retreated further in April, reaching its lowest level since July 2022 as consumers became less positive about the current labor market situation, and more concerned about future business conditions, job availability, and income.” Peterson added that confidence declined among consumers of all age groups and for all income groups except those in the $25,000 to $49,999 range. Plans for vacations, home purchases, and large appliances decreased 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%).
                              Get A Demo

                              Vertical IQ’s Industry Intelligence Platform

                              See for yourself why over 60,000 users trust Vertical IQ for their industry research and call preparation needs. Our easy-to-digest industry insights save call preparation time and help differentiate you from the competition.

                              Build valuable, lasting relationships by having smarter conversations -
                              check out Vertical IQ today.

                              Request A Demo