Impact of Holidays on Department Stores

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As the holiday season approaches, retailers are gearing up for the busy shopping period. However, this year, many department stores are facing challenges.

According to recent data, half of the 189.6 million people who shopped during Black Friday weekend visited a department store. This suggests that department stores still hold some appeal for shoppers, but the numbers are not as impressive as they once were.

One reason for the decline in department store sales could be the shift towards online shopping. Many shoppers have turned to mobile for holiday shopping, and retailers like Nordstrom are investing in e-commerce to keep up with the trend. Nordstrom saw a 60% rise in e-commerce spending during Thanksgiving-Black Friday, with a $17 increase in average online order value.

However, not all department stores are keeping pace with the digital revolution. Kohl's customer experience is better online and through its shopping app compared to its stores. This could be a problem for Kohl's, as it recently entered into a partnership with Amazon to sell Amazon devices in its stores. If Kohl's stores are not in the best shape to take advantage of this partnership, it could be a missed opportunity.

J.C. Penney is another department store struggling to adapt to the changing retail landscape. The company had a third quarter with a net loss narrower by a third, better than analysts had expected, and improved margins despite a hefty sales decline. However, J.C. Penney remains hampered by problems left mostly unsolved by four CEOs since 2013. Jill Soltau, who was appointed CEO in October 2018, has taken major actions to improve profitability, including stopping the sale of furniture and major appliances in most physical stores to focus on J.C. Penney's legacy strengths in apparel and soft home furnishings.

Despite these efforts, J.C. Penney's performance during the third quarter was not as strong as expected, and a bad holiday performance could lead to store closures or a shrinking footprint. Cowen & Co. analysts expect a highly promotional holiday environment, which could put further pressure on department stores like J.C. Penney.

Meanwhile, mass merchants like Walmart and Target are increasingly winning, while "apparel-driven retailers" like Kohl's, Macy's, and Gap Inc. underperform. Target is dominating department stores with lower prices, broader assortment, and better merchandising. Macy's had a third quarter with topline and comp declines and shrinking profits.

Department stores once made the holiday season lucrative for themselves, but the landscape has changed. Retailers like Nordstrom are forging partnerships with digital retail favourites like Rent the Runway and Glossier to stay competitive. Nordstrom is also investing in cutting-edge retail concepts like Local stores and Trunk Club subscription styling service.

In conclusion, department stores are currently experiencing a tough third quarter, particularly for women's apparel and mall and department store retailers. The holiday season is critical for many retailers, and it remains to be seen how department stores will fare this year.