Turnarounds uncertain at Macy's, Kohl's, Nordstrom as department stores enter the holiday season
America’s malls are preparing for another Black Friday — but it’s not the 2000s anymore with lines snaked around store entrances, and that has cast dark clouds over the sector’s future.
“The whole Christmas shopping experience is totally different now,” says Morningstar analyst David Swartz, due to the likes of retail behemoths Amazon (AMZN), Walmart (WMT), and Target (TGT).
Plus, off-price retailers such as Ross Stores (ROST) and TJX Companies (TJX) owned TJ Maxx and Marshall’s, “are taking sales away from department stores constantly,” Swartz added.
Macy’s (M), Kohl’s (KSS), and Nordstrom (JWN) are fighting to stay in the game by closing lagging stores and pouring money into online operation.
But, the legacy department stores have still fallen behind digitally and questions surround whether they’ll remain public companies in the future amid evolving shopper patterns and high operating costs.
The struggles are in the pudding, so to speak.
Same-store sales dropped 1.3% in Macy’s preliminary third quarter results. Net sales fell 2.4% to $4.74 billion. Yahoo Finance data shows analysts expect Macy’s will report $22.1 billion in sales for 2024 — if hit, that would be about $3 billion less than calendar year 2021.
Kohl’s third quarter net sales fell 8.8% to $3.5 billion. Same-store sales declined 9.3%, dragged down by softness in apparel and footwear. The company booted its CEO Thomas Kingsbury.
Kohl’s is expected to reach $15.8 billion in sales this year, which would be down by roughly $4 billion from calendar year 2021.
Nordstrom’s third quarter results saw same-store sales grow 4% for the namesake brand. Off-price business Nordstrom Rack’s sales grew 3.9%.
Shares of all three retailers trade on a paltry average forward price-to-earnings multiple of 8 times according to Yahoo Finance analysis, a sizable discount to the 22.5 times afforded to the S&P 500.
Analysts estimate Nordstrom’s full year sales at $14.8 billion, about on par with calendar year 2021.
Investors in all three chains should expect flat to a low single digit sales decline for the holiday season, CFRA analyst Zach Warring told Yahoo Finance.
By comparison, the National Retail Federation (NRF) projects consumers to spend between 2.5% and 3.5% more than last year during the holidays.
“Consumers are looking for value more than ever,” JC Penney CEO Marc Rosen said on a phone call with Yahoo Finance. “What’s evolved…is how consumers view value.”
Shares of Macy’s have dropped 19% this year to around $16 per share, compared to a $24.80 per share buyout offer it rejected in July.
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