Oh, to be a department store in 2017.
A fresh wave of lackluster holiday results from department stores this week is the latest evidence that traditionally brick-and-mortar players are failing to find their stride in the digital era.
Before the dust could settle on Macy’s Inc.’s announcement Wednesday of a massive streamlining — which will see the struggling chain slash 10,100 jobs in addition to shuttering 100 of its 730 doors — early reads showed dismal holiday sales also plagued Kohl’s Corp. and The J.C. Penney Co.
Kohl’s said Wednesday that its comparable sales decreased 2.1 percent during the November-December holiday period. Meanwhile, total sales for the combined fiscal period decreased 2.7 percent.
Similarly, JCPenney reported that its November-December same-store sales dropped 0.8 percent, a disappointment against Wall Street’s bullish call for a same-store sales gain of 3 percent.
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To boot, both Macy’s — which also reported poor holiday sales — and Kohl’s downward adjusted their full-year outlooks, signaling that they don’t see any improving trends in the immediate future.
Investors quickly moved to rid themselves of retail stocks on the heels of the news, with Kohl’s and Macy’s seeing double-digit percentage declines in their share prices and JCPenney’s stock slumping high single digits.
But with all of the department stores reporting varying results across categories — Macy’s cited strength in apparel, while JCPenney saw weakness in the category — experts say the department store slump continues to be a sign of the digital-heavy times.
According to Cowen & Co. analyst Oliver Chen, the explanation is simple: “If you aren’t special enough, customers won’t visit your stores.”
“Holiday sales misses from Kohl’s and Macy’s demonstrate rough road for mid-tier retailers as we think off-price retail, Amazon, specific luxury brands, or better curated stores are gaining share,” Chen wrote Thursday. “Going forward, [fiscal year 2017] could be at risk.”
In a note Thursday addressing sluggish holiday sales at Kohl’s, UBS Investment Bank analyst Michael Binetti also noted that the need to offer deep discounts and perks such as free shipping will continue to plague Kohl’s.
“Structural trends like e-commerce [and] free shipping will remain a headwind,” Binetti wrote. “We’re more concerned today that — like in 4Q16 — even easy compares aren’t enough to offset heavy promotional requirements to drive traffic to stores.”