While not all retailers will thrive during this holiday season, which is expected to see industry-wide sales as good or slightly better than last year’s, there are four big department store chains that look ready to outperform. Stronger online sales growth, cost-efficient operations and a focus on consumers looking for deal prices, are all factors that could contribute to Macy’s Inc. (M), Nordstrom Inc. (JWN), Target Corp. (TGT) and Ross Stores Inc. (ROST), having a very merry holiday season, according to Barron’s.
Online Boosts the Bottom Line
Consumer confidence rose to a 17-year high in October and with U.S. aggregate sales growth for this holiday season forecasted to be similar to last year’s 3.5%, or slightly higher at 4%, a big difference that will set these department stores ahead of the rest is the extent to which they have been able to grow their online presence.
If it was not already obvious that consumers were increasingly going online to make their retail purchases, last December’s 13% jump in online sales sure got the message across. Since mid-December, traditional brick-and-mortar retailer’s share prices have suffered, with department store share prices plunging as much as 40%, according to Barron’s.
As of the end of trading on Monday, Macy’s was down 41.92% year to date, Nordstrom’s was down 13.54% and Target was down 19.87%. While Ross was up 10.88% for the year, it’s been no match for online giant Amazon.com Inc.’s (AMZN) 50.20% rise. But, if these department stores are serious about turning around and taking advantage of the online retail trend, their stocks may be trading at a considerable discount. (To read more, see: Amazon Effect Prompts New ‘Decline of Retail’ ETFs.)
Retail Survival Plans
Target has improved its online presence as the big department chain now allows customers to order online and then choose between, either picking up the order themselves, or having their local store ship the order to them. Compared to last year’s Q3, Target’s online sales grew 24% and accounted for the majority of the store’s 0.9% comparable store sales growth.
Macy’s has also strengthened its online sales capabilities, offering in-store pickup for online orders as well. The company has also been restructuring its operations, having announced back in August plans to merge its merchandising, planning and private brand units, into one. Macy’s claimed that the restructuring would result in a cut of 100 jobs and would help to save the company around $30 million per year.
In the most recent quarter, while its comparable store sales growth fell, Nordstrom’s online comparable sales grew 7.5%. Online sales accounted for 15% of its net revenue. The company has also been expanding its discount store, Nordstrom Rack, in order to appeal to consumers that appear increasingly cost sensitive. (To read more, see: Is Nordstrom Back on Track?)
Ross, the only department store out of the four whose shares are up for the year, has also seen success in focusing on discounted products for the cost-conscious consumer. The ‘off-price’ retailer saw Q3 comparable sales growth of 4%, double the Consensus Metrix’s forecast of 2%.