Macy’s and J.C. Penney both reported end of year sales growth, offering encouraging signs that if department stores struggling to hold their own against online retailers had a decent period, other retailers did as well.
The results, announced Thursday, came after both retailers focused on improving their online services while highlighting more exclusive offerings. Low unemployment, a strong stock market and other factors set the stage for a good shopping season. The National Retail Federation believes retail sales could exceed its forecast for growth of 3.6 percent to 4 percent from a year ago and mark the best performance since 2014.
Much of that growth may go to online sellers, though, and Bain & Co. predicted that Amazon will account for half of the end of year 2017 sales growth. Many retailers, particularly department store chains, still have lots of challenges ahead as shoppers are increasingly buying online and shifting their spending more toward experiences. Sears Holdings Corp. has been among the hardest hit as it has failed to keep up with its peers. The company announced late Thursday that it will be closing over 100 additional stores. That comprises 64 Kmart and 39 Sears stores. Liquidation sales will begin as soon as next Friday. The stores will be shuttered between early March and early April, the company said.
Macy’s said sales at established stores rose 1 percent in the November-December period. That excludes licensed businesses and compares to a 2.7 percent drop a year ago. The company said active apparel, shoes, dresses, coats, fine jewelry, men’s tailored clothing, children’s fashions and home furnishings were all top performers.
However, it still expects an annual sales drop at established stores of 2.4 percent to 2.7 percent, and total revenue is forecast to fall 3.6 percent to 3.9 percent compared to a year earlier. Macy’s also says it will close another 11 stores, cut jobs and streamline non-store functions to save about $300 million. CEO Jeff Gennette says the company’s focus has been expanding online, stabilizing its stores and laying the foundation for growth.
Macy’s expects the headcount will be reduced by 5,000, or about 3.5 percent of its total workforce. Macy’s has a total of 140,000 employees.
Neil Saunders, managing director of GlobalData Retail, said in an investor note that while the end of year sales growth is a welcome change, Macy’s still lags the overall sector’s growth and he believes it is losing market share overall and in key categories. Saunders also thinks that the sales growth is a function of a robust market where shoppers were willing to spend more than a result of specific actions taken by Macy’s.
J.C. Penney, meanwhile, said revenue at stores open at least a year rose 3.4 percent for the nine-week period that ended Dec. 30. That compares to a 0.8 percent decline a year earlier. It also reaffirmed its full-year guidance for fiscal 2017. CEO Marvin Ellison said the sales growth was led by home, beauty and fine jewelry, and that Penney’s clothing business is improving. He added that e-commerce business is outpacing prior-year results with double-digit sales growth, fueled by fine jewelry, home decor, luggage, toys boots and athletic footwear.
Still, Jefferies analyst Randal Konik said in a note that the November and December trend “doesn’t change our overall thesis, as we believe the mall-based (department) store sector is challenged with structural issues.”
Macy’s shares slipped more than 3 percent, or 84 cents, to close at $24.49, while J.C. Penney’s stock slipped a penny to close at $3.69 on Thursday. Sears Holdings Corp.’s shares fell nearly 5 percent, or 18 cents, to close at $3.58.