New research from New Canaan, Conn.-based Customer Growth Partners (CGP) shows that department stores exhibited some surprising strength during the 2010 holiday shopping season, which has bolstered the firm’s outlook onmalls as a whole.
The strong season means that department stores gained market share compared with off-mall retailers in 2010 after three decades of declines. As a result, many operators will soon report their best annual earnings in years, if not ever. “Department stores from Macy’s to Nordstrom, and mall operators from Macerich to Simon, have used the recession not just to cut costs, but to reinvent themselves, and they’ve emerged from the worst retail debacle in decades stronger and hugely more relevant to the needs and lifestyles of today’s consumers,” CGP President Craig Johnson said in a statement.
CGP estimates that department stores posted $21.74 billion in sales in the fiscal quarters ended Jan. 31 for seven major chains. The figure was higher than either 2008 or 2009 and means, on the whole, that department stores accounted for 2.5 percent of retail sales. The results are a 10 basis point rise over 2009. To be sure, the figure is still a far cry for what the sector used to account for. In 1990, for example, the department store sector accounted for 7.5 percent of all retail sales. But it does mark the first year since the 1980s that the department store sector’s share of sales did not decline year-over-year, according to CGP.
The success is not across the board, however. Sears Holdings continues to struggle, for example. But many other department store operators have found a niche and performed well during the holiday shopping season. In addition, the sector benefited by struggles at Walmart, which has now suffered through almost two years of lagging sales.
“Industry leaders such as Macy’s, Nordstrom and Saks have all used the recession’s down years to reinvest and reinvent themselves for today’s shoppers, and to bring back levels of newness, excitement and execution not seen in years,” Johnson said in a statement.
CGP estimates that Macy’s will report its best annual performance since its 2005 acquisition of the May Co., with 2010 sales up 6.5 percent to $25 billion. In addition, its operating income will reach an estimated $1.87 billion, a 75 percent increase over the prior year. Similarly, Nordstrom posted record sales of $9.3 billion in 2010, a 13 percent gain over 2009.
For the mall sector, the strong performance of department stores contributed to delivering healthy sales per square foot numbers for regional mall REITs. CGP estimates that the average sales per square foot for General Growth, Macerich, Simon Property Group, Taubman Centers and Westfield combined came in at $467. That is up from $431 per square foot in 2009 and on par with the 2008 figure. It is still below the 2007 figure of $490 per square foot, however.