The Broken Department Store Model

Four of the five worst-per­form­ing S&P 500 stocks in the first half of the year were department stores. A few days into the sec­ond half of 2019, there is no in­di­ca­tion that trend is changing.

Nordstrom, which fin­ished June with the du­bi­ous dis­tinc­tion of the S&P 500’s worst per­former, lost 2.3% Tues­day af­ter UBS be­came the lat­est in a string of firms to lower its rat­ing for the stock.

The sell­ing pres­sure spilled over more broadly in the re­tail sec­tor: Macy’s and Kohl’s were also among the five big­gest S&P 500 de­clin­ers in the first half of the year, fell 1.3% and 1.1% respec­tively. Gap Inc.. fills out the roster. And, JCPenney is down 55% for the 12 month period.

The disruption is not about retail in general: Walmart, Target, Costco, Marshall’s, Ross Stores, Home Depot, Lowes and others are showing growth in sales and earnings.

And then there is Amazon

The business model for department stores has been disrupted. And, disruption is the mother of invention. Stay tuned…

From Akane Otani for the Wall Street Journal

20 Companies Account for Nearly All Retail & Fashion Profits

20 “super winner” companies now account for 97% of economic profit in the retail and fashion industry, a dramatic increase from 70% in 2010.

This finding is one of many interesting insights released in the “State of Fashion 2019” report from McKinsey & Company and The Business of Fashion.

The study shows increased polarization, with luxury and value advancing and mid-market players falling behind. “Well-known European luxury companies tended to be overrepresented in the top 20, with North American companies coming in a close second.”

Over time North American department stores lost out, with none remaining in the top 20, compared with three 10 years ago — a stark illustration of the fragility of the traditional retailing model.

The report states that 20% of companies represent 128% of the total industry economic profit.

Department Stores & Apparel: The Future is Blurry

Morgan Stanley predicts that the department store share of the apparel market will drop from 24 percent in 2006 to only 8 percent by 2022.

Many analysts continue to predict that, this year, Amazon will become the largest retailer of apparel in the United States. 

Top apparel retailers are ranked as Walmart, Amazon, Target, Macy’s, Kohl’s, The TJX Companies, Gap, Costco Wholesale, Nordstrom, Ross Stores, and JCPenney.

Continue reading “Department Stores & Apparel: The Future is Blurry”