The U.S. department store industry, once considered a declining sector, shows signs of recovery. Department store chains Macy's and Kohl's have seen their stock prices surge due to sales recovery and strategic adjustments, attracting investors' attention once again.
According to Axios on the 3rd (local time), Macy's announced that it recorded its highest same-store sales growth rate in 12 quarters in the results released that day. The growth of high-end department store Bloomingdale's and beauty retailer Bluemercury drove its performance, and the newly remodeled Macy's stores also had a positive effect.
Analysts say that the strategy of closing 64 unprofitable stores and focusing on core locations, implemented earlier this year, is paying off. Macy's plans to close 150 stores, which represents one-third of its total stores, by the end of next year, while focusing investment on 350 key stores.
After the earnings announcement, Macy's stock surged about 13% during the trading session. Investors are positively reacting to the recovery signals, giving momentum to the company's revival plan, termed "a new leap." However, tariff burdens remain a recognized risk. Tony Spring, Chairman and CEO of Macy's, noted, "We are responding precisely regarding tariffs" and stated, "We will apply price increases selectively by category." Macy's warned that tariff pressures were partially reflected in the second quarter, but additional cost increases are inevitable by the end of the year.
Kohl's is also garnering investor expectations with improved performance. Kohl's stock soared 39% within a month after last month's earnings announcement. Analysts suggest that the strategy of abandoning the long-maintained "no coupons" policy and expanding discount benefits has effectively drawn customers back to stores. Oliver Chen, an analyst at investment bank TD Cowen, projected, "Women's clothing returned to profitability in July among peers, and jewelry sales increased by 12% in the second quarter," adding that "there is a possibility that Kohl's will return to a growth trend starting next year due to back-to-school season effects."
Kohl's is also concurrently working on improving store efficiency. The company has announced plans to close 27 stores by April next year to complete its restructuring. Neil Saunders, a GlobalData analyst, commented, "Macy's has achieved remarkable performance through appropriate responses to the situation," adding that "as customer satisfaction and evaluations improve, this leads to an increase in store visitors."
However, the fundamental challenges facing the department store industry remain. As consumers can choose from various alternatives, the value of traditional department stores is not what it used to be. According to a report released by consulting firm PwC, U.S. consumers plan to reduce their holiday shopping expenditure by 5% this year compared to last year, marking the first decrease since 2020. Analysts suggest that rising prices and tariff burdens are dampening consumer sentiment. However, the sharp rise in Kohl's stock might also reflect short-term buying by individual investors fueled by the meme stock craze, beyond just performance improvements.
Nonetheless, industry experts highlight that department stores are seeking survival strategies in new ways rather than accepting decline. Axios analyzed that "with improvements in performance realized through changes such as enhancing premium brands, expanding beauty retail, and selective discount policies, department stores can still maintain their presence in the U.S. consumer market."