||Department Stores in Good Position After 1Q Resurgence
Department stores delivered in the first quarter, with their strong results reflecting initiatives, including more exclusive brands, that should aid them as the year progresses and conditions become more challenging.
The major midtier department chains all delivered solid earnings, with topline results showing their customers felt comfortable spending and their merchandise was compelling. While higher cotton costs and gasoline prices stand to weigh on upcoming results, department stores have positioned themselves well, analysts say.
"They have regained their footing as a place for customers," said John Long, retail strategist at Kurt Salmon. "That is certainly a positive going into what will likely be a rocky period."
The major department stores, including Macy's Inc., Kohl's Corp., J.C. Penney and Dillard's Inc., are demonstrating a resurgence following the recession when some of them were forced to revamp their approach to selling. The group has emerged, in some cases, by putting a bigger focus on youth and wealthier customers. Their uniformly strong first-quarter results were issued ahead of teen and specialty retailers, whose numbers may reflect dings from department stores, some analysts say.
Department stores have put more focus on younger customers by rolling out more exclusive lines, which are brands that only they carry and that often have designer or well-known names. Generally on the less expensive end are private label lines, which are the stores' own brands. Department stores also continue to carry a good deal of national brands, with the combination seen as offering something for everyone.
J.C. Penney is an example of a department store that has embraced exclusive merchandise in a big way, carrying the Liz Claiborne Inc. line and also continuing to set up in-store Sephora cosmetics departments. Penney is also expanding its MNG by Mango offering, which is a contemporary fashion line.
Exclusive lines are key to Penney's strategy, helping to boost overall store business, Penney Chief Executive Myron Ullman said last week after the company posted a nearly 7% rise in first-quarter earnings.
Macy's, which reported very strong first-quarter earnings, is building business with exclusives and also its efforts to tailor merchandise and marketing to local tastes. The effort "has allowed Macy's to be more responsive and relevant than retailers that have approached selling only on a national level," Long said.
Macy's program is broad. "It's not merely about climate differences and income disparities between areas," Long said. "It's about brand preferences, sizing and ethnic configurations."
Department stores are also embracing online selling and, unlike specialty apparel retailers, benefit by being able to offer multiple brands and products. Department stores are in all facets of online marketing, and are clearly popular by at least one Internet measure. Kohl's Corp. has 4.5 million Facebook "likes." Macy's has 1.9 million and Penney has 1.7 million.
(Source: Dow Jones Newswires, 05/16/11)