Fitch: Diverging Fortunes Define U.S. Department Store Industry
NEW YORK -- May 16, 2013
U.S. department stores have produced widely divergent results over the last
year in the face of minimal industry growth, according to a Fitch Ratings
Fitch projects flat to slightly down sales for the department store industry
in 2013 and 2014 compared to $186 billion-$188 billion in 2011-12. Within
Fitch's rated portfolio, an expected top-line decline of high single-digit
sales for J.C. Penney and Sears Domestic will largely offset the 2%
sales-weighted growth projected for other large department stores. Fitch
expects Macy's, Dillard's and the luxury department stores will continue to
gain share with comps growth in the low-to-mid-single-digit range.
The more successful chains have differentiated product offerings, strong
customer service, and a successful omnichannel strategy that incorporates
strong store presentation and merchandise offering with growing online sales.
Fitch expects a market consolidator would need to generate top-line growth of
2% or above to grow market share and ward off competition from other channels
such as specialty, discount, and online, to sustain healthy profits and cash
Fitch remains concerned that with sales for the whole sector expected to be
flat to down, more store closings or potential restructurings will need to
occur over the next 24-36 months. This could have growing implications for
traffic patterns and competitive dynamics within the mall, as department
stores are key anchor tenants. Fitch notes that overall square footage has
remained flat since 2008.
Promotional pressure remains intense, particularly within the mid-tier
department stores given a lack of growth in household real income and
inflationary pressures over the last couple of years on staples such as food
and gas. J.C. Penney and Sears are the notable laggards, and Kohl's has
recently produced sub-par sales growth.
The report details key industry dynamics and includes full rating profiles on
each of the nine Fitch-rated department store retailers. Each company report
includes Fitch's assessment of the business and financial profile, key
selected financial data, a detailed debt organizational chart, and covenant
The full report 'Department Stores: In a State of Flux' is available at
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research Department Stores: Diverging Fortunes
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Monica Aggarwal, CFA, +1-212-908-0282
Fitch Ratings, Inc.
NY, NY 10001
Isabel Hu, CFA, +1-212-908-0672
Brian Bertsch, +1-212-908-0549
Media Relations, New York
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