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Retail Trends

Department Stores

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With traffic counts depressed at many shopping centers, a number of retail industry observers have been all too willing to point the finger of blame at department store anchors. But a funny thing happened on the way to the department store wake: new signs of life.

Luxury product makers like Prada and LVMH Moët Hennessy Louis Vuitton are reporting double-digit sales increases this year — and cite sales in chains from Saks and Neiman Marcus to Macy’s as a primary contributing factor. In what was an overall difficult year for retailers, mall-based department stores saw market share increase — albeit ever so slightly — to 2.5 percent. “Even though it was only a tenth of a share point, for department stores, that is a huge change,” says Craig Johnson, president of private equity firm Consumer Growth Partners. “This is a real turn in the market. We’re optimistic that the momentum is just gathering.”

Saks is so confident that it is headed in the right direction that the retailer recently decided to tweak its merchandising focus and concentrate on the priciest SKUs. In the first quarter of this year, Saks saw sales rise 8.8 percent from 2010 levels. Comparable-store sales jumped 10.2 percent, Saks’ best showing since 2007.

Macy’s also generated impressive first-quarter numbers, with earnings soaring nearly sixfold thanks in part to a 5.7 percent increase in revenues. Things were so good, in fact, that the operator of the Macy’s and Bloomingdale’s chains doubled its dividend payout to shareholders. “Our confidence derives from our belief that we remain in the early innings of implementation of our current strategies — My Macy’s localization, enhanced sales training, exclusive and differentiated merchandise and omni-channel integration,” says Macy’s chairman, president and CEO Terry J. Lundgren.

Even venerable Belk, the largest of the independent regional chains, displayed some vigor with a 90.2 percent increase in earnings on the strength of a 5.1 percent rise in same-store sales for the fiscal year ended in January.