Over the past few months, major department stores like Nordstrom (JWN) and Macy’s (M) have announced their international expansion plans. On May 12, 2015, Nordstrom announced its plans to hire 1,000 employees for its Pacific Centre store in Vancouver, Canada, which is scheduled to open on September 18, 2015.
Declining US department store sales
According to the monthly retail sales data released by the US Census Bureau on May 13, department store sales (excluding leased departments) declined by 2.2% on a month-over-month basis to $13.7 billion in April 2015. Department store sales also declined by 5.1% on a year-over-year basis.
Department store sales in the US have been declining for the past few years. Excluding licensed department stores, department store sales as a percentage of total US retail sales were 3.1% in April 2015, down from 4.4% in April 2010.
Department stores are facing heavy competition from online retailers like Amazon (AMZN), clothing retailers like GAP (GPS) and Abercrombie & Fitch (ANF), as well as off-price retailers including TJX Companies (TJX) and Ross Stores (ROST).
International growth opportunities
Department stores are looking for growth opportunities in international markets. A rising population, higher income levels, and urbanization have resulted in increased demand for discretionary items like clothing and accessories in emerging economies.
According to a study by management consulting firm Wazir Advisors, the per capita spending on apparel over the 2012–2025 period will grow at a faster pace in countries like Australia, Canada, China, and Russia, compared with the US. Large department stores like Macy’s and Nordstrom can expand in international markets by leveraging their scale and financial position to capture the demand for branded apparel and accessories.