Fiscal third quarter results
Department stores’ results for fiscal 3Q15, which ended October 31, 2015, conveyed mixed signals to investors. While Macy’s (M), the largest department store, started the earnings season on a disappointing note with lower sales, Kohl’s (KSS) and JCPenney (JCP) exceeded Wall Street analysts’ sales expectations in 3Q15. Nordstrom (JWN) missed analysts’ 3Q15 sales estimates, reporting slower-than-expected sales growth.
Factors that impacted sales
Macy’s reported a 5.2% fall in 3Q15 sales due to lower international tourist sales and lower third-party sales of its private brand merchandise. Dillard’s (DDS) 3Q15 sales declined by 1.8% due to weakness in certain categories like men’s apparel and accessories, ladies’ accessories and lingerie, and home and furniture.
Nordstrom missed sales estimates in 3Q15 despite reporting higher sales growth than its peer group. Nordstrom’s 3Q15 sales increased by 6%, as the decline in the full-line store sales was offset by a rise in online sales and higher Nordstrom Rack store sales.
Kohl’s attributed the 1.2% rise in its 3Q15 sales to a strong back-to-school season and late October selling periods. JCPenney’s 4.8% sales growth in 3Q15 was a result of strong performance in the back-to-school season and strength in the men’s apparel, home, Sephora, footwear, and handbags categories. Kohl’s and JCPenney together constitute 1.8% of the SPDR S&P Retail ETF (XRT).
Expectations for fiscal 4Q15
The fiscal fourth quarter includes the holiday season, which is vital for department stores and retailers. According to the National Retail Federation, holiday season sales (excluding autos, gas, and restaurant sales) are expected to rise by 3.7% to $630.5 billion on a YoY (year-over-year) basis. This estimated growth rate is lower the 4.1% growth seen in the 2014 holiday season. For more on the 2015 holiday season, read Key Spend Trend Analysis for the 2015 Holiday Season.
Department stores have taken several initiatives to capture the holiday season demand. We’ll discuss this in the next part of this series.