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Fitch Updates 2014 Outlook for U.S. Department Store Industry
March 7, 2014 / 10:09 PM / 4 years ago

Fitch Updates 2014 Outlook for U.S. Department Store Industry

(The following statement was released by the rating agency) CHICAGO, March 07 (Fitch) U.S. department stores have seen sales decline by approximately 4% to about $175 billion -- the worst rate of decline since the 2008-2009 recession and lower than Fitch Ratings' medium term projection of a decline of 1% to 2% annually. This reflects the continued secular pressure and channel leakage to specialty apparel, discounters and, more recently, the online channel. The eight department stores that Fitch rates (approximately 60% of the sector) reported comparable store sales decline of approximately 0.9% on a sales-weighted basis in 2013. Total sales volume for these companies was down 2.2% for the year versus 4% for the sector. The notable laggards continue to be Sears Holdings Corporation; Bon-Ton Stores, Inc.; Kohl's Corporation and J.C. Penney Company, Inc., although J.C. Penney finally turned a positive 2% comp in fourth-quarter 2013. Macy's, Inc.; Nordstrom, Inc.; and Neiman Marcus, Inc., which continued to post positive comps and market share gains, have differentiated product offerings, strong customer service and a successful multi-channel 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 ward off competition from other channels such as specialty, discount and online retailers. Fitch expects comparable store sales for the department stores the agency rates will remain flat to grow 1% in 2014 due to the expected improvement in J.C. Penney. Inventory levels in the channel appear to still be somewhat high at the end of 2013, indicating further clearance activity in first-quarter 2014; Fitch does not expect that the promotional activity will abate. As a result, gross margin for the sector could remain under modest pressure in 2014. The full report 'Department Stores: 2014 Updated Outlook' is available at '' Contact: Monica Aggarwal, CFA Senior Director +1-212-908-0282 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Isabel Hu, CFA Director +1-212-908-0672 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: Additional information is available at ''. Applicable Criteria and Related Research: Department Stores: 2014 Updated Outlook here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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