Kohl's, Macy's and Nordstrom feel the squeeze

Published: 17-May-2016

US retailers have been suffering financially due to unfavourable sales environments

A string of US retailers have been feeling the negative effects of unfavourable sales environments of late.

US department store Kohl's saw sales drop 3.7% in the first quarter of 2016 to $3.972bn, compared with $4.123bn in the first quarter of 2015. Meanwhile, reported net income took a nosedive down 87% to $17m, compared with $127m in the prior year quarter.

Kevin Mansell, Kohl’s Chairman, CEO and President, said: “First quarter sales were challenging. Despite the sales environment, we were able to manage our gross margin and inventory levels consistent with our expectations as we took the markdowns necessary to clear excess inventory. We managed our expenses effectively throughout the quarter as every area contributed to our savings versus our plan.”

The number of stores Kohl’s operates did increase marginally in the year that passed between Q1 2015 and 2016; the retailer ended the 2016 quarter with 1,167 stores in 49 states, compared with 1,164 stores at the end of Q1 2015.

Macy's takes knock

Kohl’s is not the only US retailer to have suffered financially in Q1. Macy’s also saw sales tumble, down 7.4% to $5.771bn compared with $6.232bn in Q1 2015. Macy’s put this drop down in part to the 41 stores it shuttered in 2015. However, Macy’s was still opening stores of its Bluemercury beauty specialty stores, with seven new free standing stores opened.

Terry Lundgren, Macy’s Chairman and CEO, said: “Our management team is rising to the challenge and aggressively changing our playbook to gain market share and accelerate progress and results for the remainder of 2016 while also continuing to build for the longer term. We are not counting on the consumer to spend more, so we are working harder to give customers more reasons to buy from us by delivering outstanding style, quality and value.”

Nordstrom scales back

The results at Kohl's and Macy's follow the news that US fashion and beauty retailer Nordstrom is due to axe 350 to 400 jobs by the end of Q2 2016 in order to improve its operating model. For Nordstrom, earnings in Q1 2016 were below the company's expectations, primarily driven by lower than planned sales and higher markdowns to better align inventory to current trends. Total net sales in Q1 were $3.2bn, up 2.5% compared with net sales of $3.1bn during the same period in fiscal 2015. However, total comparable sales dropped 1.7%. But it seemed beauty was a top achiever for Nordstrom, with this category being the top performing across US full-line stores and Nordstrom.com.

Co-president Blake Nordstrom said: “Our first quarter results were impacted by lower than expected sales. In response we have made further adjustments to our inventory and expense plans. As the pace of change in retail continues to accelerate, we remain committed to serving customers by taking steps that will continue to meet their expectations while driving profitable growth.”

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