Mall-based retailers feeling pain after shoppers turn away
Grim news continues to roll in for mall-based retailers, with several companies reporting declines in a key sales metric over the holiday period despite a broader rise in consumer spending.
Kohl’s Corp., J.C. Penney Co. and Victoria’s Secret owner L Brands Inc. all reported drops in same-store sales, which is a critical measure of retail success. Macy’s Inc. also reported a drop in comparable sales on Wednesday, although it noted improving trends, while Bed Bath & Beyond withdrew its financial projections amid weak results.
The holidays are the most important time of year for most retailers, so hopes for a sustained turnaround for beleaguered companies in large part hinged on a better performance in the final months of 2019. But deeply ingrained trends – such as digital-savvy shoppers migrating to wherever the discounts are, forcing prices down across the market – are preventing many retailers from regaining their former stature.
The declines at Kohl’s and L Brands in particular were surprising, said Poonam Goyal, an analyst with Bloomberg Intelligence.
“Sales should have been up, but they weren’t and that’s a bit concerning,” Goyal said. “They could have posted better results, and the fact that they didn’t shows the need for them to drive traffic and maybe even shrink their stores into smaller formats.
The biggest retailers – especially Amazon.com Inc., Walmart Inc. and Target Corp. – are among the primary beneficiaries of the mall-based troubles. E-commerce gobbled up market share during the holidays, with web sales in the U.S. growing almost 19% compared to last year.
Here’s a look at some of the details the companies released Thursday.
Victoria’s Secret lingerie is sinking into irrelevance, Jefferies analyst Randal Konik said Thursday after the company’s parent reported a drop in holiday sales.
L Brands Inc. reported Thursday that quarter-to-date comparable sales at Victoria’s Secret sank 12%, while store traffic was down by the mid-teens – worrisome signs for a company that’s struggled with changing consumer preferences. The company has been slow to adjust to a broader change in the lingerie business, with competitors gaining traction by embracing different body types while Victoria’s Secret continued to drive its push-up bra aesthetic.
Pink, which is the company’s young adult-focused brand, reported that same-store sales plunged by a mid-teens percentage rate. Konik said Pink’s weak results implied the brand “is not wanted any longer.” In a meeting with investors last year, L Brands executives touted the brand as a key part of its growth strategy.
L Brands representatives didn’t immediately reply to a request for comments.
Kohl’s reported a same-store sales decline of 0.2% in November and December.
CEO Michelle Gass said strength in e-commerce, beauty, footwear and other areas was offset by weakness in women’s apparel, and said the company is working “with speed” to fix the problem.
“Although the sales dip at Kohl’s is only modest, it is disappointing that the company was not able to continue the growth posted during the third quarter,” Neil Saunders, managing director of GlobalData Retail, said in emailed comments. “This is especially so as the consumer economy was strong over the period, so the flat performance is more reflective of Kohl’s and its strategy rather than of external dynamics.”
The company had stressed the importance of promotions and partnerships, like serving as a drop-off point for Amazon returns, in attracting customers over the holiday period.
The department-store chain, which has been fighting to reverse falling foot traffic and improve its inventory management, reported that same-store sales fell 5.3% in the holiday period when excluding the impact of its exit from the appliance and furniture categories. J.C. Penney reaffirmed its forecast for a full-year adjusted comparable-store sales decline of 5% to 6%.
While e-commerce is growing in relevance, stores remain an important factor, Bob Phibbs, head of the Retail Doctor, a New York-based consulting firm, said.
The results at J.C. Penney and Kohl’s suggest 2020 could be another difficult year for department stores, which were the worst-performing sector on the S&P 500 Index in 2019.
Right now, their main challenge is luring shoppers away from more niche options like Lululemon Athletica Inc., according to Phibbs.
“In 2020, it’s all about knowing who your customer is, becoming a niche player and knowing how to deliver,” he said.