Retail bankruptcies and store closures have made some splashy headlines for a year now. Last year had been full of ups and downs for the retail sector, with the media describing it as a retail apocalypse. But the fact is that the retail industry is showing signs of recovery and sustaining the uphill battle, busting the so-called retail apocalypse.
When compared to the other retail peers, the department store chains had an uncertain future as they had to battle the turbocharged competition from online behemoth Amazon (AMZN). Despite this, there are a few companies that are withstanding these rapid changes and trying to reinvent themselves to sustain.
Two companies Macy’s (M) and Dillard’s offer us an excellent example of survival in the Amazon Era. Though they had several stores in the underperforming malls, they remain successful.
Macy’s new CEO Jeffrey Gennette is proving his mettle. His North Star Strategy is one of his signature plans to draw profits in the long run. Shutting down lower performing stores helped the company as in its latest fourth quarter the company reported a marginal growth of 1.8% in sales at stores opened recently. This growth is significant considering the constant decrease it witnessed in its previous quarters. Since 2014, the company for the first time reported positive comparable sales of 1.3%.
The improvement in comparable sales is what is impressive about Macy’s, highlighting the management’s effort in bringing some gains. For the full year the company raised its guidance, it expects its EPS to be around 3.55-3.75 and comps to be above 1%.
Macy’s is working out new strategies to woo customers. This year Macy’s plans to invest close to $1.05 billion on capital expenditures, $150 million more than what it spent last year. With this, the company’s management focuses on uplifting the in-store shopping experience. Despite the store closures, the company managed to report double-digit growth for its digital business.
Two companies Macy’s and Dillard’s offer us an excellent example of survival in the Amazon Era. Though they had several stores in the underperforming malls, they remain successful.
Macy’s has a more extensive footprint. Apart from the North Star Transformation plan, the company is also working on monetizing its valuable $21 billion real estates. The company recently revealed its plan to flagship two of its properties.
Overall, Macy’s is gaining momentum. Another departmental store that performed well and is of great value to investors is the retailer of fashion apparel Dillard’s. While Macy’s is heavily investing in its five-point strategy, Dillard’s is working on minimizing its investments and spending more on buybacks to boost its EPS.
In the recent quarter, Dillard’s posted a 3% rise in its comparable sales. Positive sales trend from the third quarter continued to the fourth quarter. Sales rose 6% during the fourth quarter, and net income spiked 177% to $157.6 million due to a tax benefit.
Despite the revenue growth, the question that hovers around Dillard’s is whether or not it can continue with the same momentum this year because the company is still losing its key customers. The company has to figure a way to battle challenges such as deteriorating traffic, promotional pressure, changing trends in apparel retail segment and stiff competition from online companies. These conditions can prove to be a threat to the company. Despite having a clean balance sheet, Dillard’s growth prospect remains weak.
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