In the latest evidence that department stores continue to underwhelm American shoppers, Nordstrom and Kohl’s posted results that experts say are mostly “meh.”
Kohl’s, amid some aggressive cutbacks, says its fourth-quarter comparable sales were flat, as were total revenues, at $6.83 billion. And net income slipped 3%, to $265 million.
Michelle Gass, Kohl’s CEO, acknowledged that the results were a disappointment. "While 2019 was a year in which our financial results did not meet our expectations,” she says in the company's announcement, “it was also a year of innovation and investment that further strengthened Kohl’s differentiation in the market.”
The Menomonee Falls, Wisconsin-based company says that in the year ahead, it expects sales to come in between flat and down 1% — not exactly the kind of forecast that inspires confidence.
And while Nordstrom serves a much higher-end customer, results there were similarly muted. Sales gained 1% in its full-price divisions, and 1.8% in its off-price units. Total revenue for the fourth quarter rose to $4.44 billion, from $4.38 billion in 2018. And net earnings fell to $193 million from $248 million in the comparable quarter.
While the two stores may serve different types of consumers, their challenges are similar, writes Paul Trussell, an analyst who follows retail for Deutsche Bank, in his report on the results. He rates both companies as a “hold.”
While Nordstrom “is experiencing solid momentum with its local strategy, we believe challenges remain around generating sustainable top-line and income growth over the long term,” he says.
“Kohl's is turning the page on a tough 2019 and taking more aggressive actions to stabilize the business and position for future growth,” writes Mark R. Altschwager, an analyst who covers the company for Baird. That includes a recent restructuring and efforts to shore up its ailing women’s apparel business. “Overall, results were at the lower end of management's plans when entering the holiday season.”
Perhaps even more concerning for the world of brick-and-mortar is that while Nordstrom invested heavily in its new store in Manhattan, that gamble is not paying off.
“Nordstrom has added a very expensive store in New York,” writes Neil Saunders, managing director of GlobalData Retail. “On its own this should be powering a generous sales uplift. However, even with the addition of an enormous store, Nordstrom’s growth remains below the overall market, indicating it continues to cede share.”
And while he was happy to see its 7.4% growth in online sales for the quarter, “store sales across both parts of the business fell by 1.7%.”
That means that while its multichannel offers and in-store pickups are gaining, they may be at the expense of store sales. “We believe it is also having a negative impact on impulse purchasing, as fewer shoppers are visiting outlets and even many of those that collect their orders from a store are failing to browse and buy other things while there,” says Saunders.