Once considered the dinosaurs of retailing, department stores are showing signs of life.
When the nation’s retailers reported September sales results yesterday, the department store group was among the best-performing categories, showing a year-over-year increase of 8.8 percent, the strongest gain since 1997.
“The department store sector blew away expectations,” noted Thomson Financial, which predicted the group’s sales at stores open at least a year would show a smaller 5.3 percent rise for the month.
Retailers across the board benefited from strong consumer spending, lower gasoline prices and cooler weather. An exception was discount stores, which were hurt by strong comparisons to last year, when sales surged following Hurricane Katrina.
In addition to those broader trends, department stores also benefited from the wave of consolidation that has swept the industry, analysts said.
In the wake of mergers, such as Federated Department Stores acquisition of the May Department Stores’ Company, dozens of overlapping or under-performing stores were closed, resulting in the displacement of about $3 billion in sales annually, according to Deutsche Bank analyst Bill Dreher.
“There are huge market share shifts available, and department stores are in a good position to capture those gains,” Dreher said.
Once derided as a “sea of sameness” in terms of the clothing they sold, department stores have slowly moved to reinvent themselves over the past decade by offering more exclusive and fashion-forward items. At the same time, these stores have tried to wean customers off the heavy discounts that they had come to expect.
“The department store is a smaller piece of the overall market today, but it’s a much more efficient model than what existed 15 years ago,” said Richard Hastings, an analyst with Bernard Sands.
Some of the best performers were Kohl’s, which saw year-over-year sales rise 16.3 percent for the month, Nordstrom, with a 13.4 percent gain, and Saks Inc., with a 10 percent increase.