Department store stocks got a big lift on Friday after U.S. Census data showed a year-over-year 726.8% jump in clothing and clothing accessory sales during April 2021.
which reports its first-quarter earnings on Tuesday, saw its stock jump 14.4%. Luxury department store Nordstrom Inc.
was up 10.2%. And Kohl’s Corp.
was up 8.2%.
Department stores were in a slump even before the COVID-19 pandemic. During the pandemic, they have taken steps to strengthen their positions.
Nordstrom has focused on its active assortment with the addition of the Tonal home gym system and an athletic microsite.
Kohl’s, which did battle with an activist investor group during the pandemic, launched its first private-label athleisure brand, added some big fashion names to the merchandise lineup, like Tommy Hilfiger and an upcoming partnership with Sephora, and says it added millions of new customers.
And Macy’s just announced a proposed upgrade to the area around its New York City flagship location in Herald Square, as well as the addition of corporate work space.
Still, UBS analysts rate Macy’s stock sell heading into the earnings report. UBS has an $8 price target on Macy’s shares.
“Macy’s has major disadvantages vs. peers around price, product, and service. We believe these dynamics should lead to major share loss and margin pressure,” analysts said.
Even with the tremendous recovery in clothing sales in the past year, analysts reacted cautiously to the overall result. Overall U.S. retail sales were flat for April after a big jump in March.
“The April figures present a generally positive picture of the U.S. economy but illustrate that the economic recovery in the first half of the year remains fairly gradual,” said Andrew Viteritti, lead for commerce and regulation at The Economist Intelligence Unit, the research division of The Economist Group and sister company to The Economist publication.
“We expect consumer spending to pick up substantially by the second half of the year, reflecting increasing rates of vaccination and the easing of coronavirus restrictions, which together will release pent up demand. This will enable the U.S. economy to recover to its pre-pandemic output levels this year, with real GDP growth of 6%.”
Neil Saunders, managing director at GlobalData, says the rise is “logical” given the conditions in 2020.
“For over a year, consumers have reduced their spending on categories like apparel and they are now playing catchup – refreshing their closets as society reopens and activities like travel and entertainment become realistic,” he said.
Looking ahead, he anticipates a possible shift in spending as consumers settle into post-COVID activities.
“As we enter summer, it is likely more households will start to travel and vacation. Offices will also start to open back up – to some degree – and commuting will come back. This spend will potentially compete with retail, especially if gas and travel prices are elevated,” he said.
The ProShares Decline of the Retail Store ETF
has slumped 28.3% for the year to date. The SPDR S&P Retail ETF
is up 45% for the period. And the benchmark S&P 500 index
has gained 11.3% for the period.