Challenges and Opportunities Ahead: Department Stores Must Adapt to Evolving Market Dynamics
Department stores have experienced a material sales recovery in 2021, supported by the reopening economy, expanding vaccine rollout, healthy consumer wallets, and higher market liquidity. Margin improvements during this period were even more material, driven by operating leverage gains as well as lower discounted merchandise. Looking at the holiday season and beyond, DBRS Morningstar believes these department stores will face challenges as well as opportunities as they navigate this period of relatively strong demand while dealing with inflationary pressures, supply chain issues, and the ongoing evolution of consumer spending and shopping habits as well as uncertainties related to new coronavirus variants.Now more than ever before, technology, channel optimization, and analytics are changing the retail ecosystem and how these department stores adapt to this transition is key to sustainable and profitable growth. DBRS Morningstar believes the sector's overall credit quality will be at least stable over the near term and any positive rating action on any specific issuer will likely be driven by relatively strong operational execution and market share gains combined with prudent financial management.
Nordstrom is a fashion retailer providing a selection of brand-name and private label apparel, shoes, cosmetics and accessories for women, men, young adults and children. The company serves customers through two businesses: Full-Price and Off-Price. The company's operations consist of the company's Nordstrom U.S. and Canada full-line stores, U.S. and Canada Nordstrom Rack stores, Jeffrey boutiques, Last Chance clearance stores, Trunk Club clubhouses and Nordstrom Local. Additionally, customers are served online through Nordstrom.com, Nordstromrack.com, HauteLook and TrunkClub.com.
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