Department Store Sales Continue to Slip in Otherwise Positive March for Retailing
America’s department stores continue to show weakness while the rest of the retail industry demonstrates resilience amid macro uncertainties, tariff and recession fears and slumping consumer sentiment.
March department stores fell a seasonally adjusted 0.3 percent from February, while overall retail sales in the U.S. rose 1.4 percent to $734.9 billion, according to the monthly data released by the Census Bureau on Wednesday.
General merchandise stores were up 0.6 percent during the month; specialty stores rose 0.4 percent; online sales were up 0.1 percent; auto sales were up 5.3 percent; stores selling electronics were up 0.8 percent, and sporting goods stores were up 2.4 percent.
While the March department stores’ weak result stood out, it was hardly surprising considering the sector is in a state of upheaval, characterized by extensive store closings, turnaround bids and restructurings.
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Sales during the first three months of the year fell 4 percent compared with a year earlier, while all retail and food service sales gained 2.8 percent.
Macy’s Inc. is closing approximately 150 department stores over a three-year period, leaving 350 still operating, and its sales last year decreased 3.5 percent to $22.3 billion, with comparable sales down 0.9 percent on an owned, licensed and marketplace basis.
Kohl’s in January installed a new chief executive officer, Ashley Buchanan, formerly CEO of Michaels, and in March he disclosed key elements of a new turnaround plan, to a large extent focused on private brands. Kohl’s sales decreased 7.2 percent last year, and 9.4 percent in the fourth quarter.
Saks Global has been struggling with paying bills, and in the process of integrating its Saks Fifth Avenue and Neiman Marcus businesses, both of which experienced sales declines last year as the luxury sector overall softened. Saks Global purchased the Neiman Marcus Group in a $2.7 billion deal finalized last December.
Dillard’s comparable-store sales fell 3 percent last year and total sales were down 2 percent.
The March sales gain was a reversal from declines from the previous two months. Headed into the month, consumers were seen as in good financial shape generally, although confidence was sinking. In part, experts attribute the sales uptick to consumer efforts to stock up before tariff-related price hikes ahead. Retail pundits also don’t expect the gains to last much longer, if at all, as the year progresses. Last week, the University of Michigan survey of consumer sentiment in which hundreds of Americans are contacted, posted its second-lowest reading ever.
“March U.S. retail sales came in relatively strong with sales of auto and gas up about 4.5 percent, albeit with strength in categories like consumer electronics that will generate debate about the potential for pulled-forward demand as consumers anticipate tariff-related price increases later in the year,” said David Silverman, senior director of Fitch Ratings, in a report on the March sales. “Overall consumer health remains good, although consumer sentiment is softening. We expect the implementation of tariffs and their impact on inflation, corporate profits and financial market volatility to further weigh on consumer psyches.
“Most retailers will report [first-quarter] earnings in May and it will be a first chance to hear from many on updated planning assumptions following recent news flow,” Silverman said. “We expect a somewhat high degree of uncertainty around the impact on consumer pricing, sales volumes and profitability given changing policies and lack of historical comparables. Fitch will focus on management expense and inventory planning, given our view that flexibility and agility remain keys to success in an environment likely to remain choppy.”
Earlier in April, Fitch lowered its 2025 outlook for the U.S. retail and consumer products sectors to “deteriorating” from “neutral” reflecting the expected impact of tariffs on spending as consumer sentiment moderates and retail costs rise.
