These 5 retailers are suffering in a changing retail world

January 12, 2016 in Economy by RBN Staff

USA Today
, USA TODAY | 2:21 p.m. EST January 11, 2016 

Macy’s isn’t the only store taking a hit in a rapidly changing retail world.

More shoppers are mining their phones and the web for deals and flocking to off-price chains to save a buck. They’re also choosing stores that can turn around stylish merchandise fast and favoring specialty merchandise such as comfortable and stylish athletic gear. The shift is making business challenging for some traditional retailers. Even as stores typically on solid footing, including Macy’s and Nordstrom, have scrambled to keep up with the shift in shopping habits, they’re finding it difficult to maintain an edge.

Here are five retailers facing challenges in 2016:


Macy’s announced a significant round of layoffs and 36 store closures last week, the same day it said holiday season sales fell a disappointing 4.7%. Macy’s struggled with poor sales of winter gear during an unseasonably warm end to 2015 and continued to see tourism dollars drain from the business. The stock has fallen 47% in the last 12 months.

While Macy’s has implemented services such as being able to buy online and pick up in store, it’s still a large department store chain that relies heavily on categories that aren’t doing so hot right now, such as handbags and clothes.

“There’s not a whole lot of newness in apparel,” says Bob Drbul, Nomura equity analyst. Macy’s and other department stores also face competition from brands like H&M and from off-price retailers such as TJ Maxx, which continue to pull in middle class shoppers with steep discounts on designer goods, says Ken Perkins, president of Retail Metrics.

Though with strategic shifts on the horizon, Drbul expects Macy’s to weather the change. “They have a great balance sheet, a very experienced and seasoned leadership team, and they’ll come through this,” he says.

Asked for comment, Macy’s spokesman Jim Sluzewski pointed to the retailer’s press release about its restructuring plans. Macy’s announced plans Wednesday meant to streamline the way it does business to become more efficient, including those layoffs and store closures, which are expected to lead to $400 million in savings.


Nordstrom faces many of the same problems as Macy’s, including competition from fast-fashion retailers like H&M that are experts in turning around stylish new merchandise quickly. Plus online competition generally is leading to lower traffic and fewer impulse buys at mainstream stores, says Efraim Levy, an equity analyst with S&P Capital IQ.

Nordstrom has long been known for superior customer service and a loyal customer base, but sales have faltered recently. The company lowered its fiscal year expectations after experiencing soft sales in the third quarter and its stock is down 42% from a year ago.

And unlike Macy’s, Nordstrom isn’t known for offering very compelling discounts, which makes it “tough to counter mid-tier competitors that frequently offer 50%-70% sales,” writes Citi analyst Paul Lejuez in a recent note to clients. Plus Nordstrom Rack, a competitor in the off-price sector, suffers from a lack of traffic drivers by stocking mostly apparel — a weak category at the moment — and not the home goods found at competitors like TJ Maxx, Lejuez says.

Citi cut its investment rating on Nordstrom from “buy” to “neutral,” citing concern about whether Nordstrom will be able to keep up with intense promotions at competitors. Nordstrom spokesman Dan Evans said the company doesn’t comment on sales results outside of earnings calls.


The teen retailer faces an incredibly competitive environment, up against H&M, Zara, Forever 21 and now Primark, a U.K. brand that started opening in the U.S. last year. Compared to those stores, Aeropostale hasn’t been quick enough turning out desirable apparel and relied on stamping merchandise with the Aeropostale logo for too long after that fashion went out of style, says Perkins of Retail Metrics.

With more than 800 stores, many have questioned the viability of Aeropostale’s business as it’s struggled to appeal to its target audience. Perkins also expects brands, including Aeropostale, to start downsizing their store count as they build leaner business models set up to better compete online.

Aeropostale shares are trading under a dollar, down from nearly $3 a year ago. Sales fell 20% in the third quarter. “When your stock is down under a buck, it’s troubling territory to be in,” Perkins says.

The company declined to comment.


The long-beleaguered Sears may not get by on its significant real estate portfolio much longer. The former king of the catalog business has seen revenue fall by nearly half in the last decade and has only posted positive same-store sales growth once since 2005. Sears, which also owns Kmart, faces an affront from all sides — companies like Lowe’s and Home Depot are chipping away at appliance sales, Target and fast-fashion brands have encroached on apparel and then there’s Amazon, which is squeezing pretty much everyone.

Plus, its stores are dated and uninspiring.

“They haven’t invested in display or merchandising,” Perkins says. “They haven’t upgraded their stores. They really have just watched the business slowly dry up.”

The one thing Sears has going for it is its impressive array of real estate holdings, which it started spinning off into a real estate investment trust last year. Still, shares have fallen by nearly half in the past year and Perkins questions how much longer the company can rely on revenue from its property sales without overhauling its merchandise.

“Sears Holdings is highly focused on restoring profitability to the company,” company spokesman Brian Hanover told USA TODAY, citing Sears’ strategy to turn into a “member-centric” business centered around a loyalty program that allows it to do more targeted marketing and promotions. He also points out Sears has seen five consecutive quarters of improved year-over-year performance on EBITDA, a measure of earnings before taxes and other financing expenses are factored in.

HH Gregg

As a regional player,  with 227 stores in 20 states, HH Gregg has to contend not only with falling traffic in more rural areas but stiff competition in consumer electronics, which is dominated by retailers such as Amazon and Best Buy.

The company said last week that it estimates same-store sales for the third quarter ended Dec. 31 fell 11%, with steep declines in appliances and consumer electronics. Sales of computers and tablets are estimated to have fallen 35%.

HH Gregg launched an overhaul in 2014 that included a national ad campaign and updated logo. It’s also trying to make inroads into the home furnishings business, a category that saw sales increase an estimated 16% in the current quarter. But investors remain skeptical. Its shares are down nearly 64% from a year ago.

The company said it wouldn’t comment on business performance until it puts out its earnings report at the end of the month.