Top 10 Department Stores: Who Made the Cut?

8/13/2013

Click here for an updated look at the top department store chains

As department stores battle for position with the consumer by introducing new private-label products, remodeling and opening stores, beefing up loyalty programs and ramping up marketing programs, they all have turned up the heat on their omnichannel efforts. Retailers are working to integrate stores, websites, mobile and catalog to ensure that all channels work in unison and that inventory can be shared among them. Department stores are finding that customers who shop all channels spend more than those who shop just one; making it easy for them to move from one to the other seamlessly is a direct line to bigger basket size and greater profitability. It's also crucial for competing with the likes of Amazon.

In Apparel Magazine's third annual ranking of U.S. department stores, retailers continue to jockey for position. The list is comprised of retailers with at least $100 million in annual sales that are publicly traded on the U.S. stock exchange, by profit margin for their most recent fiscal years, respectively. Privately held retailers are not included, as well as Nordstrom, because it files with the SEC under Retail – Family Clothing Stores, rather than Retail – Department Stores.

The Top 10 Department Stores:

Kohl's
Dillard's
Macy's
Belk
Neiman Marcus
Sak Incorporated
Burlington Coat Factory
Bon-Ton Stores
Sears Holdings
JCPenney

Kohl's topped the list this year with a 5.11% profit margin as it continues to refine its store experience to better serve the customer. E-Commerce exceeded $1.4 billion in 2012, as the company invests in a new platform from Oracle, rolling out this summer. In its efforts to perfect the omnichannel experience, the retailer has equipped all stores with WiFi, replaced gift registries with kiosks, and will pilot mobile POS in the third quarter of this year. While it's global inventory visibility project will allow the retailer to better track in-store inventory, the first step on the path toward offering in-store pickup for online orders.

With a 4% comp-sales increase on top of a 4% increase the prior year, Dillard's ranked second. The retailer continues to focus on knowing its customer and not veering from its merchandise strategy that is focused on presenting limited distribution, high-profile brands. The retailer is also working to improve the flow of merchandise receipts to stores in pace with demand, and to pinpoint replenishment of products with greater precision based on improvements in data analysis and logistical response.

Macy's chairman, president and CEO Terry Lundgren said the retailer has "moved beyond the meaning of 'department store' in the traditional sense of the word," to be "America's Omnichannel Store." Macy's has taken a leading role in this space, catering to consumers who move between stores, computers and mobile devices without missing a beat. This year the retailer will equip another 208 stores with fulfillment capability, bringing the total to 500 by year's end.

During 2013 Belk will celebrate its 125th anniversary with a multi-year $600 million reinvestment in the business that will touch everything from branding and service, to technology, to store remodels and expansions. The retailer grew e-commerce sales by 85% to $135 million in 2012 and is working to better integrate its customer data from online and store sales for a more complete view of customers. Part of the massive IT overhaul will include new POS equipment, including wireless tablets for sales staff, which will provide insight into a customer's purchase history.

With online generating 20.2% of total revenues for Neiman Marcus in 2012, the retailer is focused, like its competitors, on getting omnichannel right. This year it made the decision to close its warehouse in China and fulfill online orders to its Chinese e-commerce site from U.S. facilities. In November, Neiman expanded its relationship with Target as the two teamed up to sponsor an episode of ABC's popular drama, "Revenge."

Saks has worked hard to make itself quite attractive, expanding its Off 5th outlets and focusing on omnichannel via its "Single View of the Customer" platform, and on the back end is integrating its in-store and Direct inventory systems. In 2012, Saks completed the rollout of free WiFi networks and also placed iPads in all of its SFA stores to allow associates to access saks.com and merchandise "look books" to expand the merchandise offerings available to customers, and to access inventory from all locations. It began a pilot of iTouch-based mobile POS devices in several of its stores, including Off 5th. The year also saw the start of "Project Evolution," a multi-year migration of its existing merchandising, planning, procurement, finance and human resources information technology systems to an enterprise-wide systems solution. To meet the rapid growth of Saks Direct, the retailer opened a new fulfillment center in Tennessee, equipped with an advanced mobile-robotic fulfillment system.

Burlington Coat Factory sets the focus on the customer this year as the retailer focuses on expanded product offerings and categories to increase her basket size and frequency of visits, while also turning its attention to simplifying navigation, reducing rack density, facilitating quicker checkouts and improving fitting rooms in the stores. To refine its off-price strategy further, the retailer launched a Merchant Scorecard that rates products across four key categories – fashion, quality, brand and price – to help formalize a framework for buying decisions. This, in addition to recent implementations of allocation and markdown optimization systems, will help to improve offerings and drive comp-store sales growth.

It was a challenging year for Bon-Ton Stores, making several transformational changes in its business and stabilizing its financial performance, improving each quarter of the year as it better balanced its merchandise assortment, implemented more disciplined inventory management, improved marketing and upgraded its e-commerce business. This year also saw the re-launch of the retailer's loyalty program. The retailer is making strides toward localizing its assortment to the different personalities of the regions it serves, re-engaging its core customer while also reaching new customers. It is investing in CRM and other marketing techniques, while working to improve gross margin via better inventory management that includes new liquidation techniques, more strategic pricing of merchandise assortments and focus on better inventory turnover in smaller stores.

In April, Sears Holdings announced the launch of a new business unit called Shop Your Way Brands, featuring new clothing and lifestyle lines, which will be available only at Kmart and on ShopYourWay.com, Sears' social commerce platform. Sears and Kmart apparel businesses improved in 2012, helped by improved assortments and better inventory management, which it expects to improve further this year as it adapts its supply chain to buy on demand versus accumulating inventory that requires promotional pricing to sell. As the retailer works to integrate its retail channels into the Shop Your Way program, it has rolled out tablets and mobile devices to Sears stores across the country in 2012, introduced mobile checkout to many locations and introduced a "Return in 5, Exchange in 5" capability that allows members to fill out product return information online and drop off or exchange the item they want to return at its Merchandise Pick Up area within five minutes.

This one's up in the air: department store or soap opera? You decide. Turning JCP around will be no easy feat. Amidst the chaos, the retailer has been rolling out technology, including WiFi in most of its stores as well as mobile devices for associates that liberate them from fixed POS terminals and allow them to assist and checkout customers on the floor. On the customer outreach side, JCP is down on bended knee asking customers to "come back" in social media posts as well as in a new commercial, admitting that it has made mistakes and promising to listen to customers' needs.