NEW YORK – Just like the stores in movies such as “A Christmas Story” and “Miracle on 34th Street,” department stores were once magical places, with storybook windows, mounds of toys and gifts and Santa and his elves, enchanting generations of shoppers.
Now, after having lost their holiday sense of wonder for years, even decades, department stores are reigniting that spark with exciting displays, prettier decor and trendier merchandise. Their new-found status, expected to help them win back customers from specialty and discount retailers, will be most noticeable as the holiday season kicks off Friday.
J.C. Penney Co. is selling cashmere sweater sets for under $100 and iPod-friendly polyester jackets for $129.99. Macy’s is getting back into toys and electronics; it is rolling out vending machines that sell iPods and other gadgets. It also struck a deal with Martha Stewart to sell a new home furnishing collection to be in stores next year.
At the high end, Saks Inc., which shed its mid-tier department store business to concentrate on its luxury business, has had a fashion makeover. Holiday best sellers for women include Burberry mufflers and cashmere fingerless arm warmers from Portolano.
At Bloomingdale’s, designer apparel and status accessories are doing well so far this season, offering the air of exclusivity, according to CEO Michael Gould.
The changes on the selling floor are part of a major shift in the department store industry. Mergers and acquisitions helped eliminate weak stores, and the retailers have worked hard to develop exclusive fashions. The result: Department stores are reversing their fortunes, achieving sales gains this past year that beat their discount- and specialty-store rivals.
A big turning point was Federated Department Stores Inc.’s acquisition last year of May Department Stores Co., creating a company with huge merchandising power and the ability to demand better prices from suppliers. Federated’s conversion of most of the struggling May stores to Macy’s branches in September created a national brand that has energized the sector.
Department stores have also benefited from the woes of some of the national apparel chains like Chico’s FAS Inc., whose sales slowed this year, and Gap Inc., which has struggled for years to find the right fashion formula.
Department stores should also do well if consumers, as expected, return to more traditional gifts such as apparel, as there isn’t a new electronic item this year. Still, some analysts question department stores’ staying power beyond Dec. 25.
“Department stores are going to do fine this holiday season, but I am concerned where they are going to be next fall,” said Marshal Cohen, chief analyst at NPD Group Inc., a Port Washington, N.Y.-based market research firm.” The stores still haven’t done enough to connect with consumers. They still haven’t put service back in the equation.”
And there’s the issue of convenience, which makes some shoppers still shy away from cavernous department stores.
Laurel Smith, of Nashville, Tenn., said she likes to go to stores she can “run right in.”
“I guess if you have new, comfortable shoes, and don’t have to carry a purse and have a lot of time, it would be worth it,” she said.
Nonetheless, brighter prospects for department stores have helped lift the industry’s spirits this holiday season. From the February-October period, department stores averaged a same-store sales gain of 4.1 percent, according to the International Council of Shopping Centers. That compares with a modest 1.3 percent pace for mall-based apparel store and a 2.9 percent gain for discounters. Same-store sales, from stores open at least a year, are a widely followed measure of retail strength.
“They have bigger selection and have better sales,” said Becky Hoscheid, of Cherry, Ill. “You want to go to something where you can get everything at one place.”
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