Top U.S. retailers are posting strong quarterly growth across the board, a signal of increasing consumer confidence and a testament to the response of the industry’s old guard to the growing threat from e-commerce firms like Amazon.
From apparel and beauty to electronics, grocery and discount superstores, retailers are defying skeptics who years earlier proclaimed the death of bricks-and-mortar stores by reporting strong sales both there and in e-commerce businesses. Some once-struggling companies are posting profit gains for the first time in years.
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Experts point to the improved economy and the recent GOP-led tax law as reasons why consumer spending is up. But they also cite higher prices, a realignment to core product offerings and the acquisition of more technologically sophisticated companies as drivers of the industry’s strong performance.
“It’s not that retail’s dead, it’s that retail is going to be redefined,” Marshal Cohen, chief industry adviser at NPD Group, said in a recent interview. “We’ve seen the strong and the progressive rise to the top.”
To be sure, others are skeptical of the growth and note that, despite the improved big-picture numbers, several companies are still contending with under-performing stores and operations.
“The business up top is going to continue to look better and better, but inside the improvement, there are going to be big winners and big losers,” said Mark Cohen, director of retail studies at Columbia University’s business school in New York City.
In the apparel industry, Nordstrom Inc. posted an 8.4 percent increase in net sales to $4.6 billion for its most recent earnings period, while Dallas-based Neiman Marcus’s revenue grew 6.2 percent to $1.48 billion. Even youth-oriented retailers are surging after years of decline: American Eagle reported a 12 percent increase in sales.
The expansion is similar in the discount and big-box retail sector. Walmart reported a 4.4 percent growth in total revenue to $77.7 billion for the three months through April 30. Best Buy, one of the more successful turn-around stories, posted a 13.9 percent increase in sales.
In the beauty industry, Ulta boosted sales 23 percent to $1.9 billion at the beginning of the year.
Part of the general improvement is attributable to an increased focus on the in-store experience, a notable phenomenon given the still large amount of store closings and a broad-based shift to online.
“Retailers are learning that maybe it’s not the product that people want, maybe it’s the experience that people want,” said Brendan Witcher, vice president at market research company Forrester. “Omnichannel shopping really does have value. That’s using more of an enterprise-level strategy, and that’s working as well.”
But despite the largely positive outlook for many companies, some continue to struggle. Sears, for example, reported a 27.6 percent decline in net sales to $4.3 billion.
Competitors hoping to avoid a similar fate are pursuing a variety of strategies to bolster their customer base and make purchases easier. For many, the process amounts to honing a competitive edge against Amazon.
Target Corp., for example, purchased same-day delivery firm Shipt for $550 million earlier this year.
The Minneapolis-based company rolled out the service in Minnesota earlier this month and said it would expand it nationwide by the end of 2019. Last month, Target announced a 10 percent increase in net sales, the highest in the past five years.
Amazon, meanwhile, has sought to expand its own brick-and-mortar presence and experimented with several new initiatives aimed at delivering products closer to their final destination: inside the customer’s home.
“That last mile is the biggest challenge to conquer,” NPD’s Cohen said.
