Checking In on Wholesale

This week will see some of the biggest US multibrand retailers report financial results, including department store chains Macy’s, Kohl’s and Nordstrom, plus sneaker seller Foot Locker and Ulta Beauty. After the numbers are out we’ll have a better picture of how an uncertain economy is shaping consumer behaviour.

Department Stores

Three of the biggest US department store chains, Macy’s, Kohl’s and Nordstrom, report quarterly results this week. Each is a microcosm of what’s ailing post-pandemic American retail: Macy’s represents the shrinking middle, Kohl’s the squeezed lower-income consumer and Nordstrom the vanishing aspirational shopper. Each has a long history of being among the first stores that shoppers cut out of their routine when they need to save a little cash. It’s no secret where they’re going instead: last week, TJX, the parent of off-price giant T.J. Maxx, reported better-than-expected revenue and profits. The company’s market capitalisation just crossed $100 billon, about 10 times Macy’s, Kohl’s and Nordstrom combined.

On the bright side, expectations for department store sales and profits are already low, so the most likely scenario is that these retailers continue to muddle through. They’re also adapting: Macy’s private line and smaller stores are its latest attempt to capture shifts in the retail landscape, for instance. These are the right moves to make, but all three chains have rolled out innovations before, whether it’s Amazon returns or experimental retail formats, without changing the underlying narrative of gradual decline.

Specialty Retailers

Foot Locker benefits from its status as one of Nike’s biggest third-party retailers, and with 2,600 stores worldwide, as one of the world’s largest footwear sellers, period. But it’s also vulnerable to decisions made at Nike HQ (Foot Locker shares plunged 35 percent in February 2022 after Nike indicated it would pull back from its wholesale relationship). More recently, the relationship has looked a bit less one-sided, with Nike pivoting back to wholesale after discovering how expensive direct sales can be, and the rise of brands like Crocs and Hoka giving Foot Locker more non-swoosh options.

Ulta Beauty, which also reports earnings this week (and which lost CEO Mary Dillon to Foot Locker last year), is lucky to be among the biggest players in one of the few categories where wholesale and physical stores are still king. So long as US consumers are still shopping for makeup, there’s a good chance they’re doing it at one of Ulta’s 1,300-plus stores, or in hundreds of Target shop-in-shops. The question Ulta’s earnings can answer is how much those customers are spending. Is the average order size continuing to shrink, and are customers gravitating more toward affordable brands over prestige lines?

What Else to Watch for This Week

Sunday

The Women’s World Cup final: Spain vs. England

Tuesday

Qixi Festival - the holiday often compared to Valentine’s Day is usually a big opportunity for luxury brands. This year, it will also be a major indicator of how China’s gloomy economy is affecting consumer behaviour.

Macy’s, Urban Outfitters, Coty report results

Wednesday

Kohl’s, Foot Locker, Abercrombie report results

Thursday

Nordstrom, Ulta, Gap, Burlington report results

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