Department stores under alert: Moody’s cuts outlook again

Department stores, on alert. Moody’s has cut the department stores outlook again. The rating agency expects that the operating income outlook of all operators in the sector will drop 20% on average this year, down from the 15% decline estimated two months ago.   

The agency has made new forecasts after the quarterly results of the groups did not evolve as expected. Off-price retailers and value players are some of the drivers of the fall in department stores, according to Moody’s.

Although large groups like Nordstrom or Macy’s have also entered the off-price game, “those off-price efforts aren’t big enough to drive the overall businesses,” stated the rating agency in its report.

“Inventory management is critical to success,” Moody’s said. “Most major players have limited expenses left to cut because keen expense management has been the focus for years.” That will make gross margin improvement all the more crucial for performance.