US department stores Nordstrom and Macy’s second quarter results are less terrible than analysts first feared.

Nordstrom has posted 1.8 per cent year-over-year increase in comparable sales at its full-line stores and an increase in e-commerce sales, beating its previously issued company guidance.

The retailer reported its e-commerce sales were up 20 per cent compared to the previous corresponding period, buoyed by interest in its annual deals event known as the Anniversary Sale. It also posted an increase in sales at stores open at least a year, including 3.1 per cent growth for its off-price chain, Nordstrom Rack.

The retailer’s full line physical department stores, however, recorded a 4.4 per cent comparable sales decline for the quarter.

Neil Saunders, managing director of GlobalData Retail, said Nordstrom’s results provided a ray of sunshine in a day of muted results clouded by continued sales declines.

“Not only are sales a marked improvement on the prior quarter, but they also beat previously issued company guidance,” Saunders said. “Both things stand as a reminder that even in a challenging market, getting the strategy right can, and does, make all the difference.”

Saunders said there is no denying that Nordstrom entered this earnings season in a much better position than many of its peers.

“That it did is not a matter of chance: the company has, for a long time, invested in its retail proposition and has taken sound strategic decisions like the diversification into off-price and the development of an omnichannel plan,” he said. “These steps are paying dividends and are ensuring that Nordstrom remains relevant even as the retail sector continues to change rapidly.”

Despite the strong headline numbers, it is true that not all parts of the business are delivering growth.

According to Saunders, fortunately, this softness was more than made up for by the incredibly strong growth in the online businesses of both the full- and off-price divisions.

“It is certainly the case that online is cannibalizing store sales to some degree, but the most important point is that across all of its channels, Nordstrom is doing a good job of retaining customers and their spend.”

Saunders said as much as Nordstrom has outperformed, it remains in a very challenging part of the retail market, as is evidenced by the continued forecast of flat full-year comparable sales growth.

“In our view, this underscores the fact that future performance will be variable – with the next quarter being especially difficult as the company comes up against tough prior year comparatives,” he said. “Constant growth may not be the order of the day, but it remains clear to us that Nordstrom is on a much better trajectory than most other players in the department store segment.”

Meanwhile, Saunders said after a torrid opening quarter, department store chain Macy’s second quarter figures come as a relief.

“Certainly, a same-store sales decline of 2.8 per cent is far from good, but it is one of the better performances Macy’s has turned in over recent periods,” Saunders said. “Of course, the question is whether this gentler decline represents a genuine turning point for Macy’s, or whether it is simply a bottoming out after years of sharp deterioration.”

Saunders said one of the factors that has benefitted Macy’s comparable sales is the program of store rationalisation. He said as much as this is painful to total sales growth, Macy’s has retained some of the sales as loyal shoppers have transferred their custom to other stores. This impact was not present in the first quarter as Macy’s was in the midst of closing down stores, but is now coming through more strongly. 

“Positively, the ebbing sales tide has also slowed at a time when some of Macy’s long talked about strategic initiatives are finally coming into play,” Saunders said. “This suggests that the company may now be getting its act together in improving the quality of the in-store experience. We are hopeful that this energy and drive is a function of the new leadership of Jeff Gennette, although we recognise that it is still far too early in his tenure to pass fair judgment.”

Saunders said the revamped women’s shoes offer is an example of an initiative which is helping Macy’s regain some momentum. “Here, the company has advanced the proposition and moved to an open-sell self-serve model.”

After a successful pilot, which resulted in double digit sales growth, the strategy is now in more stores and will be rolled out to all shops by the end of August.

“As much as these steps are positive, they are but small drops of success in a vast ocean of challenges,” Saunders said.

“Alone, they will not transform the business, and they do not put Macy’s on a growth footing. For that to happen a more radical and fundamental rethink of other categories – including the problem child that is apparel – needs to happen,” he added.

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