Supply Chain Research

U.S. department stores Dillard’s, JC Penney, Kohl’s, Macy’s and Nordstrom report earnings for the three months through October 31 on November 10 and 11. Analysts surveyed by Reuters expected sales in aggregate to fall 0.6% on a year earlier.

Trade data can help test that prediction, but with important qualifications. The structure of supply chain logistics make it difficult to directly observe department store behavior. Yet, nationwide imports of key product lines might provide a proxy for department store sourcing.

National imports of apparel overall – both knitted and otherwise – fell 8.6% in the fiscal third quarter on a year earlier, Panjiva data shows. This comes  after a 2.9% drop in the second quarter, including a weak back-to-school period for all retailers discussed in Panjiva research of October 17.

There was also a negative trend in the imports of accessories. This was led by an 6.8% drop in imports of bags (including leather- and non-leather luggage), which was the sixth straight decline. Imports of shoes fell 4.7%, which may be focussed on formalwear given imports of trainers actually jumped 43.2%. Finally, as flagged in previous research, imports of gloves experienced a 2.3% slide possibly on the anticipation of another warm winter.

Data covers all imports of shoes, apparel-type gloves and bags. Preliminary data for October Source: Panjiva

One bright spot for the department stores may be hardline furnishings. Imports of these increased 8.4% after a 9.7% increase in the second quarter. A recent decline in the University of Michigan survey suggests this gain might not be carried over into the fourth quarter. Yet, overall imports, in shipment terms, of the broad types of products sold in department stores fell 4.7% in the fiscal third quarter. This was the fifth straight quarter of year-over-year declines.

Data covers all imports of apparel ( knit and otherwise), accesories and furniture (excluding soft furnishings) Source: Panjiva

Combined analyst estimates call for a 0.8% fall in revenues on a year earlier ranging from an increase at Nordstrom of 4.6% to a potential decline at Macy’s of 2.3%. The 4.7% fall in product imports is nearer the 6% drop seen in the first quarter of this year, when revenues for the group fell 3.9%. This would suggest that there needs to be: gains in average pricing; a cut in inventories; a gain in market share at the expense of specialty retailers; or increased local sourcing to ensure revenue expectations are met.

Calculations include company financial data and estimates gathered by Reuters. Lower panel compares total group revenues to imports of all products in apparel, accessory and furniture lines Source: Panjiva