From Macy’s to Neiman Marcus: Covid-19 Lockdowns Practically Killed Department Stores, Will There Ever Be a Full Comeback? (ANALYSIS)

Last Updated on July 29, 2021

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Department stores and the Covid-19 pandemic haven’t had the best of relationships. At the height of the Covid-19 pandemic, most people didn’t exactly want to shop in a department store. And if they did, it probably wasn’t even open. There was an option to shop online, of course, but with day-to-day life being upended, the shopping bug was in its cocoon for many. 

Fast-forward to today, and things have changed. Large retail chains are finally getting “back to normal” as Covid-19 has passed its peak (though the Delta variant is causing definite concern).

But the question is: with the rise of digital-savvy competition, is this sustainable? Or did the pandemic create a permanent shift in the tides? The latest earnings reports from some major retailers help shed light on the question.


After a very bad 2020 due to Covid-19 (with a net loss of $91 million in the third quarter alone), Macy’s reported a surprise profit in the first quarter of 2021. It made a profit of $103 million, or 32 cents per share.

That’s especially meaningful when compared to a loss of a whopping $3.6 billion, or $11.53 a share, a year earlier. Overall, the department store earned 39 cents a share (whereas analysts were expecting a 41 cent loss per share). 

This is a major difference from a year ago, when Macy’s shuttered its stores and focused on e-commerce. Even then, shoppers were more concerned with buying daily necessities than sandals and perfume. 

What’s just as encouraging as these numbers, is the fact that Macy’s added 4.6 million new customers during the quarter (a 23% increase from the same period in 2019) and 47% of those shoppers made online purchases. 

Just as encouraging as these numbers was the addition of new shoppers. Macy’s said it added 4.6 million customers during the quarter, a 23% increase from the same period in 2019. It said 47% of those new shoppers made online purchases.

Those online sales made a huge difference, as overall digital sales climbed 34% year over year and grew 32% from 2019 levels. In addition, e-commerce sales comprised 37% of overall net sales — a 13-point improvement from the first quarter of 2019.

Digital sales made an especially strong showing — climbing 34% year over year and grew 32% from 2019 levels. That’s important, as younger shoppers are exclusively going online, and brands have to succeed in order to engage this shopper.

E-commerce sales represented 37% of net sales, a 6 percentage-point drop from a year earlier, when Macy’s stores were shut and its only revenue stream was digital.

But that’s a 13-point improvement from the first quarter of 2019, Macy’s said. Fueled by this, Macy’s is investing big in its online business and plans to grow e-commerce sales to $10 billion by 2023.

Given these strong numbers, Macy’s upgraded its outlook. The country’s largest department store chain now expects net sales in fiscal 2021 to fall within a range of $21.73 billion to $22.23 billion, up from a prior outlook of $19.75 billion to $20.75 billion. After adjustments, that’s $1.71 to $2.12 per share.

So what are people buying? The earnings report noted strength in the luxury category, including fine jewelry and watches and clothing for special occasions. Most tellingly, one of the most improved categories year over year was luggage: a sign that people are ready to start traveling more regularly again.


In its earnings report for Q1 of 2021, Nordstrom didn’t fare as well as its much larger competitor, Macy’s — despite a more robust, modern digital platform and a heavy focus on online events and “buy online, pick up in store” offers. 

Its quarterly revenue of $3.01 billion was actually better than the $2.90 billion that analysts expected. But that wasn’t enough to overcome a loss of $166 million, or $1.05 per share — way more than the 57-cent-a-share loss analysts were expecting. Also disappointingly, net sales were down 13% compared to the same quarter in fiscal 2019. 

So why the big loss given the revenue gain? Nordstrom cited higher labor and shipping costs, and constraints in the supply chain that the apparel industry (and many other industries) has faced during the Covid-19 pandemic. 

There are a few bright spots, though, for the retailer known for its Anniversary Sale and liberal lifetime returns policy. Nordstrom’s digital sales rose 23% from 2020 (and 28% compared with the same period in 2019). And its e-commerce business comprised 46% of total sales in the latest quarter: a relatively healthy number. 

The company is still positive things will turn out well for 2021. Its fiscal 2021 outlook calls for revenue growth of more than 25%. It also anticipates that, by the end of the year, digital sales will make up a full half of its total sales. Let’s see what the fall and holiday season bring.

Neiman Marcus 

For luxury department store Neiman Marcus, the Covid-19 pandemic was, in many ways, a last straw after quite a few years of struggle keeping up in a world where fewer shoppers are heading to luxe brick-and-mortar stores and many want cutting-edge digital shopping experience. 

In May 2020, the chain’s heavy debt load of $4 billion proved too much to take in the face of declining sales and furloughed employees  — so the 113-year-old chain filed for Chapter 11 bankruptcy. The 113-year-old retailer received $675 in debtor-in-possession financing and agreed to restructure. 

In September, four months after filing, the company emerged from bankruptcy, with less debt due to a significant bond purchase. But, while giving it more time to find its footing in a retail market that has now improved, that doesn’t take the company out of the woods.

To help propel positive momentum and draw a younger, digital-savvy shopper, it has invested $500 million in digital initiatives. Will this investment pay off? Only time will tell.


On the mainstream end of the retail side, popular department store chain Kohl’s latest earnings report shows major improvement from the Covid-19 low.

The big-box retailer’s net income rose to $14 million, or 9 cents per share, from a loss of $541 million, or $3.52 per share, a year earlier. The company earned $1.05 per share, obliterating expectations of 4 cents.

Revenue rose almost 70% to $3.89 billion from $2.43 billion a year earlier (beating analyst expectations of $3.48 billion). What’s more, digital sales rose 14% year over year, making up 30% of total sales. 

Of all categories, sales of activewear showed the most growth, showing the athleisure trend, certified during the Covid-19 pandemic, isn’t going anywhere anytime soon, even as people start traveling and going out to special events. 

Despite this very successful quarter, Kohl’s shares tumbled after the earnings call. And that’s because of the outlook it provided. The company, just like Nordstrom, hinted at supply chain issues and higher-than-normal costs it faces as it bounces back from the Covid-19 pandemic. 

This raises a universal question when it comes to retail right now: How long will this spike in pent-up shopper enthusiasm last, as we slowly emerge from the pandemic? Is this retail bump shoppers’ temporary reaction to being pent up at home for 15 months, or is it a sign of longer-term strength?

It’s clear any major retail establishment has a lot of work to do to keep this momentum going in the face of both digital innovation and rising inflation.