Department stores kick off 2018 with stock rally

Department stores kick off 2018 with stock rally

Department stores so far are having a happy new year.

Encouraged by momentum from early holiday sales results, and anticipating more good news for the industry later this month, Wall Street was cheering these retailers on Tuesday, sending their stocks higher.

Shares of J.C. Penney climbed more than 8 percent, Kohl’s and Nordstrom‘s stocks were up about 4 percent, and Macy’s shares were rising more than 3 percent by midday.

“Everybody had a better Christmas than we thought they were gonna have, and that includes Kohl’s, Penney’s and Macy’s,” Jan Kniffen, the CEO of J. Rogers Kniffen Worldwide Enterprises, told CNBC.

“And that doesn’t mean Macy’s and Dillard’s had positive store comps,” Kniffen added. “But they had better than what people thought.”

Shares of Dillard’s, a smaller Arkansas-based chain, were up more than 1 percent, while Sears Holdings, the parent company of Sears and Kmart stores, rose about half a percent.

According to Craig Johnson, an industry consultant and president of Customer Growth Partners, retailers are slated to post their best growth for the holiday season — up nearly 6 percent — in more than a decade.

Meantime, the National Retail Federation, the industry’s trade group, has said holiday sales could climb as much as 4 percent, compared to 2016’s growth of 3.6 percent. NRF CEO Matthew Shay is set to announce and comment on final results later this month.

At the end of December, Mastercard’s SpendingPulse survey revealed that between Nov. 1 and Christmas Eve, holiday retail sales (excluding automotive sales), rose 4.9 percent compared with the same period last year, marking the biggest year-over-year increase the firm has tracked since 2011.

“Specialty apparel and department stores … saw moderate gains,” the report said. “This is particularly impressive given recent store closings.”

Multiple department store CEOs, including Jeff Gennette at Macy’s and Kevin Mansell at Kohl’s, have already called out strong holiday sales ahead of their fourth-quarter earnings reports, which will show exact same-store sales and other key metrics.

“I think there is a lot of excitement about the robust holiday sales numbers and investors believe that this will have helped the department store sector,” GlobalData Retail Managing Director Neil Saunders told CNBC.

“However, it is a very much a short-term boost and does not mean the structural issues with the sector have been fully resolved,” he cautioned.

About this same time last year, Sears, Macy’s and Penney announced they would be closing more stores across the U.S., sending shockwaves through the industry. For most of 2017, department store chains struggled to recuperate and move away from a “dying” narrative.

This year, retail consultants are expecting another wave of closures from certain companies, while names like Dollar General, Dollar Tree, Aldi and TJX (the owner of TJ Maxx and HomeGoods) continue to expand their physical footprints.

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