Stimulus And eCommerce Surge Lift Dept. Store Sales In January

Sales at U.S. department stores did something last month they haven’t done in a while: They grew. In fact, the 1.5 percent year-on-year increase posted collectively by the nation’s large retail chain stores was the first time since 2019 that this battered and diminished segment has been able to make that claim.

The findings come within Mastercard’s latest SpendingPulse report for the month of January, which also showed that total U.S. retail sales grew by 9.2 percent last month, thanks in large part to record eCommerce sales, which rose 62 percent from January of 2020.

Mastercard also said the $600-per-person cash infusion of a second round of federal stimulus checks in early January helped keep the momentum from a better-than-expected holiday season rolling into the new year.

“A big, bright note from January is that consumers are spending. While we know that consumers are also saving their stimulus funds and paying down debt, these numbers show that [the] stimulus is helping to boost sales for retailers around the country,” said Mastercard Senior Advisor Steve Sadove, who was also the chairman and CEO of luxury retailer Saks from 2007 to 2013.

The eCommerce Tsunami

Not only did rising digital sales fueled by COVID-era lifestyle changes save the day for retail and department stores, but the online shopping surge was visible in every region and every state, Mastercard reported — including in places like California, where eCommerce rose 77 percent in January. That spike in eCommerce was enough to lift the Golden State’s total retail sales by almost 8 percent.

“We’re living in a digital world,” Sadove said. “For consumers, eCommerce has emerged as a lifeline and a lifestyle. January’s numbers are just further proof of this ongoing trend.”

In fact, this belated digital embrace by department stores comes at the same time that Amazon just closed the books on a record-breaking Q4 and FY 2020, and as its share of eCommerce sales hit 46.5 percent in Q3, the most recent PYMNTS Tracker data showed.

Retailers Still Struggling

With more than two dozen big-name retail chains filing for bankruptcy protection over the past year, including Lord & Taylor, JCPenney and Neiman Marcus, it could be argued that there is less competition, and that viable businesses have had plenty of time to adapt. Still, just last week, the 190-year-old North Carolina-based department store Belk filed for bankruptcy protection beneath the weight of $450 million of debt.

According to a statement from the company: “Belk plans to continue normal operations throughout its financial restructuring. Under the RSA, suppliers will be unimpaired and will continue to be paid in the ordinary course for all goods and services provided to the company. Customers will continue to receive the quality merchandise and service they expect when shopping at Belk’s stores across the Southeast and online at Belk.com.”

On Monday (Feb. 8), Belk announced that it expects to complete its financial restructuring through an expedited “pre-packaged, one-day” reorganization. It expects to file for Chapter 11 on Feb. 24, and anticipates that the restructuring will be approved that day. That restructuring calls for enabling Belk to raise $225 million of new capital, significantly reduce debt by approximately $450 million and extend maturities on all term loans to July 2025.

In addition, Seattle-based upscale chain Nordstrom said last week that it plans to phase out the HauteLook brand that it bought in 2011 and fold it into its existing discount platform, Nordstrom Rack. The move marks the latest effort to cut costs at a time when the company has forecast that its fourth-quarter sales would decrease in the low 20 percent range versus a year ago.

And then there’s Dillard’s, the beleaguered retailer that has found itself in the spotlight as the unwitting beneficiary of a short-squeeze, along the lines of GameStop, and has seen its stock rise 100 percent so far this year, with no discernible change in its business or outlook.