The Return of Department Stores

Nov. 1, 2006 — -- As the holiday shopping season ramps up in the weeks ahead, shoppers will open their wallets and spend money on hot items like flat-screen TVs, so-called "skinny" pants, and T.M.X. Elmo.

And according to retail experts, a fair number of those shoppers will return to what has been an uncommon destination in recent years -- the department store.

"Those who have survived the huge competitive onslaught over the last few years from mass merchandisers at the low end and specialty stores at the high end, are much, much stronger on a lot of fronts," said Wendy Liebmann, president of the New York-based consulting firm WSL Strategic Retail.

After years of losing market share to smaller niche stores like American Eagle Outfitters and big-box retailers like Wal-Mart, department stores have experienced a bit of a renaissance recently.

Sales were considerably higher in September for many of the nation's largest department stores.

Sectorwide, department store sales rose 6.2 percent compared to the same time a year ago, according to the International Council on Shopping Centers. In September, that figure was up 8.4 percent compared to a year earlier.

That marked represented the strongest monthly gain since January 1997.

Call it the retail equivalent of "Survival of the Fittest."

Despite that improvement, the all-important November and December holiday shopping months will be a telling period for the industry.

Industry analysts and consultants point to various reasons why shoppers have recently returned to department stores.

One important development has been the increasing consolidation in a sector that had been characterized by a large number and a wide variety of different stores, many offering the same products for sale.

The clearest example is Federated Department Stores, owner of Macy's and Bloomingdale's, which purchased May Department Stores Co. last year.

After the acquisition, Federated closed many locations and brought others under the Macy's nameplate, including the well-known Chicago store Marshall Fields.