More shoppers are mining their phones and the web for deals and flocking to off-price chains to save a buck. They're also choosing stores that can turn around stylish merchandise fast and favoring specialty merchandise such as comfortable and stylish athletic gear. The shift is making business challenging for some traditional retailers. Even as stores typically on solid footing, including Macy's and Nordstrom, have scrambled to keep up with the shift in shopping habits, they're finding it difficult to maintain an edge.
Here are five retailers facing challenges in 2016:
Macy's announced a significant round of layoffs and 36 store closures last week, the same day it said holiday season sales fell a disappointing 4.7%. Macy's struggled with poor sales of winter gear during an unseasonably warm end to 2015 and continued to see tourism dollars drain from the business. The stock has fallen 47% in the last 12 months.
While Macy's has implemented services such as being able to buy online and pick up in store, it's still a large department store chain that relies heavily on categories that aren't doing so hot right now, such as handbags and clothes.
"There's not a whole lot of newness in apparel," says Bob Drbul, Nomura equity analyst. Macy's and other department stores also face competition from brands like H&M and from off-price retailers such as TJ Maxx, which continue to pull in middle class shoppers with steep discounts on designer goods, says Ken Perkins, president of Retail Metrics.
Though with strategic shifts on the horizon, Drbul expects Macy's to weather the change. "They have a great balance sheet, a very experienced and seasoned leadership team, and they’ll come through this," he says.
Asked for comment, Macy's spokesman Jim Sluzewski pointed to the retailer's press release about its restructuring plans. Macy's announced plans Wednesday meant to streamline the way it does business to become more efficient, including those layoffs and store closures, which are expected to lead to $400 million in savings.
Nordstrom has long been known for superior customer service and a loyal customer base, but sales have faltered recently. The company lowered its fiscal year expectations after experiencing soft sales in the third quarter and its stock is down 42% from a year ago.
And unlike Macy's, Nordstrom isn't known for offering very compelling discounts, which makes it "tough to counter mid-tier competitors that frequently offer 50%-70% sales," writes Citi analyst Paul Lejuez in a recent note to clients. Plus Nordstrom Rack, a competitor in the off-price sector, suffers from a lack of traffic drivers by stocking mostly apparel — a weak category at the moment — and not the home goods found at competitors like TJ Maxx, Lejuez says.
Citi cut its investment rating on Nordstrom from "buy" to "neutral," citing concern about whether Nordstrom will be able to keep up with intense promotions at competitors. Nordstrom spokesman Dan Evans said the company doesn't comment on sales results outside of earnings calls.
With more than 800 stores, many have questioned the viability of Aeropostale's business as it's struggled to appeal to its target audience. Perkins also expects brands, including Aeropostale, to start downsizing their store count as they build leaner business models set up to better compete online.
Aeropostale shares are trading under a dollar, down from nearly $3 a year ago. Sales fell 20% in the third quarter. "When your stock is down under a buck, it’s troubling territory to be in," Perkins says.
The company declined to comment.
Plus, its stores are dated and uninspiring.
"They haven’t invested in display or merchandising," Perkins says. "They haven’t upgraded their stores. They really have just watched the business slowly dry up."
The one thing Sears has going for it is its impressive array of real estate holdings, which it started spinning off into a real estate investment trust last year. Still, shares have fallen by nearly half in the past year and Perkins questions how much longer the company can rely on revenue from its property sales without overhauling its merchandise.
"Sears Holdings is highly focused on restoring profitability to the company," company spokesman Brian Hanover told USA TODAY, citing Sears' strategy to turn into a "member-centric" business centered around a loyalty program that allows it to do more targeted marketing and promotions. He also points out Sears has seen five consecutive quarters of improved year-over-year performance on EBITDA, a measure of earnings before taxes and other financing expenses are factored in.
As a regional player, with 227 stores in 20 states, HH Gregg has to contend not only with falling traffic in more rural areas but stiff competition in consumer electronics, which is dominated by retailers such as Amazon and Best Buy.
The company said last week that it estimates same-store sales for the third quarter ended Dec. 31 fell 11%, with steep declines in appliances and consumer electronics. Sales of computers and tablets are estimated to have fallen 35%.
HH Gregg launched an overhaul in 2014 that included a national ad campaign and updated logo. It's also trying to make inroads into the home furnishings business, a category that saw sales increase an estimated 16% in the current quarter. But investors remain skeptical. Its shares are down nearly 64% from a year ago.
The company said it wouldn't comment on business performance until it puts out its earnings report at the end of the month.