Last year, several department stores declared bankruptcy, including the liquidation of Hudson's Bay, an iconic Canadian department store. Against this backdrop, it is expected that more department stores will close by 2026, and department store closures may occur annually in the coming years.

In mid-January, Saks Global, which owns luxury brands such as Saks Fifth Avenue, Neiman Marcus, and Bergdorf Goodman, officially filed for bankruptcy protection. Industry insiders speculate that some Saks and Neiman Marcus stores may close as a result. Macy's also announced its latest round of store closures, affecting 14 locations, as part of its downsizing strategy, which will ultimately result in the closure of 150 stores. In addition, Dillard's completed the closure of one store this month.

A recent annual report from Green Street shows that vacancy rates at over 1,000 publicly and privately held shopping centers are expected to rise in the short term. The report specifically notes that vacancy rates for anchor tenants, such as department stores, are likely to increase accordingly. The report also mentions that the "decline of the department store business model" over the past 15 years has led to the closure of at least 175 shopping centers, with the remaining centers generally facing operational difficulties.

"However, the wave of department store closures hasn't been significant since 2020, because despite flat or declining sales in recent years, most stores remain profitable," Vince Tibone, managing director at Green Street Management, said in an email. Tibone, who focuses on U.S. industrial and shopping center research, predicts that this situation will not change unless there is an economic recession.

Some analysts, however, believe that the future of the department store model is brighter than ever before.

"I think they're still swimming against the current—there are a lot of challenges to overcome. But the key is that they are now addressing these issues," Neil Saunders, managing director at GlobalData, said in a phone call. “Department stores still have some problems, and I think the industry will continue to shrink in the coming years, so we haven't seen the end of the decline of department stores yet. But we hope to see this trend begin to stabilize, and a new space will emerge where they can operate quite comfortably.”

Regardless of their operating performance, these department store retailers have impressive revenue figures. Even companies with declining sales have raked in billions of dollars in revenue in their recently released quarterly reports, such as Saks Fifth Avenue ($1.6 billion), JCPenney ($1.4 billion), and Kohl's ($3.4 billion). In the third quarter, Macy's achieved net sales of $4.7 billion, boosted by same-store sales growth, and Dillard's also reached $1.4 billion in net sales. Nordstrom, which was privatized last year, recorded net sales of $4.2 billion in its latest fourth-quarter earnings report.

Simon Siegel, a senior managing director at Guggenheim, points out that revenue is the only true measure of a company's size.

“There are many metrics to measure the health of a company, but revenue is the only measure of its size. It has nothing to do with how you feel about it, or how many likes it gets on Instagram,” he said by phone. “The general perception is that department stores are in decline, but they generate tens of billions of dollars in revenue every year from scratch. That doesn't mean they're healthy, but nobody can say they're dead because they can get people to spend money—whether they walk into a physical store, click online, or any other way—they can convince people to shop at department stores.”

Current Situation

A field visit to Manhattan, from downtown to uptown, revealed that the city, which once boasted dozens of department stores, now has only a handful left—a pattern that has gradually unfolded across the United States in recent years.

Amanda O'Neill, director of U.S. retail at S&P Global Ratings, said the segment has shrunk to the point where each participant needs to be evaluated individually, rather than making a blanket judgment on the entire business model.

Although the performance of different department stores varies significantly, this performance does not seem to be directly related to whether they serve high-income or low-income customer groups. Saks Fifth Avenue is not only facing bankruptcy but also grappling with a large amount of unpaid bills, severely damaging its relationships with numerous suppliers.  Meanwhile, its suppliers, employees, and customers are increasingly turning to Bloomingdale's and Nordstrom.

Nick Eglanian, president of retail development company SiteWorks, stated in an email: "Nordstrom, now a family-owned business again, seems to be revitalizing its flagship stores and returning to basic merchandising and operating models. But even if these trends continue, it will ultimately only survive as a smaller chain (assuming it continues to improve)."