Department Stores Are Giving Up Market Share to Discounters and Off-Price Retailers

Implications: Middle income consumers are trading down from department stores such as Kohl's,  Bon-Ton and Macy's to off-price retailers and discounters like TJX and Ross Stores, Wal-Mart and Costco.  Missy apparel retailers and brands targeting "boomers" are suffering more than most in this economic downturn. Aeropostale, Urban Outfitter's, J. Crew and H&M are thriving at a time most specialty retailers, catering to younger shoppers, are reporting negative comps.

Analysis: Consumers continued to buy apparel In February, but as their confidence and sense of wealth diminished, bypassed traditional department stores and better women's specialty stores such as Chico's, Coldwater Creek and Talbots. Our consumer survey's show these women spending more on fashion at off-price retailers like T. J. Maxx and Marshalls and looking for bargains on commodities at Wal-Mart.

Although teen retailers like American Eagle Outfitter's and Wet Seal are loosing ground, the fickle trend conscious consumers in this segment are buying at Aeropostale, Urban Outfitters like it's 2006.

We have concluded that although business is soft overall (including luxury) that women  are becoming more resourceful by trading down and teenagers are becoming very selective.

Pent up demand for apparel may be a positive factor in the second half of 2008 but lacking "must have" items, we feel that women's apparel will continue to be the weakest apparel segment for the next twelve months.