Please ensure Javascript is enabled for purposes of website accessibility

5 Retailers Struggling as We Head Into the Holiday Season

By Natalie Walters - Oct 8, 2017 at 1:03PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These chains have fallen behind and regaining ground looks unlikely.

The holidays are meant to bring peace and rest.

But for certain retailers, the last three months of 2017 are bringing anxiety about the possibility of failing to bring in necessary sales.

Brittain Ladd, a global strategy and supply chain consultant based in Seattle, said the holidays can be a make-or-break period for retailers. With Ladd's help, I've come up with this list of five retailers that aren't expected to have a rosy holiday sales season: David's Bridal, Neiman Marcus, Sears Holdings (SHLDQ), Nine West, and Claire's Stores.

For struggling Sears Holdings, the holidays are a particularly stressful time as it will most likely not be able to deliver the earnings report that investors are hoping for to indicate that it is on the uptrend. 

"Some retailers are dreading announcing numbers that are so bad they will send signals to Wall Street that they have no chance of survival," said Ladd. "People and analysts abandon those brands and it accelerates their demise." 

What do the five retailers on this list have in common? They failed to understand their customers and their competitors and now they're playing catch-up on trends instead of leading, according to Ladd. These stores, for instance, failed to adapt to online retail early enough to become a household name in the e-commerce space like Amazon or Zara.

Last holiday season, retailers brought in $122.9 billion in non-store sales (e-commerce and catalog), which represented a 12.6% jump from the previous year, according to the National Retail Federation. Meanwhile, overall sales increased a more modest 4% year-over-year to $658.3 billion. 

These five retailers are scrambling to get an online presence, but it seems to be too late as Amazon gobbles up online market share. Digital marketer NetElixir predicts that Amazon's share of holiday online sales will jump to 34% this year, up from 30% in the 2016 season. 

Because these retailers took so long to change, they're simply not relevant anymore, and that's their biggest issue, Ladd explained. Even if these stores make big changes or create new services, they don't have enough customers to test those out on anymore. "Once you lose relevancy, it's almost impossible to get it back," Ladd said. 

A bride getting her waist measured for her dress

David's Bridal sells affordable wedding dresses. Image Source: Getty Images

1. David's Bridal

Founded in 1950, David's Bridal now has over 300 locations in the U.S., U.K. and Canada. The chain offers wedding and bridesmaid dresses for affordable prices and claims to dress about 60% of all brides in the U.S.

The struggling bridal company will need to pay about $500 million in loans in 2019, Reuters reported in August. Lenders to David's Bridal have hired investment bank Rothschild to begin debt restructuring talks ahead of the loan due date as a way to avoid a future debt default.

Woman holding shopping bags and standing in front of a rack of clothes at a store

Neiman Marcus is weighed down by debt. Image source: Getty Images.

2. Neiman Marcus

High-end department store Neiman Marcus is being weighed down by a $4.8 billion debt load. The company has suffered a number of setbacks since the last holiday season, including the loss of CFO Donald Grimes after just 17 months on the job. 

Neiman Marcus was in takeover talks with Hudson's Bay, owner of Saks, but the company said in June that its 42 stores were no longer for sale. That same month, Neiman Marcus reported a drop in same-store sales for the third straight quarter.   

The front view of a Sears store

Sears has been closing stores. Image source: Sears Holdings.

3. Sears Holdings

Sears Holdings has become a punching bag for retail critics. In the latest round of bad headlines, the struggling retailer announced in June that it would close 72 Sears and Kmart stores, in addition to the 180 closures that were announced earlier in the year.

Reuters reported in August that Sears was having trouble attracting vendors due to the risk of working with a company that could file for bankruptcy protection at any moment. 

Same-store sales at Sears fell 11.5% in the latest quarter, which was significantly worse than the expected 7.1% drop. Revenue of $4.37 billion also fell short of the expected $4.21 billion. 

A woman tries on red heels in a store

Nine West is another retailer that has suffered from its mall-based location, finding itself struggling to attract foot traffic. Image source: Getty Images.

4. Nine West

Women's shoes, handbag, and accessory retailer Nine West has about 250 stand-alone stores in addition to selling its merchandise at other wholesale retailers. The retailer's strong brick-and-mortar presence hasn't been helpful in the age of online shopping. 

In May, Nine West, owned by private equity firm Sycamore Partners, announced that investment bank Lazard would help it restructure its debt. The retailer also said that it had enough liquidity ($160 million as of Dec. 31 2016) to continue on its course in the meantime. 

A young girl wearing pink sunglasses, bracelets, and a headband looks at jewelry she has in a yellow shopping bag

Teen jewelry store Claire's is struggling to compete with stores like Forever 21 that offer jewelry plus clothing. Image Source: Getty Images

5. Claire's 

You can probably guess the problem with Claire's. The store that specializes in low-cost jewelry for teens is known for its brick-and-mortar locations, not its online presence. 

Claire's, which also owns accessories brand Icing, had about 2,700 stores worldwide as of April 2017, in addition to 901 concession store locations and 647 franchised shops. The company closed 166 stores in 2016. 

While Claire's posted net income of $53.9 million last year, much of its money has to go to paying off its nearly $2.17 billion in outstanding debt. 

The holiday shopping season is just around the corner. We'll have to wait and see how shoppers treat these chains and whether 2017 closes with cheer or gloom, but they certainly aren't starting from positions of strength.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sears Holdings Corporation Stock Quote
Sears Holdings Corporation

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.