The past decade was brutal for American department stores, which were besieged by superstores, off-price retailers, fast-fashion retailers, and e-commerce giants.
Investors usually measure a retailer's growth through comparable-store sales growth, or the revenue growth at locations opened for at least a year. However, we can also measure a retailer's productivity with its average sales per square foot.
Nordstrom (NYSE: JWN), the priciest retailer of the bunch, is crushing many of its peers, which are in a clear race to the bottom. There's also a correlation between a department store's sales per square foot and its revenue growth: J.C. Penney (NYSE: JCP), Sears (NASDAQ: SHLD), Macy's (NYSE: M), and Kohl's (NYSE: KSS) all posted negative sales growth in fiscal 2016, but Nordstrom reported a 2.9% increase.
Nordstrom's average stores are also smaller than the average Sears, J.C. Penney, or Macy's store. Selling pricier products within smaller spaces boosts a retailer's productivity -- that's why Apple Stores generated a whopping $5,435 in sales per square foot over the past 12 months. Unless American department stores shrink their footprints, they'll keep struggling to boost their overall productivity.
Offer from The Motley Fool: The 10 best stocks to buy nowMotley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. In fact, the newsletter they run, Motley Fool Stock Advisor, has tripled the S&P 500!*
Tom and David just revealed their ten top stock picks for investors to buy right now.
*Stock Advisor returns as of August 1, 2017.