By Mark Seavy

Following financial struggles, management changes, and new merchandise strategies, how will department stores move forward?

Industry experts say it’s still unclear how department store chains will regain the ground lost to off-price retailers amid tighter consumer spending. It seems clear, however, that the key to any department store’s strategy will need to involve winning back previous customers while also attracting a new, younger generation of shoppers.

And that juggling act comes, in the case of Kohl’s and Macy’s, amid activist shareholder pressure. Nordstrom’s, meanwhile, is finding a new path forward while the founding family works to take the retailer private after failing in a similar effort in 2018. And Selfridge’s in the U.K. is currently weighing potential investment from Saudi Arabia and Gucci owner Kering following the collapse of its co-owner Signa.

The approaches these department store chains are taking to right their operations vary. At Macy’s, new CEO Tony Spring moved quickly with plans to close 150 locations and increase focus on small- format Bloomingdale’s and Bluemercury locations.

At Kohl’s, CEO Thomas Kingsbury is in process of launching 1,500-square-foot Babies ‘R’ Us in-store formats at 200 locations under a licensing deal with brand owner WHP Global to complement its infant and toddler businesses. The addition of the new format—plus expanded assortments of home goods and impulse items—will add $2 billion in revenue over the next few years, Kingsbury said. This follows Kohl’s having installed Sephora in-store formats in 910 locations, a move that started under former CEO Michelle Gass and generated $1.4 billion in sales in 2023.

“All the department stores are seeking to remain relevant and create buzz that attracts younger consumers who maybe haven’t stepped into a department store in some time,” said a licensing executive. “And that has to be done with a sense of urgency.”

In-store formats aside, department stores are also increasing their reliance on collaborations and licensed products to raise the profile of their merchandise mix.

Licensee Mon Chateau, for example, is launching its Guy Fieri cookware under a six-month exclusive with Macy’s and Amazon. Earlier this month, Nordstrom introduced a collaboration between footwear brand Sam Edelman and students at the Savannah College of Art and Design at 33 locations. Kohl’s, meanwhile, is bolstering its apparel selection with licensed offerings from brands like Quicksilver, Roxy, Aeropostale (Authentic Brands Group); Limited Too (Bluestar Alliance); and Madden Girl (Steve Madden).

“They’re also increasing their floor space for bedding and trying to take back some the business that may have been lost to the off-price channel,” said Judi Alvarez, VP of Licensing and Marketing at kitchen and bath textiles supplier Town & Country Living, which has licenses for brands including Kate Spade, KitchenAid, and Fiesta. “Customers still like to shop in-person and see all the products that are available. But they are looking for value not only in price but also for products that are special and different. We are hoping to get together with department stores to take a fresh approach to kitchen textiles and coordinates.”

Yet as department stores weigh these new merchandise strategies and corporate structures, some analysts are pushing for them to become privately held in order to turn around their businesses.

“They are thinking ‘can we take this [business] private’ because when they are private, maybe they can run it differently and be more revolutionary in terms of the business model,” said Gerald Storch, CEO of Storch Advisors and a former Toys ‘R’ Us CEO. “They can make changes outside of the public eye. These retailers have in common this idea that being private might be a better way to run the business.”