The divide between retail winners and losers is widening.
That became even more evident Wednesday with the latest batch of earnings reports: Big-box stores and off-price retailers have been responding faster to shoppers' increasing shift online with expanded deliveries and better merchandise. But many mall-based clothing chains and department stores continue to suffer weak sales as they struggle to lure in shoppers.
"There is an increasing polarization in retail," said Neil Saunders, managing director at GlobalData Retail. "It's a vicious cycle, and it's difficult to pull out of the tail spin."
In fact, for the first two fiscal quarters of this year, earnings at off-mall retailers rose 3%, compared with a drop of 29% for mall-based retailers, according to Retail Metrics, a retail research firm, which analyzed results at 105 retailers.
On Wednesday, Target raised its annual earnings guidance after reporting strong sales and traffic. It was helped by its same-day delivery services, as well as a strong lineup of homegrown brands. Lowe's, the nation's second largest home improvement retailer behind Home Depot, blew past Wall Street's second-quarter earnings expectations, buoyed by strong demand for spring goods and sales to contractors.
Both companies' stocks soared.
Earlier this week, Home Depot handily beat second-quarter profit expectations, while Walmart raised its outlook for the year last week and off price chains like T.J. Maxx are also faring well, resonating with shoppers who love to treasure hunt.
But clothing chains and department stores haven't differentiated their merchandise enough, and now discounters are further squeezing them by pushing into more affordable trendy fashions, retail industry analysts say.
Last week, Macy's lowered its annual earnings guidance after its earnings suffered in the second quarter as it slashed prices on unsold merchandise. J.C. Penney's is in worst shape. It posted another quarter of sales declines. Kohl's shares, meanwhile, fell Tuesday after posting a sales decline though business improved later in the quarter.
Nordstrom is expected report declining second-quarter profits and sales late Wednesday.
Saunders and other analysts say that they started to see a clear divide between retail's winners and losers four or five years ago, but that gap has gotten more pronounced because of a combination of factors. For several years, a strong economy provided tail winds to retailers of all stripes, and last year's tax cuts gave merchants a nice sugar high. But as the economy starts developing some cracks, vulnerable retailers will become even more exposed.
Analysts also say that the shift to online shopping keeps accelerating, giving a big advantage to retailers like Target and Walmart who've been able to invest billions of dollars in online deliveries and in their stores. Some mall-based retailers are now looking at other ways to bring in shoppers, including subscription rental services and carving out areas to sell second-hand clothes.
But for some, it may be a case of too little, too late.
"In a world where consumers have more choices than ever, inferior brick-and-mortar experiences will go away," Target CEO Brian Cornell told analysts Wednesday.
Target's comparable store sales, which include online sales, rose 3.4 % as customer traffic jumped 2.4%. Online sales soared 34%. The Minneapolis company raised profit expectations for the year, sending its shares up 19%. Shares in Lowe's Co., which is based in Mooresville, North Carolina, were up more than 10%.
Still, it is an uncertain time for even surging retailers like Target.
The Trump administration has imposed a 25% tariff on $250 billion in Chinese imports. A pending 10% tariff on another $300 billion in goods would hit everything from toys to clothing and shoes that China ships to the United States.
And it appears the retailers that have been winning all along will be the ones to better navigate the tariff storms.
Cornell told analysts that while the trade wars present an additional layer of uncertainty and complexity, he pointed to the company's diverse assortment, deep expertise in global sourcing and sophisticated set of manufacturing partners around the world.
Meanwhile, Macy's said last week that its shoppers don't have an appetite for higher prices in a ballooning U.S. trade war with China. The department store was forced to raise prices on some luggage, housewares and furniture to offset the costs of a 25% tariff implemented in May. Macy's vowed not to increase prices as a result of the 10% tariff, but CEO Jeff Gennette said the company will be speaking with vendors about ways to offset rising costs if the trade war escalates.
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LAS VEGAS (AP) — A $12 billion passenger bullet train linking Las Vegas and the Los Angeles area was dubbed the first true high-speed rail line in the nation on Monday, with the private company building it predicting millions of ticket-buyers will be boarding trains by 2028.
“People have been dreaming of high-speed rail in America for decades,” said U.S. Transportation Secretary Pete Buttigieg before taking a stage with union representatives and company officials at the future site of a terminal to be built just south of the Las Vegas Strip. “It’s really happening this time."
Buttigieg cited Biden administration support for the project that he said will bring thousands of union jobs, boost local economies and cut traffic and air pollution.
Brightline West, whose sister company already operates a fast train between Miami and Orlando in Florida, aims to lay 218 miles (351 kilometers) of new track almost all in the median of Interstate 15 between Las Vegas and Rancho Cucamonga, California. It would link there with a commuter rail connection to downtown Los Angeles. A station also is planned in San Bernardino County’s Victorville area.
Company officials say the goal is to have trains exceeding speeds of 186 mph (300 kph) — comparable to Japan’s Shinkansen bullet trains — operating in time for the Summer Olympics in Los Angeles in 2028.
“I believe we’ll look back at today and say, ’This was the birth of an industry of high-speed rail,'” Brightline Holdings founder Wes Edens said Monday.
The company aims to link U.S. cities that are too near each other for air travel to make sense and too far for people to drive.
Las Vegas has no Amtrak service. The idea of a bullet train to Los Angeles dates back decades under various names including DesertXpress. Brightline West acquired the project in 2019, and company and public officials say it has all required right-of-way and environmental approvals, along with labor agreements.
Brightline received Biden administration backing including a $3 billion grant from federal infrastructure funds and recent approval to sell another $2.5 billion in tax-exempt bonds. The company won federal authorization in 2020 to sell $1 billion in similar bonds.
Brightline West says electric-powered trains will cut the four-hour trip across the Mojave Desert to a little more than two hours. It projects 11 million one-way passengers per year, with fares that Edens said will be comparable to airline ticket costs. The trains will offer rest rooms, Wi-Fi, food and beverage sales and the option to check luggage.
Officials hope the train line will relieve congestion on I-15, where drivers often sit in miles of crawling traffic while returning home to Southern California from a Las Vegas weekend. An average of more than 44,000 automobiles per day crossed the California-Nevada state line on I-15 in 2023, according to Las Vegas Convention and Visitors Authority data.
Florida-based Brightline Holdings' Miami-line debuted in 2018 and expanded service to Orlando International Airport last September with trains reaching speeds up to 125 mph (200 kph). It offers 16 round-trips per day with one-way tickets for the 235-mile (378-kilometer) distance costing about $80.
Other fast trains in the U.S. include Amtrak’s Acela, which can top 150 mph (241 kph) between Boston and Washington, D.C. But fast train connections for other U.S. cities have been floated, including Dallas to Houston; Atlanta to Charlotte, North Carolina; Chicago to St. Louis; and Seattle to Portland, Oregon. Most have faced delays.
In California, a proposed 500-mile (805-kilometer) rail line linking Los Angeles and San Francisco was approved by voters in 2008, but has been beset by rising costs and routing disputes. A 2022 business plan by the California High-Speed Rail Authority projected the cost had more than tripled to $105 billion.
The Las Vegas strip is shown behind the groundbreaking sight of a high-speed passenger rail line between Las Vegas and the Los Angeles on Monday, April 22, 2024, in Las Vegas. A $12 billion high-speed passenger rail line between Las Vegas and the Los Angeles area has started construction. (AP Photo/Ty ONeil)
CORRECTS TO SEN. CATHERINE CORTEZ MASTO Sen. Catherine Cortez Masto, D-Nev., speaks at the groundbreaking for a high-speed passenger rail on Monday, April 22, 2024, in Las Vegas. A $12 billion high-speed passenger rail line between Las Vegas and the Los Angeles area has started construction. (AP Photo/Ty ONeil)
Kids play in confetti at the groundbreaking ceremony for a high-speed railway on Monday, April 22, 2024, in Las Vegas. A $12 billion high-speed passenger rail line between Las Vegas and the Los Angeles area has started construction. (AP Photo/Ty ONeil) (AP Photo/Ty ONeil)
U.S. Secretary of Transportation Pete Buttigieg speaks at the groundbreaking for a high-speed passenger rail on Monday, April 22, 2024, in Las Vegas. A $12 billion high-speed passenger rail line between Las Vegas and the Los Angeles area has started construction. (AP Photo/Ty ONeil)
A plane takes off behind a groundbreaking for a high-speed passenger rail on Monday, April 22, 2024, in Las Vegas. A $12 billion high-speed passenger rail line between Las Vegas and the Los Angeles area has started construction. (AP Photo/Ty ONeil)
Sen. Jacky Rosen, D-Nev., speaks at the groundbreaking for a high-speed passenger rail on Monday, April 22, 2024, in Las Vegas. A $12 billion high-speed passenger rail line between Las Vegas and the Los Angeles area has started construction. (AP Photo/Ty ONeil)
Sen. Catherine Cortez Masto, D-Nev., left, and Sen. Jacky Rosend, D-Nev., right, speak at the groundbreaking for a high-speed passenger rail on Monday, April 22, 2024, in Las Vegas. A $12 billion high-speed passenger rail line between Las Vegas and the Los Angeles area has started construction. (AP Photo/Ty ONeil)
Nevada Governor Joe Lombardo leaves the stage at a groundbreaking for a high-speed passenger rail on Monday, April 22, 2024, in Las Vegas. A $12 billion high-speed passenger rail line between Las Vegas and the Los Angeles area has started construction. (AP Photo/Ty ONeil)
U.S. Secretary of Transportation Pete Buttigieg, center, Sen. Catherine Cortez Masto, right, drive rail spikes into a symbolic rail, on Monday, April 22, 2024, in Las Vegas. A $12 billion high-speed passenger rail line between Las Vegas and the Los Angeles area has started construction. (AP Photo/Ty ONeil)
FILE - This photo taken Wednesday, Jan. 25, 2012, shows the site of a proposed station for a high-speed rail line to Las Vegas, background, at the end of the Dale Evans Parkway exit from Interstate 15, on the far outskirts of the Mojave Desert city of Victorville, Calif. Brightline West and U.S. transportation secretary and other officials projecting that millions of ticket-buyers will be boarding trains by 2028. (AP Photo/Reed Saxon)
FILE - This photo Jan. 25, 2012, photo shows the site of a proposed station for a high-speed rail line to Las Vegas, foreground, with Interstate 15 in the background, on the far outskirts of Victorville, Calif., the Mojave Desert city on the route from Los Angeles to Las Vegas. Brightline West and U.S. transportation secretary and other officials projecting that millions of ticket-buyers will be boarding trains by 2028. (AP Photo/Reed Saxon)
This Jan. 25, 2012, photo shows the site of a proposed station for the high-speed rail line to Las Vegas at the end of the Dale Evans Parkway exit from Interstate 15, on the far outskirts of the Mojave Desert city of Victorville, Calif. Brightline West and U.S. transportation secretary and other officials projecting that millions of ticket-buyers will be boarding trains by 2028. (AP Photo/Reed Saxon)
FILE - A Brightline train is shown at a station in Fort Lauderdale, Fla., on Jan. 11, 2018. A fast-tracked plan to build a high-speed passenger rail line between Las Vegas and the Los Angeles area is set to mark the start of construction. Brightline West and U.S. transportation secretary and other officials projecting that millions of ticket-buyers will be boarding trains by 2028. (AP Photo/Wilfredo Lee, File)
