Question

How did the population movement from urban to suburban America affect the economics of department stores like Dillards, Macy's and grocery stores?

Answer 1

population shift from central urban areas into suburbs resulting in the formation of suburban sprawl. As a consequence of the movement of households and businesses out of the city centers, low-density, peripheral urban areas grow. (Sub-urbanization is inversely related to urbanization, which denotes a population shift from rural areas into urban centres.

Economic impacts

• Macy's stock has lost 63% of its value over the past month and now trades for less than 3 times trailing earnings.
• Dillard's stock has fallen 39% over the same period, but still trades for about 11 times earnings.
• Due to its low underlying profit margin, the seasonality of its business, and low e-commerce penetration, Dillard's is likely to be harder hit by the growing than Macy's.
• A long Macy's/short Dillard's pair trade is starting to look very attractive.

2019 wasn't a good year for department stores. After many chains experienced a brief sales and profit revival starting in late 2017 and lasting through much of 2018, sales and earnings trends went south again last year.