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Target and TJMaxx are killing department stores

Department stores like Macy’s have a big problem, and it’s not Amazon: Discount retailers Target and TJMaxx continue to take their customers.

Macy’s struggled during its latest quarter, adding to a string of poor results at department stores. This comes as lower-priced retailers grow sales and consumer spending in the United States remains strong. Americans are still shopping, but they are hunting for bargains elsewhere.

Macy’s posted a sales decline of 3.9% at stores open for at least a year, the company said Thursday.

“The sales deceleration was steeper than we expected,” Macy’s CEO Jeff Gennette said in a prepared statement Thursday.

He blamed warm weather, fewer tourists shopping in stores and problems at lower-tier malls with a Macy’s. Macy’s lowered its expectations for the holidays, driving its stock down during early morning trading. Shares of Macy’s have lost 49% so for this year and Macy’s is the worst-performing stock on the S&P 500 this year.

“The chain is still not doing nearly enough to entice shoppers into buying,” Neil Saunders, analyst at GlobalData Retail wrote in a note to clients.

Department stores are making changes to stores to boost the customer experience. But they are taking incremental steps, rather than sweeping overhauls. At the same time, they are getting squeezed by discount chains, forcing them to put products on sale. That has pressured profits.

Macy’s and JCPenney are also located in older malls, while Target and TJMaxx’s stores are typically standalone, independent of malls.

“The mall is getting more toxic,” Jefferies analyst Randal Konik said in a note to clients.”Mall traffic will likely continue to wane over the years ahead,”

Even Kohl’s, which has most of its stores away from malls, seems to have lost its footing.

Kohl’s sales at stores open for at least a year last quarter ticked up just 0.4%, while JCPenney’s fell 6.6%, excluding the impact from JCPenney’s decision to discontinue selling appliances and furniture.

“There’s a lot of choices out there for women,” Kohl’s CEO Michelle Gass said on a call with analysts Tuesday. “For Kohl’s, we stand for value, we stand for style relevancy and we really stand for that casual apparel.”

However, consumers keep spending on clothes and home goods at discount companies like Target, Walmart, TJMaxx and Marshalls

Target’s sales at stores open for at least a year and online increased 4.5% last quarter, including a 10% growth in clothing sales.

The company had “really exceptional performance” in clothing and saw an “oversized increase in market share during the quarter in apparel,” Target CEO Brian Cornell told analysts on a call Wednesday.

Target has built out its own lineup of clothing brands, and they are often the first thing customers see when they enter stores. The company also partnered with brands like Levi’s and Vineyard Vines for exclusive collections, which boosted sales last quarter.

At TJX, the parent of TJMaxx and Marshalls, sales at stores open for at least a year increased 4%.

“We have a significant opportunity to continue growing our customer base and gaining market share,” TJX CEO Ernie Herrman said Tuesday.

CNN