The sky isn't falling. But that doesn't mean the department store space has suddenly been healed.
Shares of J.C. Penney, Kohl's, Nordstrom and Dillard's rallied on Friday, after all four reported fiscal second-quarter earnings that beat Wall Street estimates. Shares of Macy's, which likewise topped analysts' expectations, gave up some of the gains they logged Thursday, but were still up more than 15 percent on the week.
Investors cheered the group's improvement, after a dismal first quarter that brought back memories of the financial crisis. Yet while these stores showed much-needed signs of stabilization in the second quarter, analysts cautioned that investors shouldn't get overly excited by their results.
"It's important to note that these department store earnings are still down year-over-year," said Ken Perkins, president of Retail Metrics. "Maybe they're slowly turning a corner but they're still facing all the same pressures that they've been facing for the past several years."
Indeed, Retail Metrics' latest forecast calls for department stores' second-quarter earnings to fall 97 percent compared with the prior-year period, or 13 percent when stripping out Sears. Though that's better than the firm's forecast ahead of the announcements, it nonetheless signals a contraction.
Revenues are also shrinking at these stores, with J.C. Penney being the lone department store notching year-over-year topline growth during the three-month period. Nordstrom's results were dented by a shift of its anniversary sale, part of which moved into the third quarter this year. Yet this was the first quarter its revenue declined since the financial crisis.
"They [department stores] continue to face pressures from a number of fronts," Perkins said.