Department stores are in their element at the holidays, but this year the season will serve as a key test for three major players.
The vast array of merchandise at department stores provides shoppers with the opportunity to check a lot off their lists. And they traditionally lean into the season with decorations, window displays and events to lure customers in. As a result, these retailers are poised to be among the top destinations this year for browsing and purchasing products, according to Simon-Kucher’s 2026 Holiday Shopping Report.
“People like department stores,” Michael Appel, president of Appel Associates, said by phone. “The department store format, outside the United States, is working very well.”
A number of retailers in the space in recent years have worked to return to the glory days of the model, with varying degrees of success. Analysts credit Dillard’s dedication to retail fundamentals for its consistent, if somewhat lukewarm, results; in its most recent quarter, the regional department store managed to gain market share. Under CEO Tony Spring, Macy’s has demonstrated clear signs of a turnaround, and Bloomingdale’s has thrived. Nordstrom, now under private ownership, also seems to be doing well, though it no longer has to report on its performance.
But three others — Kohl’s, J.C. Penney and Saks Fifth Avenue — all have a lot at stake during retail’s “golden quarter” this year, analysts say. They are being closely watched for signs of stabilization, according to Glenn McMahon, partner at MAC Advisory and Consulting.
“Kohl’s, J.C. Penney and Saks are three very different bets, but each faces a critical test this holiday season,” he said by email. “The issue is not simply whether consumers will spend; it is whether these retailers can convert holiday demand into enough profitable sales and cash flow to address deeper business challenges.”
Kohl’s
Kohl’s turnaround has been dragging on for years now, with little to show for it. Last year, Q4 net sales fell 4%, with comps down nearly 3%, contributing to declines of 4% in net sales and over 3% in comps for the full year compared to 2024.
The company continues to generate good cash flow and doesn’t have much debt, which means it can afford to continue its turnaround into next year, according to David Silverman, senior director at Fitch Ratings.
As of last month, the department store has a new chief merchant, former Walmart fashion executive Ryan Waymire, who’s also had stints at Wayfair, FabFitFun, Amazon and Target. But it suffered a setback this year as its Sephora shop-in-shops, long touted as a driver of traffic and sales, suffered sales declines for two straight quarters.
But ongoing sales erosion threatens to weaken its ability to compete, McMahon said. Its holiday comparable sales, traffic, markdowns and gross margins will be under a microscope, he said.
“Kohl’s needs to give middle- and lower-income shoppers a compelling reason to choose its stores over off-price chains, mass merchants and online rivals,” he said. “Another weak holiday would raise questions about how much longer Kohl’s can pursue a turnaround without further restructuring.”
J.C. Penney
After making some strides in 2025, J.C. Penney’s turnaround stalled in Q4, as net sales tumbled 8% compared to the 2024 holidays, and the declines continued into 2026. In its most recent quarter, the department store lost market share, with net sales again down 8% year on year, though activewear and beauty were strengths.
The company benefits from being part of Catalyst Brands, a conglomerate of retailers that also includes many of the names owned by Authentic Brands Group. And Penney co-owners Simon Property Group and GGP (formerly Brookfield) have an incentive to keep Penney stores open, not just to hold onto revenue but also to prevent clauses that would allow other tenants to exit or change their leases. Simon and Brookfield bought the retailer in 2020 during its bankruptcy.
“J.C. Penney's been on a downslide for a long time, but they're protected, because of the fact that they need them to be in those malls,” Appel said. “They probably have to invest a lot more money in the stores. They're treading water in my opinion.”
At some point, the retailer will have to show signs of improvement, as such large declines would indicate business model risk, according to Fitch’s Silverman.
“Penney’s holiday performance will test whether its combination of affordability, apparel, home and beauty can drive traffic and spending without excessive discounting,” McMahon said. “The risk is that persistent weak sales and thin margins leave the retailer with too little financial flexibility to invest in its future.”
Saks Fifth Avenue
After a tumultuous 2025, Saks Global landed in bankruptcy court early this year, a development that seemed inevitable to most observers. The company struggled to pay vendors throughout the year, leading to a dearth of merchandising during the critical holiday quarter.
Months later the company exited Chapter 11 as “Exemplar Luxury Group,” running, as before, high-end department stores Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, and having trimmed its debt load to under $1 billion.
“Exemplar (Saks/Neiman Marcus) has the most to prove, following a year in which the company completed a bankruptcy process, changed management teams, and has implemented efforts to improve vendor relationships,” Silverman said. “The industry will be focused on the company’s inventory position and ability to re-engage with customers that have defected in recent years.”
In the bankruptcy process, the Saks banner shrank the most, its full-line footprint cut in half, now running just 15 full-line stores and almost zero off-price stores. Of the three within Exemplar Luxury Group, and compared to Kohl’s and J.C. Penney, Saks may be the most vulnerable.
The fleet has shrunk dramatically, yet its remaining stores may not be getting enough attention, according to Appel, who noted that its marketing at the holidays this year is focused on its Manhattan flagship.
“What about the other stores? If they're not supporting them equally — and we don't know the answer — then they're not going to perform well,” he said. “And you know what's going to happen? They're going to close those stores, and it's all going to end up being Neiman Marcus. Because they don't have scale, and they're using the same buying team for both, which is completely ridiculous.”
This is exemplified by the closure of Saks’ Chicago store on Michigan Avenue, which for decades was across the street from Neiman Marcus, with both thriving.
“It's crazy not to have a major store on Michigan Avenue,” Appel said. “They might think that by closing Saks, maybe they'll get a lot of customers going to Neiman's, but they're different customers. So I think that's baloney. They don't want to make the investment. They're not taking the long term view.”
Other analysts see Exemplar as a whole facing a major test this season. Most high-end brands have struggled this year, and aspirational luxury shoppers seem to have fled. Serving these customers is complex, and, at Exemplar, luxury demand, full-price selling, inventory management, vendor relationships and cash generation will all be under scrutiny, according to McMahon. Saks in particular is likely to continue to shed market share, to the benefit of Nordstrom and Bloomingdale’s, according to Appel.
“Strong holiday sales would help, but sales alone will not resolve the larger question: can Saks generate sufficient cash to support its financial obligations and make the combined business work?” McMahon said. “A weak season could intensify pressure on an already complicated turnaround.”
