For retail, the year’s first day of reckoning has arrived. Department stores have reported their earnings results for the first quarter of 2017, and it’s expectedly bleak across the board, with falling sales missing investor expectations.

The big story
Off-price retail is still winning, physical stores either need to be cut or put to work in a cross-channel strategy, and an emphasis on speed is more important than ever.

Sales drops, by the numbers

Macy’s: -7.5 percent
Nordstrom: -2.8 percent
Saks: -4.8 percent
Kohl’s: -3.2 percent
JCPenney: -3.5 percent

Key quote
“Right now, everyone’s in a bad place, but as they reconfigure, it’s going to come down to cross-channel capabilities,” said Jessica Ramirez, an analyst at the boutique retail firm Jane Halli and Associates. “Buy online, pick up in-store, reserve online, store shipping — these things are all very important. If you don’t have this approach, you’re in the dark ages.”

Personalization over promotion
Execs across department stores are putting an emphasis on private label brands, exclusive brand partnerships and increasingly personalized marketing messaging in order to draw foot traffic and differentiate from the competition in a way that isn’t reliant on promotions. Nordstrom is cutting back on promotional events so that the company doesn’t have to match those results each year.

Woe is Macy’s
“Macy’s is not in a great place,” said Ramirez. “To change your message about promotions without becoming less promotional — you can imagine what the customer will be thinking, and that’s an issue. Why would you ever pay full price or have any confidence?”

The need for speed
Kohl’s CEO Kevin Mansell has said that speed and agility are his No. 1 priority. Right now, what he calls his “speed brands” account for 40 percent of Kohl’s proprietary brands, meaning they can move from production to the sales floor in a shorter period of time. At Macy’s, the company has been working to remove managerial layers in order to react faster to customers’ behavior and “move at their speed,” according to CEO Jeff Gennette.

“This is a consumer-driven response to the fashion cycle, and department stores are responding,” said Erich Joachimsthaler, CEO of branding agency Vivaldi. “At the same time, they still have to focus on product their customers want. Fast product isn’t good product.”

Cheap chic
Nordstrom and Macy’s are expanding the footprint of their outlets: Nordstrom will open 17 more Racks this year, with the goal of hitting 300 stores overall, while Macy’s will open 19 more Backstage stores this year. Nordstrom Rack accounts for 30 percent of all sales, while Nordstrom Rack’s online store is growing, as well: It has hit $700 million in sales since opening in 2015.

“Off-price resonates with customers looking for brand names at a value, and they can churn through product,” said Ramirez. “But Backstage inside a store can cannibalize that business — the two become intertwined, and that’s dangerous.”