Department stores haven’t had an easy life lately, but store credit cards lightened the load. Now, that part of their business faces a new threat, according to a Wall Street Journal analysis. Two developments have analysts and experts watching: First is a proposed rule by the Consumer Financial Protection Bureau to cut the late fees that credit cards can charge consumers from as much as $41 per missed payment ($30 on the first missed payment) to $8. The agency is expected to issue a final ruling in the coming months, though legal challenges could end up impacting the timing and severity of the cuts. Second, delinquencies, which have already hit Macy’s, could soon impact other department stores. Credit cards are surprisingly important to department stores. While they account for a small piece of their top lines, they boost profits. Credit income accounted for about 49% and 44% of Macy’s and Nordstrom’s operating income in 2022, according to estimates from BofA Global Research equity analyst Lorraine Hutchinson. At Kohl’s, credit income well exceeded operating income, implying that the retailer would have swung to an operating loss if it hadn’t been for the credit-card business.
