What: Macy’s and Kohl’s now derive the majority of their operating profit from store-branded credit card programmes rather than retail sales

Why it is important: This reliance on credit card income exposes department stores to significant risk if consumer credit conditions worsen, as seen in recent industry analyses.

US department stores such as Macy’s and Kohl’s have shifted their profit models, now depending primarily on store-branded credit card programmes rather than traditional retail sales. While these credit card partnerships provide upfront discounts and perks to shoppers, they also carry high interest rates, often exceeding 30%, compared to the national average of about 20%. This financial strategy has become essential for these retailers, with Macy’s generating 62% of its operating profit from credit card revenue last year and Kohl’s relying so heavily on such income that it would have posted an operating loss without it. The trend is not unique to these two brands; other retailers like Best Buy and Victoria’s Secret also derive notable portions of their profits from credit card programmes. However, this dependence introduces significant risk, as any weakening in consumer credit or rise in delinquencies could quickly undermine profitability. The sector’s ongoing struggle with declining sales, weak foot traffic, and increased competition further amplifies the importance—and the fragility—of this new profit pillar. 

IADS Notes: The reliance of US department stores on credit card revenue is highlighted in a December 2025 Financial Times article, which details how Macy’s and Kohl’s now depend on financial services for the majority of their operating profit. This pattern is mirrored in Latin America, as shown in a September 2025 América Economía report, where department stores are leveraging financial products and digital transformation to support growth. Macy’s diversification strategies and the sector’s broader adaptation efforts are discussed in a December 2024 Retail Dive analysis, while Liverpool’s increased dependence on credit card income is noted in an October 2025 El Financiero article. The ongoing vulnerability of the sector, with persistent sales declines and weak consumer confidence, is further emphasized in an April 2025 Bloomberg report, all pointing to the growing importance—and risk—of consumer credit for retail profitability.

Big-name US department stores take credit risk and put a bow on it