Department stores have a bright future, with the sector’s growth rate forecast to double in the next five years, according to a report by Verdict.

The study cites three reasons for growth. Firstly, consolidation is strengthening the sector. Although mergers tend to disrupt trading, they are also ridding the sector of many weaker companies and giving retailers with stronger propositions the opportunity to grow.

Secondly, retailers are upgrading and refurbishing stores to a much higher level, instead of focusing on cost cutting, which is attracting back luxury brands and also shoppers. And, thirdly, many department store groups have begun to expand rapidly. In the US, JC Penney, Kohl's and Nordstrom all have active development plans that will see them add more than 600 stores to their combined portfolio by 2011.

The report also said there will also be explosive growth from developing economies, such as China, as well as new markets like India, which will be very attractive for iconic department store groups such as Saks and Harvey Nichols.