Will Macy’s (NYSE: M), JC Penney (NYSE: JCP), Kohls (NYSE: KSS), and Sears (NASD: SHLD) Turn it Around?

The retail sector is suffering, as evidenced by the poor shopper turnout in the fourth quarter holiday season. As shoppers continue to hoard cash and avoid the malls, sales and profits at firms like JC Penney (NYSE: JCP), Sears (NASD: SHLD), and Macy’s (NYSE: M) have disappointed. In reflecting on the recently reporting results, there are a few key areas to observe.

 

The loss leader in the industry undoubtedly falls to JC Penney, whose performance and actions has confounded consumers. For the quarter, JC Penney’s total revenue plummeted 28.4% to $3.88 billion from the year-ago period as its total loss ballooned more than 600% to $552 million. Internet sales tumbled a horrific 34.4% and same-store sales, which exclude the effects of newly opened and closed stores, dropped a staggering 31.7%, or 560 basis points worse than Wall Street had anticipated. JC Penney failed on its plan to remove sales from the stores, and now is reversing trend – the question will be is it too late to change their outcome. Penney’s CEO Ron Johnson did his best to admit his mistakes, and noted that the company plans to bring back about 100 sales a year in order to drive traffic back into its stores.

 

Furthermore, same-store sales figures have gotten progressively worse with each passing quarter. Kohl’s (NYSE: KSS)  has been stuck in quite the rut as it’s remodeled many of its stores and revamped its pricing strategy, lowered its fourth-quarter outlook in January, but not before reporting a 3.4% rise in December’s same store sales. Macy’s (NYSE: M) is now embroiled in a lawsuit with long time partner Martha Stewart, over her plans to launch a line of product at JC Penney, something Macy’s alleges is explicitly prohibited per the terms of their exclusivity agreement.  Once the nation’s largest company, Sears is now facing the prospect of selling assets to generate cash, as the firm’s store sales have continued to sink over the past few years.

 

Consumers tastes and preference are changing. The young consumers have shifted their demand to smaller retailers and independent shops in many cases, while the aging consumers, once the bread and butter for the big box mall retailers, have reigned in their spending habits. Consumer spending, reflective of weak economic conditions, has been abysmal and there are virtually no signs of that changing any time soon. So, the retail sector must focus on adapting and reversing their trend or run the risk that many competitors have succumbed to over recent years.



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