JCP

JC Penney Brings Back Discounting; Was the Fourth Quarter Horrible?

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Last week, rumors swirled that JC Penney (click ticker for report: ) was pressuring its suppliers to place MSRPs (manufacturer’s suggested retail price) on its products so JCP could appear to be giving consumers a discount on a product (a sale without it actually being on-sale). Earlier today, that move was confirmed, and sales and MSRPs will be reintroduced at Penney’s stores around the country. Much-maligned CEO Ron Johnson noted that the strategy shift was an “evolution” rather than an admittance of failure.  Yet, the idea of including MSRPs or comparable prices isn’t at all a unique idea—just look at any TJX (click ticker for report: ) store, Nordstrom Rack (click ticker for report: ), or Ross (click ticker for … Read more

Can Eddie Lampert Turn Around Sears?

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Earlier this week, Sears (click ticker for report: ) CEO Lou D’Ambrosio announced that he’ll resign from his position in February due to an illness in the family. Not so surprisingly, Sears chairman and hedge fund titan Eddie Lampert will be taking the reigns as CEO. Lampert, who merged Sears and Kmart several years ago, will be the chief executive for the first time, and as far as we can tell, he seems confident in his ability to turnaround the failing retailer. In an interview with the Chicago Tribune, Lampert cites Jeff Bezos’ success as a finance guy turned retailer leading Amazon (click ticker for report: ) as evidence that he can turn the dying company around. Although he hasn’t … Read more

Dear Valuentum Member

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In such a short time that you’ve known us, you have seen us do so much: from generating more than 25 percentage points of outperformance in our Best Ideas portfolio since inception (May 2011) to delivering on our high-single-digit return goal of our Dividend Growth portfolio during 2012 to the Valuentum Dividend Cushion score predicting the dividend cuts of JC Penney (JCP), SuperValu (SVU), Roundy’s (RNDY), and others. You’ve seen us identify a triple in EDAC Tech (EDAC) and predict the bankruptcy of the parent of American Airlines (AMR). These are tremendous accomplishments. There’s an old saying in the market that if your winners are outperforming your losers, you’re doing a great job. Through November of last year, 87% of … Read more

November Retail Sales Disappoint

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Without question, November retail sales numbers have been lackluster. Although the number of retailers that report monthly sales figures continues to decline, let’s take a look at some of the interesting insights we saw from those that still report numbers. Kohl’s Even though we’re fairly bearish on Kohl’s (click ticker for report: ) over the long term, we did not expect the fourth quarter to start off so poorly. Same-store sales fell 5.6% year-over-year, lapping a 6.2% decline during the same period in 2011. Total sales fell 4.9%, and the company continues to lose momentum. The firm blamed Hurricane Sandy and recognizing e-commerce sales in December as the major drivers of weakness, but we think the results highlight how poorly … Read more

Sears Slide Continues

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Department store Sears (click ticker for report: ) continued its long decline during its third quarter, as evident from results Thursday afternoon. The company exceeded consensus revenue estimates, though revenue still fell 6% year-over-year to $8.9 billion. Earnings, adjusted for certain items, actually increased to a loss of $1.99, which was significantly better than consensus expectations. Though results were better than expected, the company’s deterioration continued during the quarter. Same-store sales growth was weak across the board, though we saw some signs of life from the Sears Domestic business. Same-store sales fell 1.6%, and management noted that net of consumer electronics, same-store sales would have increased. Appliances remain an area of strength due to the housing recovery, and management noted that apparel … Read more

JC Penney’s Strategy Change Was and Is Necessary

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Department store chain JC Penney (click ticker for report: ) and its CEO Ron Johnson have been under tremendous scrutiny since Johnson took the reins in November of 2011. Johnson, independently wealthy from his days leading the retail push at Apple, came in looking to revamp the retailer and ignore the Street in the process. Sales declines have been staggering; same-store sales fell 26.1% during the third quarter and internet sales, in a secular uptrend, declined 37%, leading to a 26.6% decline in total sales. Earnings, on a non-GAAP basis, fell from $0.18 per share to a loss of $0.93 per share. The company also generated negative $389 million in free cash flow, though the majority was due to cash … Read more

Kohl’s Should be Thanking JCP

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Thursday morning, Wisconsin-based department store Kohl’s (click ticker for repot: ) reported mediocre third quarter results. The retailer grew sales 2.6% year-over-year to $4.5 billion driven by 1.1% same-store sales growth. Earnings grew 14% year-over-year to $0.91 per share, exceeding consensus estimate by a few pennies. While earnings were better than expected, the earnings per share growth was due to share buybacks and modest operating leverage rather expanding gross margins. Kohl’s shrunk its share count 11% since the same period in 2011. Gross margins dipped 44 basis points year-over-year to 38.1%, and management noted that the firm has been highly promotional, leading to lower earnings. We’re also skeptical about the company’s inventory build, which now stands at $4.8 billion, 17% … Read more

Macy’s Posts Strong Earnings; Provides Bold Fourth Quarter Sales Outlook

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Department store retailer Macy’s (click ticker for report: ) reported solid third quarter results Wednesday morning. Sales increased 3.8% year-over-year during the quarter to $6.1 billion, roughly in-line with consensus expectations. Earnings rose 12.5% year-over-year to $0.36 per share, exceeding consensus estimates. As we discovered earlier this week, revenue was driven higher by a 3.7% increase in same-store sales, as well as continued strong performance from macys.com and bloomingdales.com, which grew a combined 40% year-over-year. Men’s tailored clothing, men’s shoes, women’s suits, handbags, furniture, and watches were all cited as strong performers, with juniors, tabletops, and housewares lagging. Most areas were consistent with broader trends we’ve seen across retail as of late; men continue to return to a more formal, … Read more

October Retail Roundup

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During October, the US consumer remained resilient while much of corporate America stagnated in anticipation of the presidential election and the looming fiscal cliff. Let’s take a look at retail sales results for the month. Nordstrom Nordstrom (click ticker for report: ) continues to be a standout performer in the luxury retail space, with October same-store sales surging 9.8% year-over-year. Nordstrom Rack continued to outperform the traditional stores, growing 10.5% year-over-year compared to 10.2% for traditional stores. We remain huge supporters of the firm’s expansion plans, and we believe its execution is unbeatable in the retailer industry. Nevertheless, we believe shares are fairly valued. Gap Gap’s (click ticker for report: ) October results weren’t quite as strong as September results, … Read more