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Our Reports on Stocks in the Multiline Retail Industry — archive

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Image Source: Troy Tolley Structure of the Multiline Retail Industry The multiline retail industry faces intense pressure from online retail and fierce competition from smaller retailers and discounters. Firms in the industry tend to have large real estate holdings and carry a diverse range of apparel, accessories, and household goods. With retail sales moving to the Internet, a company’s web presence is as important as its brick-and-mortar locations. The industry is undergoing a massive transformation and not all firms will survive. Brands and proper fashion assortment drive results in the short term, while execution remains key over the long haul. Several companies in this group have been reassigned to a new consolidated Multiline Retail Industry here. << Our Dividend Reports

Financial Analysis 501: Understanding Cash-Burn Scenarios

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A version of this article appeared on our website November 20, 2013. This article is for educational purposes only and does not reflect our current opinion on J.C. Penney. Please view the firm’s 16-page report for our updated take on the firm. J.C. Penney’s (JCP) third-quarter 2013 results, released November 20, left much to be desired, despite the market’s positive reaction. In fact, the performance confirmed our greatest fear, and we are maintaining our significantly below-market fair value estimate of the firm. Investors should be cognizant, however, that we don’t expect a path directly to our below-market fair value estimate of J.C. Penney’s stock, but one that has fits and starts before an inevitable decline takes hold over the next couple years. … Read more

Lampert May Be Bailing on Sears; J.C. Penney’s November Comps Showed Life

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A Schedule 13D filed by Sears (SHLD) Monday showed that CEO Eddie Lampert had cut his equity stake in the beleaguered retailer to 48.5% from a prior 55.4%. Certainly this is not reassuring the markets as recent channel checks showed further deterioration in the company’s comparable store sales trends during November. Sears is struggling to remain relevant in today’s retail environment, and Lampert’s recent selling isn’t sitting well with us about the retailer’s sustainability as an entity. The firm’s third-quarter results were atrocious, and the holiday shopping season appears to be shaping up as equally poor for Sears. J.C. Penney (JCP) made headlines Tuesday on what initially seemed to be positive news: the company’s comparable store sales grew more than … Read more

Surveying 3Q Performance Across the Retail Spectrum

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Sears There’s not much to say about Sears’ (SHLD) operational performance during its third quarter (results issued Thursday), except that it was atrocious. The firm lost more money in the most recently-reported quarter ($534 million) than it did through the first nine months of last fiscal year ($441 million). CEO Eddie Lampert has his hands full with the company’s multi-year transformation, but we think investors are hanging on to shares largely on hopes the firm will be able to monetize its real-estate portfolio in the future. Image Source: Sears But it seems that (lately) too many investors have been buying into this line of thinking, and the ‘real estate’ thesis continues to proliferate among investor psyches, particularly (now) with J.C. … Read more

Macy’s Posts Solid 3Q; Enters 4Q with Strength

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On Wednesday, Macy’s (M) reported excellent third-quarter results. Comparable store sales leapt 3.5% in the quarter, while quarterly earnings jumped 31%, to $0.47 per share. Macy’s continues to execute in its key strategies—My Macy’s localization initiative (which launched across the nation in 2009), Omnichannel integration and Magic Selling (which requires a more rigorous training for new sales associates)—and noted that it saw improvement in the sales trend in every region of the country. Operating income advanced 10.8% from the same period a year ago, as the firm’s operating margin improved to 5.7% from 5.4%. Net cash from operating activities was $819 million and capital spending was $381 million, resulting in free cash flow of $438 million in the period, or … Read more

J.C. Penney: Equity Offering Shows Desperation; Shares Score a 1 on the VBI; Lights Out by Mid-2014?

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With sales declining precipitously and bankruptcy looking like a real possibility, we have materially lowered our equity fair value estimate on retailer J.C. Penney (click ticker for report: ) to $3 per share. The firm now scores a 1 on the Valuentum Buying Index, and we’re avoiding shares at all costs in the portfolio of our Best Ideas Newsletter. Why Now? We haven’t liked J.C. Penney since former CEO Ron Johnson’s plan showed signs it clearly wasn’t working, and we have consistently maintained that Penney’s business model was obsolete and doomed to fail over the long term, even before Johnson made changes. Still, earlier this year, the firm improved its liquidity position when it raised over $2 billion in cash via debt with an interest … Read more

Which Department Store Looks Attractive?

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Our fundamental view on the department store industry hasn’t changed much after the second quarter. Kohl’s sales gains were surprising, but if we look at the two-year trend of stacked comps (last year’s quarter plus this year’s quarter), Nordstrom continues to easily outperform its peers. Source: Valuentum Ultimately, we believe improving margins in the department store industry will be difficult. Even if a firm is able to gain some additional gross margin, investments in technology will likely increase capital spending. Overall, we view the cohort as fairly valued. Fundamentally, we think Macy’s will continue to outperform Kohl’s due to its superior online shopping experience, but Nordstrom appears to have the most growth opportunities as it looks to expand on the … Read more

Could a Merger Be What Saks Needs?

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Retailer Saks (click ticker for report: ) has been stealing headlines over the past week, but it has little to do with the company’s performance. In fact, its first quarter results weren’t great—though bottom line results were in-line with estimates and top line consensus expectations were exceeded. On Tuesday morning, the company posted 5% year-over-year revenue growth on a 5.9% same-store sales growth for total sales of $793 million. Adjusted earnings per share were flat year-over-year at $0.19. Even though sales growth is great to see, the company continues to recycle the excuse that 2013 will be a “transformational” year. In reality, gross margins were flat year-over-year at 44.4%, and pre-tax operating margins actually declined 120 basis points year-over-year to … Read more

Is Tiffany Still Sparkling?

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Luxury retailer Tiffany (click ticker for report: ) reported challenging holiday sales Thursday. Global sales growth came in at 4% ($992 million)–the low end of the firm’s previous guidance range–after sales really slumped in North America. Same-store sales at the Tiffany 5th Avenue flagship store in New York and stores throughout North America declined 2% during the holiday period. Internet and catalog sales in the region did increase 4%, leading total sales in the Americas region to increase 2% on a constant currency basis (and 3% on a reported basis to $516 million). This could be a negative for other stores such as Saks (click ticker for report: ) that are so heavily tied to New York flagships, but we … 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