The Real Problem?
Macy’s Inc. (NYSE:M) sales fell throughout the recession, too, but new initiatives like Magic Selling put the top line back on an upward path. Sales are now higher at Macy’s Inc. (NYSE:M) than they were prior to the recession. Macy’s Inc. (NYSE:M) focus was on creating a better shopping experience by making its staff and stores more responsive to customers. Macy’s Inc. (NYSE:M) shares have moved smartly higher, are above where they were before the recession, and are now most appropriate for momentum and growth investors.
Kohl’s Corporation (NYSE:KSS) shares have been range bound, while J.C. Penney’s shares have been volatile and now sit well off recent highs. Part of Macy’s Inc. (NYSE:M) success is because it caters to higher-end customers, which have fared better during the recession. However, a focus on the customer experience is the big difference.
Back to the Old Way
According to media reports, Penney’s is now going back to the old way of doing things. That has included firing the new CEO and bringing back the old one. While some industry watchers are suggesting that going back to higher prices coupled with discounts and coupons is improving results, that “improvement” is from a painfully low base. However, it should at least bring back old customers.
Unfortunately, the previous path was one that had led to slow decline. So it may bring back some old customers, but it isn’t likely to be enough to salvage the brand from obscurity. And the damage to the brand from Johnson’s aborted turnaround effort has yet to be tallied. The stock is only appropriate for aggressive investors willing to bet on a turnaround play.
How Long?
For such intrepid investors, it will be important to remember that any turnaround in the share price could be short lived. Sales could pick up nicely over a year or two as old customers return only to start down the path of a slow decline again. That would likely lead the stock to follow suit. Shareholders need to keep a close eye on sales figures.
Hipper Kohl’s Corporation (NYSE:KSS) is probably a better option. Although the two companies share a similar business model and customer base, Kohl’s still has room to expand its store count. That should allow it to keep investors happy with new store driven sales growth until the lower-end segment picks up again.
Of course, if either Penney’s or Kohl’s started to move toward a higher level of service, like Macy’s Inc. (NYSE:M), they might find customers start to respond better.
The article Is This Retailer Seesawing Into Oblivion? originally appeared on Fool.com.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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