Two retailers that have embraced these strategies have been enjoying the increasing health of the U.S. economy. Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) consistently utilizes sale pricing to fuel retail growth. Bed Bath & Beyond Inc. (NASDAQ:BBBY) has utilized coupons to continue to grow sales.
The supreme discounter
Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) designs, manufactures, retails, and direct markets men’s tailored and casual clothing and accessories in the United States. The company operates 603 stores throughout the U.S. and has a strong catalog and internet business. The company employs a “high-low” pricing strategy based on customer preferences and demands. As part of the strategy, the company periodically promotes specific items or categories at prices that are below the retail price normally offered to consumers. If you’re familiar with this retailer, you know that whole store is, more or less, always on sale. The company continuously offers some type of discount to incentivize customer purchases. Sales prices are essentially synonymous with the retail experience at Jos. A. Bank Clothiers Inc (NASDAQ:JOSB).
By embracing this pricing strategy, the company has enjoyed financial success and significant growth opportunities. The company has opened 189 new stores over the past five years and plans to open 40 to 45 new stores in fiscal year 2013. The company believes that is can increase its total store count by 33% to approximately 800 stores.
The company currently trades at a P/E of 15.11, versus the specialty retail industry average of 18.99. Price/sales ratio is 0.85, versus an industry average of 1.4. Most impressively, gross margins currently stand at 58.09%, versus an industry average of 34.79%.
The company’s future growth opportunities, strong financial metrics, and reasonable valuation make Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) an interesting investment opportunity in the retail space.
The coupon king
Bed Bath & Beyond Inc. (NASDAQ:BBBY) operates a chain of retail stores that sell a range of domestic merchandise. The company operates stores under the Bed Bath & Beyond Inc. (NASDAQ:BBBY), Christmas Tree Shops, Harmon and Harmon Face Values, buybuy BABY, and Wold Market names. The company has 1,471 stores throughout the Unites States, Puerto Rico, and Canada.
If you have a mailbox, you have likely received your fair share of letter-sized blue paper offering you 20% off one item at Bed Bath & Beyond Inc. (NASDAQ:BBBY). These coupons can be used on the vast majority of items in the stores and are an effective tool in driving revenue and foot traffic to the store.
Bed Bath & Beyond Inc. (NASDAQ:BBBY) also appears to be an attractive investment opportunity. The company currently trades at a P/E ratio of 15.07, versus the industry average of 18.99 and its five-year historical P/E of 16.02. It trades at a price/sales ration of 1.12, versus the industry average of 1.40, and has impressive operating margins of 15.01%, versus the industry average of 10.09%. The company has minimal long-term debt and a five-year history of strong operating cash flows.
Can the sinking ship be righted?
J.C. Penney Company, Inc. (NYSE:JCP) has made it clear that it plans to return to the old way of doing business. By returning to deep discounting and coupon issuing, it hopes to bring back customers that were lost during the tenure of Ron Johnson.
The company recently released first quarter 2013 data, and it was not pretty. The company saw sales decrease by 16.4% from the same quarter in 2012, and comparable store sales declined by 16.6%. The company also lost $348 million in the quarter, building on the nearly $1 billion loss from 2012. The quarterly sales losses were partially attributed to construction at 505 stores. The company also announced that its approximate debt level is $3.818 billion, and the company has approximately $821 million in cash.
While the stock has rallied approximately 18% since the change in leadership, the company is still facing many hurdles. There is little data on whether customers will return and how the store constructions will impact sales. The company also has a significant amount of debt that could quickly become problematic if free cash flow doesn’t pick up. Given all the unknowns, J.C. Penney Company, Inc. (NYSE:JCP) appears to be more of a gamble than an investment.
Foolish Thoughts
If you are looking for retail exposure, Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) and Bed Bath & Beyond Inc. (NASDAQ:BBBY) look like appealing opportunities. They have mastered their pricing strategies and appear committed to maintaining them. As J.C. Penney Company, Inc. (NYSE:JCP)’s woes continue to be played out in the public eye, the company is just too risky to invest in.
The article Beating J.C. Penney At Its Old Game originally appeared on Fool.com.
John 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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