Macy’s, Inc. (M): This Stock Could Benefit From J.C. Penney Company, Inc. (JCP) and Sears Holdings Corp (SHLD)’s Decline

Page 1 of 2

Two of America’s biggest middle-income department stores are struggling. Sears Holdings Corp (NASDAQ:SHLD) is slowly bleeding cash, while J.C. Penney Company, Inc. (NYSE:JCP)‘s future remains highly uncertain.

If there’s one company that stands to benefit, it appears to be Macy’s, Inc. (NYSE:M). Although Macy’s, Inc. (NYSE:M) has vastly outperformed both Sears and J.C. Penney over the last year, further upside may lay ahead.

Macy's, Inc. (NYSE:M)

J.C. Penney’s failed turnaround plan

J.C. Penney Company, Inc. (NYSE:JCP)’s current predicament can mostly be traced back to its (now former) CEO Ron Johnson. Although J.C. Penney’s business was — at the time Johnson arrived — slowly fading into irrelevancy, the company was still profitable.

But Johnson changed all that. He drove away the store’s key customers by eliminating coupons and axing many popular brands. At the same time, he spent roughly $1 billion in a single year, mostly through store renovations.

Johnson stepped down in April, and the store’s old CEO, Mike Ullman, has returned. Discounts are back, and J.C. Penney Company, Inc. (NYSE:JCP) just unveiled its newly renovated home goods department.

So there’s reason to be hopeful. I myself own shares, along with legendary fund manager George Soros. But that isn’t to say that the investment isn’t without its risks.

The damage done over the last year might have been too much. At the same time, J.C. Penney Company, Inc. (NYSE:JCP)’s new home goods are more expensive than its traditional customers are used to, and a judge could still force the store to stop selling its Martha Stewart-designed products.

Sears might be worse off than J.C. Penney

Not even Sears Holdings Corp (NASDAQ:SHLD)’ bulls see much hope for the company’s actual business operations, instead focusing on the value of the company’s assets — in particular, its real estate.

Bruce Berkowitz’s Fairholme Capital is a major Sears Holdings Corp (NASDAQ:SHLD) shareholder. Specifically, as of the end of March, it represented more than 12% of his fund — about $1 billion of stock. In a presentation he gave last year, Berkowitz argued for Sears Holdings Corp (NASDAQ:SHLD)’ stock mostly on the value of its real estate holdings.

But not everyone agrees with Berkowitz. Analysts at Credit Suisse reiterated their Underperform rating last month after Sears Holdings Corp (NASDAQ:SHLD) reported a disastrous quarter. In their note, Credit Suisse raised the obvious question — if Sears’ business is losing money, but its assets are so valuable, then why does the company continue to operate?

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!