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Should Macy’s, Inc. (M) Fear a J.C. Penney Company, Inc. (JCP) Revival?

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Macy’s: A Growth Stock For Your Black Friday Radar ScreenWhen Ron Johnson attempted to re-brand J.C. Penney Company, Inc. (NYSE:JCP) by making it trendy, he effectively alienated its core customers. His catastrophic failure sent many of those customers to Macy’s, Inc. (NYSE:M) ; at least a comparison of both companies’ revenue suggests that was the case.

Quarterly revenue in billions 2013-Jan. 2012-Oct. 2012-Jul. 2012-Apr. 2012-Jan.
J.C. Penney Company, Inc. (NYSE:JCP) $3.8 $2.9 $3.0 $3.1 $5.4
Macy’s, Inc. (NYSE:M) $9.3 $6.1 $6.1 $6.1 $8.7

Source: YCharts

Notice that J.C. Penney Company, Inc. (NYSE:JCP)’s revenue fell a whopping 28% year-on-year from $5.4 billion in the quarter ending January 2012 to $3.8 billion in the quarter ending January 2013. Over the same period, revenue at Macy’s rose by a healthy 7%.

Macy’s, Inc. (NYSE:M) was hardly the only retailer to make significant gains while J.C. Penney imploded. The retailers in the chart below must have thought Johnson was a gift from Santa.

Should Macy's, Inc. (M) Fear a J.C. Penney Company, Inc. (JCP) Revival?

Source: YCharts

Good news for J.C. Penney is coming in fast

As you probably know, J.C. Penney Company, Inc. (NYSE:JCP) scrapped Johnson’s plan and sent him packing, then rehired his predecessor Myron “Mike” Ullman. Shortly thereafter, George Soros scooped up almost 8% of the company’s shares.

Ullman was CEO from 2004 through 2011. Although he’s been blamed for the company’s slowly sinking earnings, too many forget the first half of his of his tenure — but not Soros. I’m sure he remembers that the year Ullman took the position, J.C. Penney posted earnings of just $1.20 per share. By 2007 the company had increased its per share earnings nearly five-fold to $4.96.

It also appears that the rumored sale of J.C. Penney’s prime real estate is unlikely to happen. Possibly in response to Ullman’s return, Goldman Sachs has agreed to give the bleeding retailer a cash infusion.

Furthermore, J.C. Penney Company, Inc. (NYSE:JCP) has been allowed to market the Martha Stewart home goods that should be exclusive to Macy’s, Inc. (NYSE:M), just without the brand. Despite the logo “JCP Everyday,” a Macy’s-sponsored survey suggests that most consumers associate those products with Martha Stewart.

Competitive landscape

So, Macy’s investors should be shaking in their Steven Madden boots, right? I say wrong.

Macy’s, Inc. (NYSE:M) was hardly the only retailer to post significant revenue gains during the Johnson re-branding debacle. Although I’m sure that many of J.C. Penney Company, Inc. (NYSE:JCP)’s fleeing customers wound up at competitors like Macy’s, fiscal 2013 was a relatively good year for retailers across the board. Based on revenue growth in previous years, I imagine Macy’s quarter-ending-January’s revenue gains were only boosted slightly by J.C. Penney’s alienated customers.

If there’s one department store chain that Macy’s, Inc. (NYSE:M) needs to fear it’s Nordstrom, Inc. (NYSE:JWN) . The more-upscale retailer’s net sales increased by 12%, from $10.5 billion to approximately $11.8.

Fiscal 2013 was the third year in a row that Nordstrom posted double-digit revenue gains. Although it traditionally carries more expensive brands, the “Nordstrom Rack” off-price stores and “Last Chance” clearance stores have been gaining lower-income customers.

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