Bricks and mortar are nice, but are still losing relevance
Amazon.com, Inc. (NASDAQ:AMZN) is continuing to show how true this is. J.C. Penney Company, Inc. (NYSE:JCP), Macy’s, Inc. (NYSE:M), Target, and Wal-Mart all showed flat-to-poor results in the latest quarter, while sales at Amazon.com, Inc. (NASDAQ:AMZN) were up 22%. And while there were rumors about a year ago that the company was planning to test retail stores, this hasn’t happened. What has happened, though, is the company is expanding Amazon Locker, and testing same-day shipping in limited markets.
Simply put, the strong growth of its traditional web business is funding the company’s attempts to come full-circle to the last vestige of benefits for many bricks and mortar stores: buy it today, get it today. Don’t get me wrong; consumers aren’t going to just stop going to stores tomorrow. But the pull of convenience is very powerful, as Amazon.com, Inc. (NASDAQ:AMZN)’s continual growth testifies.
So what’s this have to do with Penney?
Management has yet to demonstrate that:
It has a plan
Can execute that plan, and stick to it
Said plan will yield positive results
Amazon.com, Inc. (NASDAQ:AMZN) and Macy’s, on the other hand, are executing on all three.
Until J.C. Penney Company, Inc. (NYSE:JCP) shows us that it can execute a plan to regain lost customers, expand its Internet business, and return to profitability, investors are better off looking elsewhere. Amazon.com, Inc. (NASDAQ:AMZN)’s valuation may be sky-high, but so is its growth rate, while traditional retail competitors are losing traction. Because of its high valuation and share price volatility, investors are best served by starting small and building a position over time. Chances are, mister market will help you get better prices if you’re patient. Just don’t expect Amazon.com, Inc. (NASDAQ:AMZN) to ever be a bargain stock.
Macy’s, Inc. (NYSE:M) may not be anything like the growth story that Amazon is, but management is doing a worthy job of managing expenses, as well as returning capital to shareholders through dividends and share buybacks. The number one thing it offer investments today, versus J.C. Penney Company, Inc. (NYSE:JCP)? A track record of success, and a predictable path to more profits. And that’s worth a lot more than a “Penney.”
The article Why J.C. Penney’s “Poison Pill” Isn’t Good for Investors originally appeared on Fool.com and is written by Jason Hall.
Jason Hall owns shares of Amazon.com. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com.
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