J.C. Penney had the lowest GMROI out of the group, although this isn’t surprising. Right now, investors wonder whether Mike Ullman can get this department store back on track. GMROI offers one way to answer this question. If J.C. Penney can get better control over its inventory and improve its margins, this department store’s GMROI will trend upward. This metric could also indicate a turnaround before J.C. Penney achieves a profitable quarter, although a successful turnaround still remains in doubt with this store.
GMROI might not provide enough information to make an investment decision by itself. This metric does help illustrate the department stores’ strengths and weaknesses, though. Nordstrom could be stronger than its recent results suggest. Although this department store had an underwhelming quarter, the GMROI shows that it still has decent pricing power and reasonable inventory turnover. This upscale retailer still looks like it could beat the market.
The article GMROI and the Department Stores originally appeared on Fool.com and is written by Eric Novinson.
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