Retail sales in the US have seen a bumpy ride in 2019, alternating
between rises and falls each month from January to April. A slew of retailers
reported their earnings over the past few weeks with more to come. Let’s take a
look at two major department store stocks and their performance.
Macy’s
For the first quarter of 2019, Macy’s (NYSE: M) reported flat sales along with a decline in profits. Comparable sales grew 0.6%, on an owned basis, and 0.7% on an owned plus licensed basis. The company has guided for full-year 2019 sales to remain flat and for comparable sales, it has given an outlook of flat to up 1%.
Macy’s shares have fallen over 30% so far this year. Over
the past one month, the stock has dropped 14%, and last week it hit a 52-week
low, falling below $21.
While this performance has failed to impress most on Wall
Street, there are those who remain optimistic on Macy’s. One of the main reasons
they have cited for this faith is Macy’s valuable real estate, which banks estimate
is worth more than $15 billion and can provide a comfortable cushion if things
turn rough. In the first quarter, Macy’s reported higher gains from asset sales
compared to the year-ago period.
Macy’s has been investing in its stores and digital channel and undertaking other initiatives aimed at driving sales growth and these initiatives are likely to pay off going forward. The company has also been slowly paying off its debt load which is another good sign. In light of these factors, some analysts believe that even if it falls, Macy’s will end up with just mild bruises.
J.C. Penney
For its first quarter of 2019, J.C. Penney (NYSE: JCP) reported lower revenue along with a net loss. Revenues have continued to decline over the past few quarters and the company has delivered losses during most of this period, with the exception of the fourth quarter of 2018.
Comparable sales have also declined over the past three
quarters with a drop of around 6% in the first quarter. Although the company has
lowered its inventory level, it is still quite high and reducing it remains a
challenge. J.C. Penney is also struggling with a heavy debt load which is a
huge cause of concern as the company’s free cash flow stood at negative $268
million in the first quarter.
It has been reiterated time and again that J.C. Penney needs a whole new strategy to pull itself out of this mess. One of the things the company needs to focus on is the improvement of its digital channel as its competitors have been doing successfully.
J.C. Penney’s stock has declined over 20% so far this year while over the past one month alone, it has dropped over 38%. Most analysts have written off J.C. Penney and believe that unless the company turns things around fast, it might not survive.