Can Turnarounds Save J.C. Penney, Sears and Best Buy?

Before you go, we thought you'd like these...
www.searsmedia.com
Some of the country's most troubled retailers had moments of resilience in May. Shares of Best Buy (BBY) rose 6 percent last week after posting better than expected profitability in its latest quarter. The week before that it was shares of J.C. Penney (JCP) soaring 11 percent after posting a surprising spike in comparable-store sales. It was the fourth week in a row that the department store operator's stock had closed higher, rising nearly 30 percent in that time.

Sears Holdings (SHLD) hasn't had a bull-affirming pop lately. Last week's quarterly report was a disaster. However, the parent company of Sears and Kmart is still trading higher than it was at the end of 2011, even though it's been posting huge losses along the way.

The three retailers may seem to be finding their way. Margins are improving at Best Buy. Comps are ticking higher at Best Buy. Sears is selling off assets to fortify its finances. However, all three chains are still struggling.

Penney Dreadful

J.C. Penney is working on a turnaround, but it's not the first time that the meandering department store chain has tried to fix its past mistakes. Ron Johnson was brought in as CEO in the fall of 2011, having worked merchandising magic at Target (TGT) before helping kick off Apple's (AAPL) wildly successful Apple Store concept.

Johnson thought that the key to making J.C. Penney was a "town hall" makeover where name brand "mini-stores" would populate its selling space. Shifting from sales to everyday low pricing was supposed to wean shoppers off of discounting.

It didn't work. Less than two years later, Johnson was gone. A former CEO returned. Sales continued to slide, but then sales started to stabilize last year. Comparable-store sales rose 6.2 percent during the first quarter of this year. That's great, but let's not forget that same-store sales slipped 16.6 percent the year before and 20.1 percent the year before that.

Add it all up, and a typical J.C. Penney store is still selling nearly 30 percent less than it was three years ago.

Buy Buy Birdie

Best Buy's problem is declining sales. It surprised the market by growing its earnings per share in its fiscal first quarter, but sales continued to slide. Things aren't going to get any better in the near term. Best Buy warns that same-store sales will keep going the wrong way through at least the next two quarters.

Best Buy also had its own CEO shuffle a couple of years ago, and Hubert Joly seems to be making the best of a rough situation where physical media is being replaced by digital delivery and folks are flocking online for the devices to play the new digital media.

Despite the strides that Joly has made, things will continue to be challenging until sales pick up again. That could happen as soon as this holiday shopping season, but that doesn't seem likely given Best Buy's recent sales momentum.

Tears for Sears

Sears Holdings has been a mess for years, and CEO Eddie Lampert's combination of Sears and Kmart hasn't helped. Instead of helping lift Kmart up to the performance level of Sears, we've seen the ] opposite.

%VIRTUAL-article-sponsoredlinks%It's not easy to grow when you're cutting costs without passing on those savings to shoppers. Third-party studies show that Kmart can't compete on pricing with its two larger discount department store rivals, and the once-storied Sears chain, with notorious displays, has buckled under joint ownership.

Sears Holdings has been able to sell off assets to raise money, but profitability has been elusive. Analysts see the red ink continuing for years. Unless something dramatic happens, it will eventually run out of money, real estate or other assets to unload. Its situation is more dire than what's happening at J.C. Penney and Best Buy, but none seems to have the necessary ingredients for a sustainable turnaround.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Apple and owns shares of Apple.

Can Turnarounds Save J.C. Penney, Sears and Best Buy?
Car dealerships, unlike many other retailers, expect you to haggle. It's built into their price tags. So if you pay the sticker price for any new or used vehicle, basically ever, you're getting hoodwinked. When you walk into a dealership, prepare to haggle over just about everything -- the trade-in value of your car, the price of the car and extras like warranties. You'll have more leverage if you have more cash, but even cash-strapped buyers can and should negotiate.

Real estate agents expect some negotiation. But when buying a home, negotiation doesn't have to be all about price. If the seller isn't willing to come down on the price, ask for extras. For instance, ask that the seller pay more closing costs (which basically amounts to a cheaper deal for you). Or ask that the seller take care of some maintenance issues you found when you had the home inspected.

Mortgage companies will quote you a rate when you ask, but that doesn't mean you need to stick to that rate. If your credit is good (find out if it is, first) or you have a big down payment, you have plenty of leverage to negotiate a lower rate. And if you can't straight-up negotiate for a lower rate, you may be able to save by paying for points. This basically means you put more cash down for a lower rate, and, in some cases, it can save you a lot of money.
If you're renting from a landlord for the first time, rent may not be as negotiable. But if you're getting ready to renew your lease, don't just accept the now-higher rental price you're quoted. Keep in mind that it's a pain for rental companies and landlords to get you moved out, prep the property and move someone new in. Unless you're living in the hottest area in town, they'll likely lose money looking for a new renter. This means they may be more willing than you'd think to negotiate pricing.
Insurance companies usually get special rates from doctors' offices and hospitals. But those rates don't automatically apply to uninsured individuals -- or those who haven't yet hit their deductibles. If a medical bill isn't going through your insurance company, negotiate it. Often times, the doctor's office or hospital will come down on the price, so that it's closer to (or if you're lucky, even less than) what your insurer might pay.
If you're in good standing on your credit card account, you have plenty of negotiating power. You can negotiate lower rates, annual fees and higher credit limits. Even if you aren't in good standing, credit card companies can help you come up with a payment plan if you can't afford the minimum payments. You just need to ask.
When hiring someone to maintain your lawn, re-roof your home or pop out a dormer window on your second story, always get at least three quotes. And once you have those quotes, negotiate for a better price or a better deal. As with buying a home, you don't just have to negotiate for a lower price. Some service providers and contractors won't bring down the price, but they will often add in extra services for the same price -- or at least for a discount.
If you've recently gotten away from your cable or Internet company's promotional pricing, you may be in for a shock. Most of us fail to read the fine print that says just how much the service will cost after the promotional period. Before you call the company, look at the promotional offers other services in town are offering. Then, tell them you're considering switching so you can get a better deal. You may not talk them all the way back down to the promo price, but you can get pretty close.
Any time you buy big-ticket items like furniture or appliances, you should negotiate the price. This is especially true if you're buying in quantity -- for example, if you're purchasing both a washer and a dryer or an entire living room set. If the salesperson won't negotiate with you, ask to talk to the manager.
As with credit card companies, if you're in good standing with your insurance company, you may be able to negotiate for better rates. At minimum, you should ask about bundling your insurance policies to see how much that could save you. And if you notice your insurance company is running a new promotional deal that you're not in on, ask about it. The company may sign you up just for asking.
Collections calls are never fun, but they can be productive if you look at them the right way. Once an account of yours has gone to collections, that means the company has paid pennies on the dollar for the account. In other words, your $5,000 debt may have cost them $200 to take over from the original company. So a collections company may accept $1,000 for a $5,000 debt -- or possibly even less. 
Whether you're shopping at a thrift store or a garage sale, you should always negotiate the price of used stuff. You can usually buy two or three things at once to get a better deal, or just negotiate for a better price on a single, bigger-ticket item.
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION
Read Full Story

People are Reading

The Latest from our Partners
1 - 3 of 15