These Big Retailers Have More to Prove for Holiday Shopping
The biggest turkey among discount department store operators last holiday season was Target. Hackers managing to steal customer information on tens of millions of charged transactions came at the worst possible time, just as the shopping season was starting to peak.
Target was forced into storewide discounts, and the result was a holiday quarter in which comparable-store sales fell and margins got crushed. The big-box retailer has been clawing its way back. It posted solid results on Wednesday with store-level sales climbing and profitability surpassing analyst expectations. It needs to keep that momentum going heading into the same telltale shopping season where it slipped last year.
J.C. Penney (JCP)
You know things are bad when you host an analyst day -- as J.C. Penney did last month -- and the stock plunges 11 percent on the day. Days after naming a new CEO, the department store chain hosted the event to tell investors that it will be able to increase sales through online initiatives and refreshing existing product categories.
Wall Street isn't impressed. Sterne Agee applauded the chain's recent cost-saving moves but feels that the turnaround has been slower in coming than it initially expected. Imperial Capital remains bearish, sticking to its uninspiring price target of $3.
J.C. Penney has had three CEOs over the past two years, and it will need a strong holiday season to prove that the third time's the charm.
Sears Holdings (SHLD)
The only thing worse than running Sears these days is having to run Kmart, too. The parent company of the two fading discount department store chains is in a funk. It has posted nine consecutive quarters of losses, and analysts see the deficits continuing through at least the next four years.
Sears has been selling off assets, but it's also running out of stuff to unload. Book value at Sears has gone from $9 billion at the end of fiscal 2010 to just a little more than $500 million today. Sales at the store level are starting to bottom out, and that's crucial. If Sears Holdings stands a chance to be around in four to five years when it has a shot at profitability, it will need to woo shoppers again. That won't be easy given the CEO's reluctance to invest in updating the stores.
It will need a strong holiday season to prove to suppliers that it will be able to live up to its end of the bargain.
Another retailer on borrowed time is RadioShack. Its holiday shopping seasons may be numbered, and it's not taking any chances this time around. It will open on Thanksgiving for the first time ever this year. The small-box seller of mobile and consumer electronics was initially hoping to be open from 8 a.m. through midnight, but a public outcry forced it to shorten its Thanksgiving hours.
RadioShack's model has been disrupted, and emphasizing smartphones and wireless services a few years ago has yet to pay off. Wall Street's eyeing RadioShack's third consecutive year of losses, and creditors are running out of patience. If it doesn't get things right this holiday shopping season, it may not have to worry about being open on Thanksgiving in the future.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. Want to make 2015your best investing year ever? Check out The Motley Fool'sone great stock to buy for 2015 and beyond.