Traditional Retailers such as J.C Penney and Kohl’s is now in Jeopardy

Published on: 09 Jan, 2020

Kohl's (NYSE: KSS) and J.C Penney (NYSE: JCP) is a traditional American department store retail chain. It was announced that the traditional brick-and-mortar retailers struggle to compete with record-breaking online shopping between Thanksgiving and New Year’s Day, according to Reuters.

Due to the decline in mall foot traffic has led to a decrease in sales through what has traditionally been the company's predominant retail channels, The Menomonee Falls, Wisconsin-based department store operator’s shares fell 8% as it posted a 0.2% drop in comparable sales in November and December. Kohl’s had also announced that they would be partnering up with Amazon, allowing customers nationwide to buy and return products such as Echo dot speakers at its stores. J.C Penney has also encountered a 7.5 % drop for the nine-week period ended Jan, 4, sending shares down 2.5%.

“E-commerce is definitely compromising the competitiveness of the physical assets of retailers,” CFRA Research analyst Camilla Yanushevsky said. “Amazon, Target and Walmart are really big names in this space and have squeezed out a lot of the little guys.”

Penney’s Chief Executive Officer Jill Soltau has shifted Penney’s strategic priorities to refocus on the retailers’ once-thriving, higher-margin apparel business rather than major appliances and limit furniture offerings.

Analyst Yanushevsky said such “heightened financial vulnerabilities” at Penney make the retailer’s tweaked strategy fraught with risk. “We think it will continue to be a significant drag to any turnaround.”

Data from credit card companies such as Mastercard also have shown a rise of 18.8% during the period of Nov.1 through Christmas Eve, while overall holiday retail sales only rose 3.4%. This past November, Kohl’s also cut its annual profit forecast by at least 40 cents per share to $4.75 to $4.95, balming weakness in its women’s apparel business back then.

Victoria’s Secret owner L Brands (LB.N) on Thursday lowered its profit forecast for the fourth quarter after reporting a 3% drop in comparable-store sales for the holiday period, but its shares rose slightly.

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Bryan Shin

Email: Bryan@financialinsiders.com

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