Fitch Ratings nailed it: calling JC Penney's (
JCP
) third-quarter results "dismal" and warning that its revenues
will fall still further. Basically, about a year after CEO Ron
Johnson unveiled his strategy for revamping the century-old
retailer to bring it into the 21st century, sales have nosedived.
Over the last five years, revenues have fallen by nearly 54%; in
the last year the decline has actually steepened. Same-store
sales plunged 26% over year-earlier levels in the third quarter,
compared to an average decline of 20% in the first two quarters
of 2012. To recoup those losses and get back to where it was five
years ago, JC Penney would need to double its revenues -
something that's hard to envisage at present.
JCP Revenue Quarterly
data by
YCharts
Too much time at Apple (
AAPL
) - which still seems unable to put a foot wrong when it comes to
marketing - may have warped Ron Johnson's world view. His intent
is to transform Penney's retail outlets into a series of
boutiques under the Penney umbrella (think a Levi's
mini-boutique, and one from Martha Stewart) and, in the process
eliminating the culture of discounting to win sales and market
shares.
"We have got to wean (shoppers) off (coupons) and educate our
consumers," insisted JC Penney executive Michael Kramer on an
earnings conference call early this year. But JC Penney's
shoppers appear reluctant to be educated. And increasingly, they
have demonstrated a clear preference to dispose of their
disposable income elsewhere.
KSS Revenue Quarterly YoY Growth
data by
YCharts
As we head toward the official kickoff of the holiday shopping
season, Black Friday, at the end of next week, it is clear that
some of the rivals poised to pick up more market share from JC
Penney are those that remain committed to aggressive discounting.
Take the case of Kohl's (
KSS
), for instance. While some of its rivals plan to open their
doors on Thanksgiving Day itself, Kohl's has raised the ante
still further by offering online "Early Bird" deals on Wednesday,
the day before Thanksgiving. That's just the latest stunt by a
retailer aimed at driving up foot traffic in stores and eyeballs
online in the all-important holiday sales period. Wal-Mart Stores
(
WMT
), for instance, plans to offer one-hour special events on
Thanksgiving Day itself, and has pledged to ensure adequate
quantities are available to meet demand during those windows.
KSS Profit Margin Quarterly
data by
YCharts
The trick for all these retailers will be to balance the
incentives - the deals - they need to coax shoppers in their
doors and stop them from turning to online retailers -- like
Amazon (
AMZN
) -- in search of better bargains, with maintaining profit
margins at a respectable level. JC Penney, clearly, has already
lost that battle, too. The only question, by the time the 2013
holiday shopping season rolls around, is how viable JC Penney
remains.
Suzanne McGee is a contributing editor at YCharts, which
includes the just-released
YCharts Pro Platinum
for professional investors.