as part of our
Here is a headline that should come as no surprise to anyone: "
Turnaround in Doubt as Sales Plummet," CNBC, November 9, 2012.
Big shock. JCPenney has been a company struggling to find
direction for the past twenty years. The company is a
"tweener" that had a hard enough time competing with the likes of
Wal-Mart (NYSE:$ WMT)
Target (NYSE:$ TGT)
on the low end and with
Dillard's (NYSE:$ DDS)
Macy's (NYSE:$ M)
at the mid-range price point
the internet revolution. But now that the company has to
compete with established internet retailers like
Amazon.com (Nasdaq:$ AMZN)
and every up-and-coming online retailer as well.
To put it bluntly, JCPenny is toast. For a long-term play
almost guaranteed to make money, you could consider shorting it and
waiting for it to eventually go belly up. But that's not what
I want to discuss today. Instead, I want to recommend that
readers pick up shares of Wal-Mart.
Consumer sentiment is improving-Reuters reports that it just hit
a five-year high-yet with the dreaded fiscal cliff looming in the
wake of the presidential election, I expect consumer to be looking
for bargains in their Christmas shopping this year.
This is bullish for low-cost internet retailers, of
course. Yet with Amazon.com and other major online players
now forced to levy sales taxes, the cost differential with "bricks
and mortar" retailers isn't as wide as it used to be.
And this brings me back to Wal-Mart. In addition to
running the largest chain of retail stores in the world by sales,
Wal-Mart is aggressively jumping into Amazon's territory with an
expanded online presence. It may be years before Wal-Mart is
able to effectively compete with Amazon in the online sphere, but
Wal-Mart's massive physical presence does give it one unique
advantage over Amazon that I expect to be significant over time:
the avoidance of shipping costs. As an example, I recently
dropped several hundred dollars buying my son a tree house.
Wal-Mart's price was roughly equal to Amazon's, yet I was able to
save nearly $300 in shipping costs due to my option of picking up
the boxes at my local store (alas, it has been two weeks and I am
still trying to assemble the @#$&ing thing, but that is another
story for another article).
Wal-Mart trades for 13 times next year's expected earnings and
yields a reasonable 2.2% in dividends. I consider this a
stock that you can buy and hold for at least the next 1-5
Disclosures: Sizemore Capital is long WMT. This article first
appeared on TraderPlanet.
The post JCPenney is Toast: Wal-Mart Wins Among Retailers
appeared first on Sizemore Insights.