Tag Archives: Macy`s

J C Penny are declining alongside other big name retailers like Macy`s that reported a disappointing gross margin outlook

The competition in the retail market is huge. Just look at J C Penny. That stock has plummeted. It peaked in February 2007. Right before the financial crisis it peaked at $85, and now the same stock can be traded for $2,41. What a ride.

J C Penny is not alone. Swedish H&M is in the same boat. The stock peaked in February 2015, but the journey from 363 SEK to 125 SEK is huge. They both need to change their strategy as soon as possible as online retailers are flooding the market all around the world.

J C Penny was founded in 1902 by James Cash Penny and William Henry McManus. That`s 116 years ago. It is an American department store chain with 850 locations in 49 U.S states, and Porto Rico.

The company has been an internet retailer since 1998. It has streamlined its catalog and distribution while undergoing renovation improvements at store level. Competitors like Alibaba, Amazon and Ebay will push their prices down. So will competition from Wal-Mart, Kohls, Macys and Target.

The arrows are going in the opposite directions. Prices and lower margins are going down while house prices are going up. Internet retailers can afford to push down the prices because they don`t have any stores.

With 98,000 employees and growing wages it speak for itself. On January 15, 2014, the company announced it was closing down 33 underperforming stores and laying off 2,000 employees. A year later, they announced that they would close 39 underperforming stores nationwide and layoff 2,500 employees and the trend has been going since then.

In May 2018, the company reported an adjusted loss of $69 million in the first quarter and lowered its projections for the year. Sales fell 4 percent.

Earlier this year, J C Penny announced it would cut 360 jobs at its stores and corporate headquarters. They lowered its earnings forecast for the year to 13 cents per share at best, and said it can lose as much as 7 cents.

J C Penny finished the quarter with just $181 million in cash, which is down from $363 million a year ago. Much of the big decrease was because of a $190 billion debt replace. Not only that; in May, they announced resignation of their CEO Marvin Ellison.

Gross margin has declined significantly since 2016, but the U.S Census Bureau reported strong retail sales growth in May and June which can be positive for J C Penny. Sales at departments stores increased 1,8 percent YoY in May and were flat in June.

I said it many year ago; the retailer market is dead. Just look at the trend. Retailers must wake up before they end up like Radio Shack. New business models must be developed and there is no doubt that a few of them will win at the end.

It will be an enormous wild ride for the JCP stock from start on Thursday.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Michael Kors opened 34 new stores last quarter while foot traffic are declining

Michael Kors peaked in early 2014 and have since then declined in month after month. The stock is trading at about $42 on the last day of May 2016. The outlook for luxury goods has been very disappointing and it still is.

It seems like the consumer spending has been transitioning away from luxury goods to technology and experiences such as food and travel. Michael Kors is a strong brand and still has a strong appeal to the consumers, but the luxury space is struggling to come back.

 

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Long investors think this is a short blip and that the stock will come back, but many people out there belive what we see right now is the new normal. The market for luxury goods have been very disappointing so far this year.

British luxury brand Burberry has declined, and they blame on weak demand in Hong Kong and a drop in tourist spending in Europe. Gap Inc is not better, and their performance can be an indication of incredible softness in the retail industry worldwide.

Nordstrom is also removing Michael Kors handbags from its stores at a rapid space, according to a report from Wedbush. Managers at Nordstrom said declining interest from shoppers for MK products led to the decision.

Not only that. Macys is offering discounts on MK handbags due to oversupply. Furthermore, both Nordstrom and Macys reported weak Q1 earnings due in part to a drop in foot traffic at stores. Just like last year, 2016 will be a challenging year for luxury goods.

Luxury goods sales are expected to rise about 3,5%, from $317 billion to $328 billion.

So far this year, we have also seen losses from luxury retailer Tiffany`s, setting the stage from weakness from Michael Kors, Vera Bradley, and Lululemon over the next week. In an effort to drive top line growth, MK has focused on opening new stores.

Last quarter the company opened 34 new stores, consisting of 15 in the United States and the rest in International markets.

While the new stores will increase operating costs and contract margins, they should help generate higher revenue in the near term.

Global stores should continue to see adverse impacts from weak currency conditions. Regardless, MK continue to deliver positive growth in key financial metrics including revenue, net sales, profits and net income.

The Estimize consensus is calling for earnings of 98 cents per share on $1,156 Billion in revenue, 2 cents higher than Wall Street on the bottom line and right in line on the top. Since the holiday season earnings estimates have fallen 3% while revenue has dropped only 1%.

Year over year comparisons are now projecting a 9% increase in profitability with sales anticipated to grow 11%.

Michael Kors is expecting to report on June 1, before the open.

 

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Wal-Mart have huge challenges

Wal-Mart is an interesting case. While the stock market have plummeted, Wal-Mart have been strong so far in 2016. Up over 8%. Wal-Mart announces earnings on Thursday and what can we expect from a retailer with so many challenges in the market right now?

Estimize calls for EPS of $1,45, which is one penny lower than Wall Street. Revenue expectations of $130,513B are greater than the Street`s consensus of $130,461B. Revenue estimates have fallen by almost $1B in the last 3 months.

This quarter it is expected to post a 10% decline in EPS YoY, with revenue estimated to fall 1%. Declining expectations have to do with guidance Wal-Mart gave in October, lowering FY 2015 guidance and claiming YoY sales growth would be flat due to wage hikes and FX headwinds. WMT

Wal-Mart have 11,600 stores and know that the market have changed to a more difficult retail climate. Wal-Mart said in January that it will close 269 stores worldwide, but it also said that in the next year it plans to open about 140 new stores nationwide.

In the U.S, Wal-Mart will also shut down all 102 Wal-Mart Express locations, which is a pilot program that started five years ago. It will close 23 Neighborhood Market locations, 12 Wal-Mart supercenters, 7 stores in Puerto Rico, 6 discount centers and 4 Sam`s Clubs.

Many claims that Wal-Mart have strong competitions from Amazon, and Wal-Mart said it will focus more on e-commerce and expanding pick-up services for customers. The retailer will open 50-60 new Supercenters, 85-95 new Neighborhood Markets and 7 to 10 new Sam`s Clubs across the U.S in fiscal 2017.

The retailer was a leader in grocery sales from mid-1990s to 2000s. Grocery still makes up about 55% of its revenue.

Wal-Mart`s ”click and collect” concept, where customers can order online and then get their merchandise at the store, give the workers more fear that this could be the beginning of more cuts in the future.

A big surprise for many was Wal-Mart`s announcement to raise base wages for its U.S workers. Wal-Mart is a cost-conscious retailer and it raised hourly wages to a minimum of $9 last April, and is set to bump them up to $10 this February.

The federal government has not raised the minimum wage since 2009 when  it lifted it from $2,15 per hour to $7,25 per hour.  Some cities are planning to raise wages to $15 per hour.

Wal-Mart is not the only one to close its stores. Sears Holding Corp will close a number of Kmart stores, while Macy`s will close 40 and cut 4,800 jobs. E-commerce and an improved superstore experience are growth drivers for Wal-Mart, but wages can be a challenge in the future.

Amazon are more efficient and generate $650,000 in revenue per employee. To compare, Wal-Mart generate $220,000 and this is a disadvantage for Wal-Mart with 2,2 million employees vs Amazon`s 154,000.

The average employee at Costco makes $21 per hour, so Wal-Mart have a lot of challenges now.

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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