"Is there any point to which you would wish to draw my attention?"
"To the curious incident of the dog in the night-time."
"The dog did nothing in the night-time."
"That was the curious incident," remarked Sherlock Holmes.
-- The Adventure of Silver Blaze, by Sir Arthur Conan Doyle
For some super-sleuth analysts, J.C. Penney's (JCPN.Q) November same-store sales report was akin to the dog that didn't bark. The update was curious, not so much for what it said, but rather what it didn't say.
The retailer recorded a big 10.1% jump in comps for the month that included just as big Thanksgiving and Black Friday promotions, seeming to confirm Penney's promise that the fourth quarter would be positive. After walking up to the very edge of the precipice, the department store looks like it's stepped back from the brink.
Yet, analysts were almost uniformly underwhelmed by the numbers and, yesterday, the retailer's stock slumped 4.5% after the markets digested the news. The problem, it seems, is that a 10% increase after a near-death experience is not such a big deal.
Last year was absolutely horrendous for Penney; with Wall Street anticipating double-digit increases in same-store sales, it was hardly praiseworthy that the company just squeaked in under the wire. It might have also been going up against one of the weakest points of comparison because last year's numbers were affected by Hurricane Sandy.
Moreover, the department store didn't say what traffic was like in its stores, and whether it was moving higher, but left it to CEO Myron Ullman to remark that both traffic and conversion were merely "exciting." Considering that October witnessed a 0.9% increase in comps, but a drop in traffic, an ambiguous statement like Ullman's is a wide-enough chasm for analysts to drive a truckload of doubt through.
Yet, Penney is doing at least as well as rival Kohl's, which, while not giving out monthly comps numbers, did have a disappointing third quarter that saw it miss top- and bottom-line estimates. Macy's also doesn't release monthly same-store sales, and though it's in a much better financial position than its rivals, it still felt enough pressure to open its doors on Thanksgiving Day, and has been just as promotional.
What might be more troubling to analysts is that, because Penney was pushing hard to make its numbers look good, and the period encompassed a holiday that saw retailers everywhere pulling out all the stops, it may have given away the store to encourage shoppers to visit, leaving margins to take a hit.
Penney began the month with its "Biggest Sale of Them All" promotion, and ended it with the start of the Christmas shopping extravaganza, so it's a safe bet that margins will be weak. But it's further proof that Ullman was serious when he said he was bringing back the doorbuster sales policy that his predecessor had abandoned. This puts the retailer in that damned if you do, damned if you don't position: criticized for not catering to its customers' desires, and knocked down now for giving them what they want.
To be sure, Penney provided a lot more color behind last month's update than it did this time around, but it did note that its e-commerce efforts were running well ahead of last year, and was in line with what it saw in October when it reported gains of 37.6 % over the year-ago period.
It should also be noted that, because Thanksgiving came so late in the month this year -- November ended just one day after Black Friday -- there was actually nearly a week's worth of shopping left in the month in 2012 compared to this time around. That's going to lop off a nearly equal amount of Christmas shopping days across the whole period, which explains why retailers are frantic; but it also indicates that J.C. Penney's dog may have barked after all.
