Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Kohl's Is Starting to Make J.C. Penney Look Good

Another troubled department store chain, another depressing look at the Christmas shopping season. 

Kohl's (NYSE: KSS  ) updated its fourth-quarter guidance Thursday and said same-store sales tumbled 2% for the three-month period, meaning it would have to lower earnings-per-share estimates from $1.59-$1.74 to approximately $1.53. Considering comps barely inched 0.8% higher for the all-important November-December Christmas holiday, it makes the results that J.C. Penney (NYSE: JCP  ) posted look positively robust in comparison.

Like its fading rival, Kohl's is struggling to overcome a persistently sluggish economy, and people are finally waking up to it not being as strong as previously thought: high unemployment, a lack of new-jobs creation, real disposable income plunging the most in 40 years, median household incomes falling for five straight years, total consumer debt now 22% higher than it was three years ago, and student loan debt 61% higher.

Needless to say, the middle class is getting slaughtered, and these are hardly conditions conducive to recovery. Mid-tier retailers like Kohl's and Penney are being taken down with them.

Yet Kohl's is laying a lot of blame for the poor quarter on January store traffic. Without enough clearance merchandise to put out on sale, customers failed to show up as expected, which compounded problems it apparently experienced with its new e-commerce site that caused it to have higher-than-expected expenses. Full-year earnings are now anticipated to come in at $4.03 per share, compared to its previous forecast of $4.08 to $4.23 per share.

The retail landscape is desolate. J.C. Penney was going up against some of the easiest comps in its history and managed to just squeak out a 2% increase for the quarter and a mere 3% rise for the two-month holiday period. Best Buy reported a near-3% drop for the nine-week period, while Sears Holdings comps were down a whopping 9%. Others including Wal-Mart warned of a slow quarter with lower same-store sales expected, RadioShack will be shuttering 500 stores, and even the more financially fit Macy's will be implementing a similar store-closing strategy, albeit on a smaller scale (and its comps for the period were 4% higher).

I've been warning investors for months to stay away from retailers because it was clear early on that their numbers were going to come in much worse than expected, and now the shoes are dropping all over the sector.

Yet the woes being experienced by Kohl's are much more dire, if only because it was thought to be in a much better position than Penney, one where a turnaround effort would take hold. Yet for all the buoyancy the retailer was exhibiting, I warned that Kohl's was simply following Penney's failed playbook. Like its rival, it brought in an outsider to shake things up, made a push for national brands while eschewing in-house favorites -- a move Penney was condemned for doing, by the way -- and introduced random technology flourishes to spice things up. Apparently, all for naught. At least Penney was able to say its numbers were positive for the first time in two years.

The results of the experiment were nothing if not predictable, and all Kohl's has to show for its effort is that J.C. Penney looks good in comparison.

A retail rags-to-riches-to-rags story
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

Read/Post Comments (3) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 09, 2014, at 1:06 AM, cincinnati wrote:

    Kohls fashions for women have become very dowdy and old. A lot of their merchandise looks recycled from past seasons. The clothes they could not sell. Penney;s is starting to have better fashion choices in all departments.

  • Report this Comment On February 09, 2014, at 1:00 PM, thedawg60 wrote:

    I thought i hear say that JCP,was bringing back St.John's Bay which would be a very smart move for em.Was thinking with all this going on about JCP Sears.Hows Dillards Macy's and Kohls among others was stacking up.Becos if it affecting a couple the others have to be in the same boat as well.Just my 2 cents

  • Report this Comment On February 10, 2014, at 8:54 AM, njtmia wrote:

    I agree with Cincinnati that Kohls brings out crap to clearance that I have never even seen in the store before. Their prices have gone up and the once good buys you could get no longer exist there.

    JCP could come down off its high horse and get a little real also. There home store sucks!

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2829013, ~/Articles/ArticleHandler.aspx, 9/1/2015 3:56:41 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.


Today's Market

updated 6 hours ago Sponsored by:
DOW 16,528.03 -114.98 -0.69%
S&P 500 1,972.18 -16.69 -0.84%
NASD 4,776.51 -51.82 -1.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/31/2015 4:01 PM
JCP $9.11 Up +0.17 +1.90%
J.C. Penney Compan… CAPS Rating: *
KSS $51.03 Down -0.69 -1.33%
Kohl's Corp CAPS Rating: **