The battle for middle-class wallets is a double-edged sword. The market is huge, but there are lots of people vying for middle-class America's attention.
We can't go into all of the competitors in the space of this discussion, so I'm going to take a look at a few names whose November sales releases caught my attention. The list will include J.C. Penney (NYSE:JCP), Kohl's (NYSE:KSS), and Dillard's (NYSE:DDS). I would have included Sears Holdings (NASDAQ:SHLD) in the mix, but Chairman Eddie Lampert decided to forgo offering monthly updates. While I understand his motivation for cutting the reports -- one reason being that he wants to make sure his investors evaluate the company as a long-term investment, just as Warren Buffett has done with his own company -- it makes for a bit less of an article. Thanks for screwing things up, Mr. Lampert!
|
Nov. Sales |
Nov. Same-Store Sales |
CAPS Outperform Ratio | |
|---|---|---|---|
|
J.C. Penney |
3.3% |
1.4% |
93% |
|
Kohl's |
12.4% |
3.7% |
88% |
|
Dillard's |
(2.0%) |
(3.0%) |
41% |
From this table, we see solid, steady performance from J.C. Penney, some declines at Dillard's, and growth at Kohl's. While we don't know exactly what's happened this month at Sears, we do know that the company has been going through a capital rationalization process. Sales and same-store sales both decline during such a process, as a company closes underperforming stores and revamps other ones.
You'll also notice a column in that table about what investors in our new Motley Fool CAPS think of these companies. Clearly, they like J.C. Penney and Kohl's, and if you want in on the discussion, you can join CAPS for free. To the credit of our CAPS participants for spotting winners, both companies have handily outperformed the S&P 500 index. That's because margins and returns on invested capital continue to increase at both companies. When that happens, they create value for shareholders, and stock prices tend to rise.
On the other hand, our CAPS players didn't peg Dillard's quite right. Despite its one-star CAPS rating, it, too, has handily outperformed the benchmark. Sure, it's not growing its square footage, but performance has been improving slightly. However, I have to admit that I would have missed this one, too, because I am not about to invest in a company that generates a meager 5.7% return on invested capital (according to Capital IQ) unless I were confident in seeing a way it would rise in the future.
The problem with these companies today is that healthy expectations seem to already be built into their share prices. That means we have to wait for better bargains to come along. Sears is the wild card in the group, since it has a real option associated with it: Eddie Lampert's investing prowess. That kind of wild card can be tough to value, but it does bode well for its future.
To read more about these retailers, check out the following articles:
Want to express yourself on these retailers -- or any other stocks? Join your fellow investors in CAPS, and let your voice be heard.
Retail editor and Inside Value team member David Meier is ranked 175 out of 14,862 in CAPS and does not own shares in any of the companies mentioned. You can view his TMF profile here. The Fool takes its disclosure policy very seriously.
