A note on retail - JCP

AGA7d

HD/TGT fell today on modest expectation of holiday sales, and the outlook for next year. JCP fell to near recent low of 29~ from as high as 37 a month ago. It just raised its earning's view a few days ago and the market reacted positively - for a short time of period.

It should be noted that JCP's CEO Ullman said the company will not go the route of discounting - "We believe anybody can slash their prices and do their business in the short term, but JC Penney is trying to balance its top line and bottom line". However, both WMT and TGT started to get aggressive on prices (WMT initiated and TGT followed), so there is a concern that JCP will lose market share. So far this year, most retailers have kept a lean inventory and refrained from discounting - so JCP is able to keep its sales from falling too far, only ~10%. For people who need to buy, you go where you like if the discounting are rare.

The JCP strategy will very likely to backfire in the holiday season. There will be more lean years ahead, it can not afford to lose the traffic. Middle class has been increasingly wooed by AMZN/TGT/KSS. JCP needs to stay competitive.