Barbara Thau, Contributor
That’s because it challenges conventional wisdom about one retail darling as well as two of the sector’s regular punching bags.
But hold your horses: A “hit,” in this context, refers to a retailer that is poised to show a palpable improvement over its holiday 2012 performance. Conversely, a retail “miss” might be assigned to a merchant that is generating top-line growth, but where mounting challenges are bubbling beneath a gleaming surface.
Hit: J.C. Penney
J.C. Penney — the retailer that has been bludgeoned by pundits, the press and consumers alike, as its sales plunged due to the radical “no-sale” strategy of its now ousted CEO Ron Johnson — is turning a corner, according to CEO Mike Ullman.
Two-thirds of the 30 things that needed to be fixed at the chain when Ullman returned as CEO seven months ago “have been fixed,” he told Women’s Wear Daily last week. These included bolstering the department store’s financials, as well as restoring both the coupons and private brands Johnson had nixed.
Now Ullman is crossing his fingers that the changes will ring up registers this holiday.
In a bid to steer clear of Penney’s dismal results last year, when fourth quarter sales plummeted 32%, the chain is going gangbusters with promotions, coupons and doorbusters. “We want to be aggressive. We want to win more than our fair share, we gave up more than our fair share,” Ullman told WWD.
Miss: Amazon.com AMZN -0.8%
Could the darling of the retail sector start to show some wear and tear this holiday selling season?
Amazon continues its expansion binge, throwing money at everything from new warehouses to spreading its wings into uncharted product categories ranging from art to groceries, after taking on fashion and beauty recently.
But while its top line continues to soar, there are signs that the retailer’s stubborn failure to post a profit could start to finally take its toll.
And this holiday season, Amazon will, for the first time, be stripped of a longtime advantage over brick-and-mortar retailers: The etailer must now collect sales tax from consumers on purchases in many states, which dampens its low-price appeal.
What’s more, some retail observers suggest that Wall Street’s patience with the online giant’s no-profit model might be wearing thin.
Although Amazon is often described as the Wal-Mart of the web, the difference is that Wal-Mart always turned a profit, according to Seeking Alpha contributor Jim Sloan in his post this week, “Why Amazon Belongs In The ‘Too Hard’ Bucket List.”
“Wal-Mart always made money,” said Sloan, having studied Wal-Mart’s annual reports dating back to 1970.
“It always had earnings and a small dividend. The earnings, cash flow, and margins were enough to be the basis for real measurement,” Sloan said.
Hit: Best Buy BBY -5.33%
Last year I said that Best Buy was fighting obsolescence, battling what seemed like an ultimately concept-killing, losing battle with lower priced online behemoth Amazon.
What a different a year makes: While it’s still not out of the woods, Best Buy has been buoyed by new CEO Hubert Joly, who’s made some bold moves.
Perhaps the most seminal one is making last year’s holiday ploy to match competitors’ prices a permanent policy.
Best Buy, which last quarter posted its first quarterly profit in a year, just might pull off a respectable holiday 2013.
The retailer has even gone as far as to embrace showrooming — when shoppers browse a brick-and-mortar store for an item, only to later buy the product online for less — a practice analysts said just a year ago would hasten Best Buy’s demise.
The chain’s holiday campaign, dubbed, “Your Ultimate Holiday Showroom,” cheekily invites shoppers to engage in the practice, and in theory, then make a purchase in the store.
“A year ago, people said that showrooming would kill Best Buy,” Joly told the Wall Street Journal. “I think that Best Buy has killed showrooming.”
Miss: Coach COH +1.04%
During the Great Recession, the luxury merchants were the most resilient patch of the retail sector.
But now Coach, for one, is struggling. And the handbag merchant’s sales and market-share declines are poised to continue through the holiday selling season.
At Coach, which has been building up its discount business, closing several full-price stores and opening more factory outlet stores, “comp-store sales have been down in the mid to single digits in the past two quarters, and their guidance is down for the next three quarters,” Matthew Jacob, senior leisure and travel analyst for ITG investment research, told Forbes at a retail holiday preview lunch.
Coach has been grappling with sluggish sales in its core handbag market overall, as well as the fierce encroachment of a rising competitor: Michael Kors. Although Coach still dominates market share in handbags, “Kors is growing comps at 20%,” Jacobs said.
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Indeed, Kors has enjoyed 30 consecutive quarters of comp-store sales growth.
Factors such as a strengthening position in the global luxury market, a robust licensed watch and jewelry business, the conversion of Kors’ department store presence into branded in-store boutiques and a hit fragrance launch contributed to Michael Kors Holdings’ double-digit sales and earnings gains in the second quarter ended September 28.
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