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Who Wants to Buy J.C. Penney? No One

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By 24/7 Wall St.

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J.C. Penney Co. Inc.’s (NYSE: JCP) board has a problem. If it wants to sell the company, in lieu of kicking out Ron Johnson as CEO, as the Wall Street Journal has reported, it may find that there is no buyer. What retailer wants a company that has lost 20% of its sales in the past year and has 1,100 aging stores? Some observers think that the J.C. Penney real estate holdings have a hidden worth. The drop in the firm’s stock price would indicate otherwise.

It might be argued that J.C. Penney is a bargain. Its market share is $3.3 billion. Its annual sales run rate is almost $13 billion. It lost “only” $985 million last year, but the rate of those losses has accelerated.

The most obvious reason that J.C. Penney could be attractive to another large retailer is that many of its 1,100 stores have to be losing money. If those stores are shuttered, losses should abate. But the number of stores is a problem secondary to the merchandising and marketing plans put into effect by CEO Ron Johnson. The failure of those may be hard, if not impossible, to reverse.

No successful retailer will buy J.C. Penney. Better-run companies like Macy’s Inc. (NYSE: M)and Nordstrom Inc. (NYSE: JWN) have settled on optimal store locations and store numbers. None of the investors in these public corporations want to see management take a long shot at J.C. Penney.

The only possible buyer of J.C. Penney is Sears Holdings Corp. (NASDAQ: SHLD), which was built by an ill-advised combination of the Sears and Kmart brands. However, controlling shareholder and CEO Eddie Lampert has continued his commitment to middle-tier national retailing. It would be monumentally difficult to put J.C. Penney together with Sears and Kmart. Likely such a combination would involve the closure of hundreds of stores, as well as logistical nightmares. But Lampert has the guts of a high-stakes gambler. The Sears Holdings experiment has been a failure. Another retail combination is a long shot, but it may be his only way out of a severe dilemma.

Even Lampert may believe J.C. Penney is too much of a risk, though. That leaves the J.C. Penney board without options.

Filed under: 24/7 Wall St. Wire, Mergers and Buy Outs, Retail Tagged: JPC, JWM, M, SHLD

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Online Risk for Brick & Mortar Apparel and Footwear Hits Critical Mass

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By 24/7 Wall St.

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If you have been a fan of the Internet since the mid-1990s or even the late-1990s, you have seen a massive change of how the Internet is used and how real-world companies have had to adapt to compete against virtual companies. One big risk for brick and mortar retailers going to back to the dawn of eCommerce was that was present was when the public gets comfortable enough and familiar enough with the process of storing credit card data online and getting to have their goods delivered without ever leaving their desk. Now that is the case, and it may be a from a smartphone.

Moody’s has issued a report showing that the surge in online sales prompts a rethink among apparel retailers. The report is even titled “Apparel Retailers at the Crossroads.” It has long been thought that apparel might be immune to online sales cannibalization. After all, what do you do when you have a return because that size-8 dress or that size-10 shoe doesn’t fit the way you hoped it would? Moody’s is signaling that the crest has reached the apparel market now.

We want to stress one issue to our readers before we get into the Moody’s report today. If a clothing or apparel retailer thinks they are immune to the web, they need to consider the lessons learned by Best Buy Co. (NYSE: BBY) after getting cannibalized by Amazon.com Inc. (NASDAQ: AMZN). The thought ten years of ordering large flat panel TVs and high-end computing online was difficult to endorse as a mainstream trend. It is commonplace now, and some accuse the Best Buy stores of being physical showrooms for shoppers to do live price comparisons on Amazon. Now consider that the footwear and apparel segment is at the 10% mark of market share when it comes to online sales and consider that Amazon.com now sells almost everything including apparel.

Back to Moody’s…

Moody’s noted, “Online sales now exceed 10% of all apparel and footwear sales in the US, which means retailers face some strategic decisions… We estimate that in the US online apparel and footwear sales will top $40 billion in 2013 and $45 billion in 2014. The online channel is now a crucial driver of growth for clothing and footwear retailers, to the benefit of the entire sector.”   The outlook is simple here: department stores and specialty apparel retailers must make some critical strategic decisions around store counts, marketing and how they spend their capital if they are to remain relevant over the long term! Step back a few words here: RELEVANT!

Margaret Taylor, the Moody’s VP in charge of the report, projects that the companies which invest in technology, fulfillment capabilities and inventory to provide a seamlessly integrated store and online shopping experience will benefit the most from increasing online sales. There is also the warning that these companies need to invest in in-store efforts and branding to fend off the online threat.

Taylor considers department stores such as Nordstrom Inc. …read more
Source: FULL ARTICLE at DailyFinance