JC Penney, Sears, Other Major Retailers Near 52-Week Lows

As the poor numbers about Thanksgiving, Black Friday and Cyber Monday pour in, many brick-and-mortar retail stocks have neared 52-week lows — unlike Amazon.com Inc. (NASDAQ: AMZN), which is near its 52-week high. Weak retailers such as J.C. Penney Co. Inc. (NYSE: JCP) and Sears Holdings Corp. (NASDAQ: SHLD) face dropping below their lows, based more bad news.

The two struggling retailers are not alone. Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT) also have traded near their lows. However, the viability of these two massive retailers is not at stake, which is a different case than J.C. Penney and Sears.

Some estimates of retail sales over the holidays put brick-and-mortar sales growth in the very low single digits. E-commerce rose as much as 14% for the same period. But online sales as a percentage of total revenue at J.C. Penney and Sears is extremely small. This is even true at retailers with heavily trafficked sites, particularly Wal-Mart. As people shop with the ability to visit dozens of retail sites each day, features like free shipping and door busters are commonplace. That leaves price as among the reasons people will buy from one retailer and not another.

J.C. Penney and Sears have at least two problems, specifically. The brick-and-mortar pie is not getting any bigger. This has driven sharp discounts, and in some cases bloated inventories. J.C. Penney and Sears may have brisk sales in some retail categories. Whether they make money on these is another matter. Even if their same-store sales rise for November and December, they could post net losses. This would not be encouraging as each approaches the sharp slowing of sales in the first quarter of 2016.

The other problem is their retail stores. They have been criticized as old and dreary. Neither company has the financial ability to make over and update hundreds of locations.

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