Shares of retail turnaround candidate J.C. Penney Co. Inc. (NYSE: JCP) have fallen 28% in the past three months, a sign that investors have given up on its holiday sales prospects. Wall Street has good reason for the opinion.

Some investors were optimistic about J.C. Penney’s prospects when the company announced same-store sales had risen by 6.4% in the quarter that ended October 31. As part of its full year outlook, the retailer forecast same-store sales higher by 4% to 5%. None of this gets J.C. Penney even close to where its revenue was before a collapse three years ago. Any recovery is only a modest gain on long past success.

In its 2012 fiscal year, J.C. Penney’s revenues were $17.3 billion. Its most recent trailing 12-month average is $12.5 billion. These setbacks were in a period in which department store and big-box retailers pressed to raise U.S. sales. Many did. And over the same period, Amazon.com Inc.’s (NASDAQ: AMZN) revenue growth has been spectacular. It expects revenue in the holiday quarter to be up as much as 25% to $36.8 billion. Its revenue in 2012 was $61.1 billion. Over the most recent trailing 12 months, that number has risen to just over $100 billion.

The fact of the matter is that same-store sales growth of 5% barely keeps J.C. Penney in a game that continues to be dominated, along with Amazon, by much larger retailers, like Target Corp. (NYSE: TGT) for example. Target has 1,800 stores in the United States, compared to J.C. Penney’s 1,060. Target’s revenue yield per store is much higher than J.C. Penney’s. This is a clear sign of retail efficiency. Target also has a great deal more money for marketing.

Whatever gains J.C. Penney makes over the holidays cannot pull it out of its position as a second-tier department store in an industry in which the companies are at war with one another and Amazon.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.