Oil prices appear to be stabilizing and while stocks took a hit in trading yesterday, many of the consumer goods quarterly earnings reports, expected to be a disaster are exceeding analyst expectations. These factors could be great news for retail which has been chugging along impressively considering the tough landscape. Considering the admirable performance of several stocks within the retail sector through recent market turmoil and energy prices gobbling up consumer spending dollars, more stable variables and solid growth plans could mean a boost in share prices.
Among the stores have shown promise this year amidst tough times is Macy’s (M). Macy’s is up nearly 20 percent since April but with the things looking slightly more hospitable right now, atleast in terms of the amount households are spending on energy, that number could continue to climb. The company has been benefitting from an improved balance sheet and strategic execution and growth. Same-store sales for the company in the first quarter were 7.4 percent higher as a consequence of their efforts. Simultanesouly, Macy’s employed its rich cash flow to minimize debt and maximize value to the share holders, boosting dividends by 100 percent.
As a result of its higher sales and improved dividends, Macy’s has been upgraded by both the S&P and Moodys. Moodys has awarded Macys a positive outlook after a considerable time when the stock was considered essentially untouchable. That attitude, in spite of improvements keeps the stock inexpensive. Macy’s has a P/E ratio of 12.40.
JC Penney (JCP) is another company in this category, but unlike Macy’s, JC Penney has a new member of its team that has rallied investor optimism. Ron Johnson, formerly of Apple (AAPL) has been hired to be the company’s new CEO. Prior to Apple, Johnson logged years a high level retail executive at Target and has seen success in both of these endeavors. As a result of an expectation that history will repeat itself shares of JC Penney have shot up 17.5 percent since the announcement. Even with the boost in share prices; however, J.C. Penney has faltered in its recovery much more than many of its competitors.
It still faces an upward climb, but as a result of long-deflated share prices, there is still a long way to go to reach pre-recession JC Penney and thus a large margin for early investors to gain. Johnson at the helm could help the company reach these goals.As a low-price retailer, J.C. Penney faces considerable pressure to keep prices low against places likeTarget, which is more of a one-stop shop and has become increasingly hip with its offerings. The cool factor of Target, with its red and white emblem, excellent advertising campaigns and flow of satellite designers have helped the company gain more attitude and press time all help Target capture more market share. Meanwhile, JC Penney, in spite of its Olsen Twin designed line, has changed little in the past years and Johnson could be the person to help it update itself. After all, Apple is highly reliant on its cool factor and its brand is well cultivated.
Johnson, who opened 300 Apple stores, could help the company develop a stronger web presence, redefine the identity they lost during the recession and perfect inventory control to insure correct product pricing.
Tiffany & Co. (TIF), the company that is known for the crème-de-la-crème of diamonds seems like no place to put your money during a “soft patch” and yet, the stock, alongside the number of millionaires, is rising. The ritzy jewelry retailer is up nearly 12 percent in the last month and has offered up double digit growth-projections for both sales and earnings. Additionally, it should be noted that the little-blue box is not notoriousonly in th United States but overseas in Asia where the wealth is rising steadily and society becomes increasingly consumer driven. These factors alongstore its improved same store sales and 10 percent same-store growth estimates for next year, make this look like a promising investment. Sales are expected to be 15.90 percent higher for 2011. Earnings for the company are projected to grow by 21.20 percent this year and 14.60 percent in 2012. That trajectory is expected to continue for five years.
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