Sears' death will benefit these 3 retailers – The Motley Fool

Sears Holdings (NASDAQ: SHLD) recently filed for bankruptcy protection and announced the closure of nearly 200 stores by the end of the year. Sears still hopes to operate at least 400 stores in the future, but their fate remains uncertain as the company undergoes a painful restructuring to ease its multi-billion dollar debt.

The bankruptcy of Sears had been telegraphed several years ago, while the retailer was faced with the decline in traffic in shopping centers and the stiff competition of supermarkets and stores. Amazon.com (NASDAQ: AMZN). Between 2007 and 2017, Sears' annual revenues increased from $ 50.7 billion to $ 16.7 billion, and analysts expected a further 26% drop this year.

Measures such as cost reduction, store closures and asset disposals have not helped raise the bar, and CEO Eddie Lampert has spent billions buying back instead of reinvesting. money in distressed stores of Sears Holdings or expand its online presence. By the end, Sears had become an empty shell.

On the plus side, the fall of Sears could help other distressed retailers. Here are the top three companies likely to experience increased sales: J.C. Penney (NYSE: JCP), Kohl (NYSE: KSS), and Macy & # 39; s (NYSE: M).

J.C. Penney

J.C. Penney is often compared to Sears, but the first is in much better condition than the last. J.C. Penney continues to operate more than 860 stores in the United States and Puerto Rico and can easily cover the current maturities of its long-term debt. Unlike Sears, which has struggled with double-digit comparable store sales for years, J.C. Penney expects his compositions to remain pretty stable this year.

However, J.C. Penney is also facing slow traffic in shopping malls and lacks a significant moat against Amazon and Walmart. Recent moves by Amazon in private label clothing pose a particularly notable long-term threat to J.C. Penney's clothing sales. J.C. Penney also had difficulty with a series of departures in C-suite – who briefly left the company without a CEO or CFO – before Jill Soltau held the position of CEO at the beginning of the month

Despite these difficulties, J.C. Penney is expected to inherit many customers that Sears and Kmart will leave behind. Many JCPenney stores are located in the same malls as Sears stores, and the retailer's focus on homeware items (led by former CEO, Marvin Ellison) could attract some homebuyers. Sears.

2. Kohl

Kohl's is doing much better than Sears or J.C. Penney in the low-end retail market. The diversified retailer has posted positive positive results over the past four quarters and is forecasting sales growth of 0.5% to 2% for the year.

Last quarter, Kohl's attributed its continued growth to a vigorous demand for men's, women's and children's clothing, footwear and accessories, offsetting a slight decline in household products sales. She also said that her focus on timeliness, product location and inventory reduction had boosted store traffic and allowed gross margin expansion.

Kohl's operates more than 1,100 stores in the United States and has recorded sales growth in all regions last quarter. Sears regards Kohl's as one of its major competitors. As a result, closing nearly 200 Sears establishments could send more customers to Kohl's stores.

3. Macy's

Macy's has posted positive sales growth over the past three quarters. For the full year, staff numbers are expected to increase by 2% to 2.5%, including approved departments. It's a pretty rosy prospect compared to his industry peers.

The last quarterMacy's has posted strong sales in its eponymous stores, Bloomingdale's and Bluemercury. It also benefited from the ongoing expansion of its Backstage off-price concept. The company operates approximately 690 Macy's and Bloomingdale stores, as well as more than 170 specialty stores such as Bloomingdale's Outlet, Bluemercury and Macy's Backstage. Macy's also expects the continued expansion of its mobile ecosystem to boost sales by more than a billion dollars (4% of its business figure) this year. year.

The only weak point of Macy's recently was his mattress business, which could absorb some of Sears' mattress sales. Macy's is generally considered a high-end retailer, while Sears targets the low-end market, but both retailers continue to overlap in the mid-market market. The off-price activity of Macy's Backstage could also benefit from the bankruptcy of Sears.

But do not jump to conclusions …

The bankruptcy of Sears could perhaps help J.C. Penney, Kohl's and Macy's, but the gains will likely be additional. In addition, Amazon or Walmart could simply absorb most of Sears' lost customers and let other retailers argue for leftovers. As a result, investors should see Sears fall in the opposite direction for rivals, without overestimating their potential benefits.

John Mackey, CEO of Whole Foods Market, an affiliate of Amazon, is a board member of The Motley Fool. Leo Sun owns shares of Amazon. The Motley Fool owns shares and recommends Amazon. Motley Fool has a disclosure policy.