Sears' disappearance could hurt, not help, J.C. Penney

While many retailers may be expecting the market share they will have with the demise of Sears Holding Corp., the endangered competitor could actually hurt J.C. Penney Co. Inc.

Retailers like Home Depot Inc.

HIGH DEFINITION, -1.41%

to win as Sears

SHLDQ, -16.84%

stores are closed and customers are looking for a new place to buy goods, especially appliances.

But Saunders of GlobalData Retail thinks that J.C. Penney

JCP, + 11.48%

could actually lose as Sears becomes the last retailer to get rid of malls already in trouble.

Lily: Sears Customers May Soon Turn to Home Depot

"The overlap between categories and customers is not as important as sometimes assumed, and even though J.C. Penney can make some gains, it will be relatively modest," he wrote. "In addition, the exit of Sears from some shopping centers could actually hurt the traffic, which would have a negative impact on J.C. Penney."

J.C. Penney announced a decline in sales in the third quarter of 2006, to $ 2.65 billion, and a decline in same-store sales of 5.4% for the period.

Nevertheless, shares closed Thursday up 11.5%.

One of the underperformers for J.C. Penney during the quarter was home appliances, according to Trent Kruse, Investor Relations Manager. Home appliances are a key area for Sears.

The retailer performed better in the men's and women's clothing and junior categories.

The new CEO of J.C. Penney, Jill Soltau, however, sees a chance to gain market share at another obsolete retailer, Toys "R" Us.

"We will take advantage of the market share opportunities of competing stores that close in many categories of our business, such as toys, where we have added 40% more to our assortment this holiday season," she said. Thursday's earnings call.

However, J.C. Penney faces fierce competition in toys, from players like Walmart Inc.

WMT, -1.96%

, Target Corp.

TGT -2.85%

and major e-commerce retailers like Amazon.com Inc.

AMZN, + 1.28%

and eBay Inc.

EBAY, + 1.00%

.

See: Amazon and eBay are banking on this traditional strategy to increase holiday sales

Walmart chief executive Doug McMillon said in his Thursday benefit speech, "Toys will also be the focus of concern. In store, 30% of our fall assortment in this category is new and we have 40% more toys online. "

Walmart Thursday announced sales of $ 124.9 billion, with e-commerce growth of 43 percent for the quarter.

Do not miss: Walmart's attention to lower prices, e-commerce is paying off as costs rise and rates rise.

Overall, GlobalData criticized J.C. Penney's most recent earnings report.

"Providing a comparable sales decline of 5.4% is poor," wrote Saunders. "Doing it at a time when consumer confidence and spending are at their peak is simply awful."

The shares of J.C. Penney are down 57% since the beginning of the year. The S & P 500 index

SPX, + 1.06%

is up 2.1% for the period.