"J.C. Penney reboot
Macy's also faces some more specific threats. The most important one is the ongoing transition back to a heavily promotional model at struggling competitor J.C. Penney (NYSE: JCP ) . J.C. Penney's elimination of most coupons and discounts last year led to the loss of more than $4 billion in sales. Macy's management has stated on several occasions that about half of its stores are in malls that also have a J.C. Penney, and that those stores have performed better than the company average. This trend provided a tailwind for Macy's earnings -- and Macy's stock -- throughout 2012.
J.C. Penney is expected to make a strong push to win those customers back this year, starting with the return of "high-low" pricing. This could begin to reverse the trend of J.C. Penney shoppers migrating to Macy's, putting pressure on the latter's revenue growth. If, as I expect, J.C. Penney really ramps up the use of discounts and coupons, this could put pressure on competitors' gross margins. A drop in gross margin could have an even bigger impact on Macy's earnings than a slowdown in revenue growth."