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Macy's, J.C. Penney put a bow on earnings season

Christine Short of Estimize

In typical fashion, the retailers wrap up the earning season. That procession begins this week when several department stores report their first quarter results. The S&P 500 (^GSPC) multi-line retailers have struggled in the last couple of quarters, but this season they are expected to put up earnings per share (EPS) growth of 9.5%, and revenue growth less that half of that at 4.2%. The big names from that industry reporting this week are Macy’s, J.C. Penney (no longer in the S&P 500), Kohl’s and Nordstrom.

Macy's

Macy’s (M) kicks things off before the bell on Wednesday morning. Currently Estimize is looking for EPS of $0.63, 2 cents higher than the Street, and revenues of $6.4B. While bottom-line growth has been supported by the department store’s M.O.M strategy - My Macy's localization (catering to different types of customers based on location), omnichannel integration (helping customers shop seamlessly on-line and in stores) and “Magic” selling (improved customer service initiative) – top-line growth has languished.

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To improve sales the company has undertaken several restructuring endeavors, and is looking to rapidly expand it’s beauty business through its recent acquisition of Bluemercury, a luxury beauty retailer with 60 stores in the U.S. The retailer is also considering opening “off-price” locations like competitors Saks and Nordstrom, which could be a challenge as Macy’s already offers moderate prices and discounts.

J.C. Penney

Next up is J.C. Penney (JCP), with Estimize looking for EPS of -$0.73 vs the Street at -$0.79. Last quarter the 113-year old retailer posted it’s first non-negative EPS report since Q4 2012. The company is still trying to recover from the mistakes made by former CEO Ron Johnson, who replaced discounts and coupons with everyday low prices, eventually driving loyal customers away. Like Macy’s, J.C. Penney recognizes the expansive growth in the beauty industry and continues to add Sephora shops in its full-line stores. Technology has also been a big focus for the company, partnering with Apple as one of the first retailers to build a shopping app exclusively for the Apple Watch. While the stock is up roughly 33% this year, it’s been on the decline as of late, even accidentally released news of better than expected same store sales (SSS) results for Q1 wasn’t enough to lift shares.

Kohl's

Kohl’s (KSS) is another name that has been sluggish for sometime now, but seems to be on the mend as a result of a new loyalty program, personalized marketing and guidance that SSS will be in the 2 – 3% range this year. These efforts seem to be working, SSS reached 3.7% in Q4, and loyalty program members are spending $80 more per year at Kohl’s than other shoppers. The loyalty program already garners 25 million members, and is expected to acquire another 10 - 12 million more in 2015. Like the retailers mentioned above, Kohl’s is betting big on beauty, installing full service beauty counters in their stores, and they are also following the health and fitness trend, bulking up on those products. The stock is up 20% for the year.

Nordstrom

Wrapping up the week is Nordstrom (JWN). Estimize is looking for $0.73, two cents better than the street, with revenue estimates also slightly above at $3.21B vs. $3.15B. While this puts earnings growth at a meager 1.5%, revenues are expected to grow 13%. Last quarter, revenue beats were mostly driven by new store openings, robust SSS, and the Trunk Club acquisition in the middle of last year. Sales at Rack stores have out grown full-line stores, and the online business has been surging, with Nordstrom.com posting sales growth of 19% in Q4, and Nordstromrack.com/HauteLook sales increasing 28%.

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