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Kohl's Likely To Benefit From J.C. Penney's New Strategy
Posted February 21, 2012
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By Adam Levine-Weinberg
Last month, J.C. Penney (JCP) announced a much-anticipated change in corporate strategy. Most notably, J.C. Penney radically changed its pricing strategy beginning February 1, by lowering regular prices, doing away with coupons, and vastly shrinking the number of promotions it runs. Most of the investor focus (quite rightly) has been on the possible effects of this new strategy on J.C. Penney's results. However, the nature of these changes is likely to create significant volatility in JCP shares, as the chain's prospects depend heavily on customer response to these new initiatives. Therefore, investors may be able to find safer (and better) returns elsewhere in the department store sector.
Kohl's (KSS) may be the biggest beneficiary, particularly over the next 2-3 years. J.C. Penney's management has emphasized that they want to become "America's Favorite Store"; in other words they want to increase their appeal beyond their traditional suburban working class and middle class base. J.C. Penney's newfound aversion to discounting only makes sense in the context of a broader plan to move the chain upmarket (on average), and compete with retailers like Macy's (M) and Nordstrom (JWN). However, this means less focus on the core customers that Kohl's and J.C. Penney have been fighting over in recent years. READ FULL ARTICLE HERE
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