Why Online Sales Growth Won’t Save JCP — In One Chart

E-commerce is a drop in the bucket, even for many stable retailers

   

Why Online Sales Growth Won’t Save JCP — In One Chart

JCPenney Why Online Sales Growth Won't Save JCP    In One ChartShares of JCPenney (JCP) stock rebounded marginally last week. The catalyst: A company update that applauded the progress being made at JCP.

Sure, JCPenney stock remains around 60% in the red year-to-date … but that didn’t stop JCP from patting itself on the back for a few positive developmenets, including online sales growth. A few details about recent JCP online sales:

  • In July, online JCP sales were up 14% over July 2012.
  • In August, online sales for JCP gained nearly 11% year-over-year.
  • September sales at jcp.com experienced 25% sales growth over the same period last year.
  • Sales from the JCP website are trending double digits ahead of last year, and were up 18.6% in the third quarter to date.

Not bad, I guess. But if you think JCPenney stock will recover because online JCP sales have begun to, think again.

Online Sales: Just a Sound Bite

The fact that JCP is touting online sales growth should hardly come as a surprise — and not just because JCPenney is pretty much grasping for straws at this point. Countless companies broadcast robust online sales growth in much the same fashion JCPenney has been: They boast double-digit growth rates, but fail to give any hard sales numbers.

For that very reason, the Securities and Exchange Commission has been doing some digging. As The Wall Street Journal reported in late August, the SEC has been asking companies “which frequently tout their online prowess” to “provide hard details about the amount of goods they sell online.”

The results? Well, just glance that this chart from WSJ article. It displays the 14 largest Internet retailers behind e-commerce king Amazon (AMZN) — many of which brag about big-time online sales growth. As the WSJ summed it up: “The absolute figures are still relatively small.”

 Why Online Sales Growth Won't Save JCP    In One Chart
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A few specific examples:

  • Target (TGT), which isn’t shown on the above chart, also has highlighted double-digit growth in online sales. The company was asked by the SEC to quantify its digital results, though. The response: “Digital sales represented an immaterial amount of total sales,” Target said in June.
  • Walmart (WMT) — the world’s largest retailer by overall revenue — boasted a 30% increase in global online sales during the second quarter. But when pressed on the matter, WMT admitted that “web-based sales contributed 0.1 to 0.2 percentage points to Wal-Mart’s 2.4% increase in U.S. comparable-store sales in fiscal 2013 and 1.6% increase in fiscal 2012.”  And while Walmart has noted that it expects $10 billion in online sales for 2013, that’s only around 2% of its overall revenue.

That brings us back to JCP — and the cold, hard truth about its online sale claims.

JCP Still Is Just Plain Ugly

While online sales growth at JCP is nice, it’s likelier than not a nonstarter for the bottom line and thus JCPenney stock.

For one, increasing Internet sales is a tide that’s lifting all boats — not one that’s going to set JCP apart in any way or change its course dramatically. And that’s because online sales growth isn’t making a sizable difference even at retailers that boast similar improvements, and have strong (or at least decent) brick-and-mortar operations to back it up.

Besides, JCP includes its online sales in comparable-store sales, as many retailers do, and that really helps us see how small of an impact the online revenue stream has. Just look at the past three months:

  • August online sales for JCP gained 11% year-over-year; same-store sales still fell 10%.
  • September sales at jcp.com grew 25%, but comps still slid 4%.
  • Same-store sales for Q2 fell 2.2%, and comparable store sales fell 12%.

Beyond that, remember that many of these metrics should — in theory — come with easy year-over-year comparison considering sales were gutted in 2012, under the misguided reign of then-CEO Ron Johnson.

The only way to go, really, should be up.

Instead, JCP has continued going down in many vital areas — whether you’re looking at the JCPenney stock price or corporate data. Overall sales are expected to slide by another 8% for the full year, while JCP is expected to post a loss more than 70% wider than last year’s.

The bottom line for investors thus remains the same: Unless you’re a master at day trading, avoid JCP stock for now. And definitely don’t buy JCPenney stock because of vague claims about online sales growth.

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/10/online-sales-wont-help-jcp/.

©2014 InvestorPlace Media, LLC

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