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

by Alyssa Oursler | October 14, 2013 9:08 am

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

JCPenney Why Online Sales Growth Wont Save JCP    In One ChartShares of JCPenney (JCP[1]) stock rebounded marginally[2] last week. The catalyst: A company update[3] 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:

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[4] 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[5]) — 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 Wont Save JCP    In One Chart
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A few specific examples:

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:

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[8] 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.

Endnotes:
  1. JCP: http://studio-5.financialcontent.com/investplace/quote?Symbol=JCP
  2. rebounded marginally: http://investorplace.com/2013/10/jcp-sell-jcpenney-stock-after-small-rally/
  3. A company update: http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-newsCompanyArticle&ID=1862384&highlight=
  4. The Wall Street Journal reported: http://online.wsj.com/news/articles/SB10001424127887324906304579039101568397122
  5. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  6. TGT: http://studio-5.financialcontent.com/investplace/quote?Symbol=TGT
  7. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT
  8. avoid JCP stock: http://investorplace.com/2013/09/jcp-jcpenney-stock/

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