U.S. retail stocks were mixed Monday amid questions over how the weekend bankruptcy filing of Sears Holdings (SHLD) will impact an already-struggling sector ahead of what could be the strongest holiday shopping season in years thanks to record low unemployment and a booming domestic economy.
The parent group of iconic retailers Sears, Roebuck and Co. and Kmart Corp., which hasn't reported a full year profit since 2011, has been in near terminal decline the past five years amid a string of store closures and restructuring attempts from billionaire investor Eddie Lampert, who said he would step down as CEO following the Chapter 11 filing. That said, Kmart and Sears still managed to generate more than $3.6 billion in revenues in the pair's apparel and 'soft home' categories, according to Credit Suisse research, and that spending will need to find a destination if more stores are permanently shuttered during the bankruptcy proceedings. Sears' second quarter sales, which had fallen by more than 25%, were tabbed at more than $3 billion.
JC Penney (JCP - Get Report) , potentially, could scoop up a good share of that spending, given the group has around 31% of its store fleet within 1 mile of a current Sears location, with each dollar captured having a stronger impact on store growth than rival Macy's (M - Get Report) , which has 35% of its stores within the Sears radius, given JC Penney's lower revenue base.
In fact, Credit Suisse suggests JC Penney could see a 2.6% boost to single store sales growth if closing store sales are shared equally, compared to a 2.1% rise for Burlington Stores (BURL - Get Report) , a 1.1% gain for Macy's and a 0.8% gain for Kohl's Corp. (KSS - Get Report) .
JC Penney is also hoping to reverse the downward momentum that has pressured shares for the past six months and pushed the stock to a year-to-date decline of 42.5% amid both slowing sales and the abrupt departure of former CEO Marvin Ellison.
Jill Soltau, a 30-year retail veteran with stints at Joann Stores, Kohl's and Sears, will assume the reigns at JC Penney's Plano, Texas headquarters today, with the aim of rescuing the group's apparel business and leveraging its 70% female customer base.
"I couldn't be prouder to lead such an iconic retailer," Soltau said when she was hired earlier this month. "I am highly passionate about the customer and I spent my entire career focused on the needs of a value-based consumer by researching, understanding and meeting her expectations for style, quality and inspiration."
She may have joined JC Penney at exactly the right time, given both its opportunity to gain market share from the Sears bankruptcy and the chances of a strong holiday shopping season built on the booming spending power of American consumers.
That said, consumer spending, which accounts for more than two thirds of domestic growth, rose by an inflation-adjusted 0.1% last month - and 4.7% over last year -- the Commerce Department said Monday following similar gains in July and August, with economists forecasting a July to September gain of 3.6%. The Conference Board's consumer confidence index is also sitting at an 18-year high while unemployment fell to the lowest level -- 3.7% -- since 1969 last month.