Macy’s and J.C. Penney Join Starbucks in Offering Same-Day Delivery Service

Updated from 5:17 p.m. to include comments from J.C. Penney CEO from the company's earnings call, in paragraphs 7 and 14. Also added the company name in paragraph 1. 
 
NEW YORK (TheStreet) -- Macy's (M) and mall rival J.C. Penney (JCP) said Wednesday that they were unveiling same-day delivery services, joining coffee king Starbucks (SBUX) in the budding movement by brick-and-mortar retailers to get consumers their purchased goods quicker.

Watch the video below for a look at Macy's latest quarterly results:

Amazon (AMZN) , which has a same-day delivery service in 14 cities that promises to deliver an item ordered at noon by 9 p.m. that same day, is being put on notice by retail's old guard which is seeking to leverage the power of its physical locations.

"It gives us a huge competitive advantage", said Macy's CFO Karen Hoguet on an earnings call with analysts regarding same-day delivery.  Hoguet suggested that Macy's store footprint, particularly its geographic positioning in densely populated major markets, is also a "huge advantage." 

Macy's same-day delivery pilots are up and running in eight major Macy's markets -- Chicago, Houston, Los Angeles, New Jersey, San Francisco, San Jose, Seattle and Washington, D.C. The service for Bloomingdale's is available in four markets -- Chicago, Los Angeles, San Francisco and San Jose. Macy's said deliveries to customers will be powered by Deliv, a crowdsourced same-day delivery provider, in collaboration with major mall owners such as General Growth Properties (GGP) , Macerich (MAC) , Simon Property Group (SPG) , and Westfield Corporation.

In the second half of 2015, Starbucks will launch a food and beverage delivery service. Details on the initial test markets and operating structure were scant on the company's recent earnings call, with executives noting that is was "very early days" and that it's working on a "multiple number of solutions" to handle the distribution system.

As for J.C. Penney, Chairman and CEO Mike Ullman stated in an earnings call with analysts that a same-day delivery service will go live in 2015.  No further specifics were supplied, and a request for comment by the company went unanswered.  

While Sears (SHLD) morphs into a REIT and closes stores, Macy's and J.C. Penney are setting the table for a future of more full-price sales and stronger earnings through impulse buying on mobile devices. The next step for each department store retailer -- in what has been called retail's "endless aisle" -- is to bring its same-day delivery services to a U.S. audience and target customers buying merchandise on Twitter (TWTR) , in real-time, with the new "buy now" button.

Macy's and J.C. Penney could use the sales and profit lift that an expanding same-day delivery service offers.

Pinning blame on consumers spending their gasoline savings on "other items", as well as buying cars instead of apparel, the department store retailer on Wednesday lowered its full-year earnings outlook to $4.25-$4.35 a share from $4.40-$4.50.  "We are not counting on a lot of help from the economy this holiday season," said Hoguet.

Macy's had reaffirmed its full-year earnings outlook in August despite reducing its same-store sales expectations, citing a challenging start to the year.

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Third-quarter same-store sales declined 0.7%, shy of the Bloomberg consensus forecast for an increase of 1.9%. Total revenue came in at $6.2 billion, below the low-end of the Bloomberg consensus range of $6.25 billion to $6.46 billion.

"We are very pleased with our third-quarter earnings, even though the sales performance fell short of our expectations," said Macy's Chairman and CEO Terry Lundgren. Macy's joins a list of household name retailers issuing financials warnings in recent weeks, including Kohl's (KSS) , J.C. Penney, and Walmart (WMT) .

J.C. Penney's third-quarter net sales came in at $2.76 billion, shy of the $2.82 billion Bloomberg consensus.  Same-store sales were virtually unchanged vs. the comparative quarter in the prior year, with analysts having anticipated a 2.8% increase.
 


At the time of publication, the author held no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.


TheStreet Ratings team rates PENNEY (J C) CO as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate PENNEY (J C) CO (JCP) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and generally disappointing historical performance in the stock itself."

You can view the full analysis from the report here: JCP Ratings Report

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