Observations on Sears, Kohl’s, Macy’s, & J.C.Penney: What does the future hold? What should be done to improve the trends?

1. Observations on Sears, Kohl’s,
Macy’s, and J.C.Penney
By Amine Ayad

2. In total sales, Macy’s & Kohl’s have been winning
$24.9B
$16.4B
$18.5B
$46.0B
$27.7B
$19.3B
$13.0B
$39.9B
11.2%
17.6%
-29.8%
-13.4%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
$.0B
$5.0B
$10.0B
$15.0B
$20.0B
$25.0B
$30.0B
$35.0B
$40.0B
$45.0B
$50.0B
Macy's Kohl's JCPenney Sears Holdings
Changes in Revenue from 2008 to 2012
Y2008 Y2012 Increase / Decrease

3. Kohl's increased stores’ count by 12%
Macy’s is a clear winner in sales growth by store
-13%
-30%
18%
11%
-52%
1%
12%
-1%
2,548
1,104 1,146
841
0
500
1,000
1,500
2,000
2,500
3,000
Sears Holdings JCPenney Kohl's Macy's
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Sales Increase / Decrease between Y2008 & Y2012 # of stores Increase / Decrease between Y2008 & Y2012
# of stores Y2012

4. Macy’s operating income had the best overall trend
Macy’s negative 2008 results were due to $5.4B “Goodwill impairment charges / adjustment”
$5,000
$4,000
$3,000
$2,000
$1,000
$0
$1,000
$2,000
$3,000
$4,000
Y2008 Y2009 Y2010 Y2011 Y2012
Operating Income in millions
Sears JCPenney Kohl's Macy's

5. Kohl's operating income (11.5%) as a percent of
sales by store is impressive
-2.0%
-7.1%
11.5%
10.7%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Sears Holdings JCPenney Kohl's Macy's
-$1.5M
-$1.0M
-$.5M
$.0M
$.5M
$1.0M
$1.5M
$2.0M
$2.5M
$3.0M
$3.5M
Operating income by store Operating income as a % of sales

6. Observations from retailers’ strategies & from
stores’ visits vary greatly
• Strategically, J.C. Penney’s underestimation of the impact of changing business
model from “high/low price” to “every day low price (EDLP)” coupled with
indecisiveness regarding company’s long-term direction proved very harmful. One
must ask: how aligned with “EDLP” strategy was adding high-end brands such as
Sephora?
• Tactically, after the new strategy, J.C.Penney’s stores appeared more organized but
assortment and sizes were clearly lacking. Personally I tried 3 times to buy from
J.C. Penney and ended up not buying because I didn’t find my size (shirt 17.5 x 32)
and shoes (9 wide).
• Macy’s marketing and merchandising (assortment) appear very attractive to
shoppers.
• Kohl’s seasonal entrance and exit, including black Friday / Christmas, appear
successful.
• Sears exiting / closing low volume stores doesn’t appear to helping operational
income and profitability i.e. need more sales per store.
• Sears and J.C.Penney are important retail companies and they can certainly revise
the negative trends but time is running out.

7. Leadership and phycology of retail will be vital
to improving trends
• A motivated and engaged retail employee means productivity
and sales.
• Customers vote by their money and customers want variety of
merchandise, depth of merchandise, and great prices i.e.
efficiency is critical.
• Marketing appear to be critical to success in this competitive
environment.
• Ability of CEO and executives to listen to employees and
customers coupled with ability of employees to express their
ideas freely will help improve trends.
• Success in retail is a function of “inspirational leadership,
functional knowledge, and critical thinking” (Ayad, 2008).

8. Resources
• 2012 Form 10-K (Sears, Kohl’s, Macy’s, &
J.C.Penney)
• Ayad, A. (2008). Optimizing inventory and
store results in big box retail environment.
International Journal of Retail & Distribution
Management, 36 (3), 180-191
Opinions expressed are solely my own, and none of the material in this document are shared, supported, or
endorsed in any manner by my employer.