Investors punished both JC Penney and Sears- but there are clear signs their business prospects are headed in very different directions. Bobbi Rebell reports.
Retail is rough. JC Penney and Sears, giants in the U.S. retail market, were pummeled on Wednesday by investors, over worries the stores aren't selling enough goods. JC Penney, cutting their third quarter sales growth estimates, and creating new concerns about the fourth quarter and holiday season. Belus Capital Advisors Brian Sozzi: SOUNDBITE: BRIAN SOZZI, CEO, BELUS CAPITAL ADVISORS (ENGLISH) SAYING: "The company lowered their sales guidance because not enough people converted. So, in English words, people went in there they didn't buy as much as the stock market expected, and why that is worriying is because JC Penney's quarter, back to school season started off well, so I think the stock market is worried about how their holiday season will end up, despite them re-iterating their guidance." Sozzi has a hold on the stock- but does like a lot of the changes the company has made under returning CEO Mike Ullman has been making- including ship from store- a way to better compete with online rivals like Amazon. Sears, however, has bigger problems, including reported issues with suppliers and the insurers that they work with, and cash flow going into the holiday season: Reuters Nathan Layne: SOUNDBITE: NATHAN LAYNE, REUTERS REPORTER (ENGLISH) SAYING: "The chief concern among investors and suppliers is a recent announcement by Eddie Lampert to provide a loan to the company. $400 million to get through the holiday season, to buy its inventory, and what was different this time is that Mr. Lampert secured that loan against properties. Sears and Kmart properties and previous lendings had been unsecured so its a sign of worry for investors." Sozzi says comparing Sears to JC Penney makes a good case study on the do's and don'ts of a retail rebound. SOUNDBITE: BRIAN SOZZI, CEO, BELUS CAPITAL ADVISORS (ENGLISH) SAYING: 'Mike Ullman came back to JC Penney in April 2013. But before he went away from 2005 to 2012, he was investing in the stores. He brought in Sephora. He opened up hundreds of Sephora's that are driving traffic and sales. Since Kmart and Sears merged, this company has been one of the worst in terms of taking their profits and re-investing in the stores. So they are so badly positioned that JC Penney will overtake them. And who might overtake them all is a Macy's. They are doing so many great things." Great things that will continue to keep investors worried about how much traction the Penney's turnaround really has.