In times when many retailers are struggling, Macy's (M, Financial) has managed to grow on all fronts. The company has significantly outperformed rivals like JCPenney (JCP, Financial) and should continue to do so in the coming months. Although Macy’s recent earnings report weren’t as good as investors were expecting, the company is still an attractive investment option and is a better buy than JCPenney.
In Q1 FY15, Macy’s reported earnings per share of $0.56, missing the analyst estimate of $0.65. The company stated revenue of $6.23 billion versus the consensus estimate of $6.32 billion. The company has taken some shrewd initiatives to fuel future growth, most notably its deal with zTailors.
Macy’s announced that it made a deal with zTailors, the first-ever nationwide on-demand digital tailor linkage, to deliver customized alterations facilities for customers who purchase men’s and women’s garments online.
All zTailors must go through a screening and certification procedure, so clients can trust they are receiving expert service from extremely trained and extensively skilled professionals.
zTailors is currently geared to bloomingdales.com and macys.com clients in the Los Angeles area, and will soon expand to metro New York City, San Diego and San Francisco, as well as in the states of Washington, Oregon and Florida. The service will be available nationwide by fall 2015.
The online process involves the following steps:
When a garment is purchased online and if it requires alteration, customers who live in selected areas can click to request tailoring and book a skilled, qualified tailor in their area.
After the item is delivered to the buyer, the tailor visits the client’s home or office for a fitting and wardrobe discussion.
Within a week or less, the tailor alters the garment and delivers the item back to the client. The charges vary for different types of services and are similar to the charges for alterations in a Macy’s or Bloomingdale’s store.
Once the altered item is delivered to the customer, the customer tries on the garment. Any re-dos are free.
Many customers prefer to purchase online. For them, this is a very appropriate way to look their finest at a fraction of the cost of custom clothing.
Macy’s Off-Price Debut
Macy’s announced that the first four pilot stores in the company’s new off-price commercial, one of the company’s key growth strategies, will open in fall 2015 in New York City.
The company’s four off-price stores will average about 30,000 square feet and have a collection of women’s, men’s and children’s apparel, shoes, fashion accessories, housewares, intimate apparel, home textiles and jewelry. Every store comprises of facilities such as free WiFi and a suite of large fitting rooms. One location will experiment with a café concept so clients can relax and refresh.
Products will consist of clearance goods from Macy’s stores, as well as special purchases from well-recognized fashion brands – all at extremely great values, often in the range of 20 percent to 80 percent off of original and comparable prices for like products.
Why Macy’s is better than JCPenney?
JCPenney hasn't reported a yearly net profit since 2010, and from that point forward its long-term debt has jumped from $3.1 billion to $5.3 billion. In the meantime, JCPenney’s net debt has jumped considerably from around $500 million to over $4 billion.
Sales, however, are way lower as compared to 2010. Ron Johnson was brought in as CEO to maneuver a turnaround; however, that didn’t work as JCPenney plummeted further. The company’s revenue is 30% lower than it was five years ago. Although revenue is rising once more, adjusting its debt is a harder task now than it was even only a few years back. JCPenney doesn't have as much room for error, and another financial hiccup could push it over the edge again.
Conclusion
Undoubtedly, Macy’s is in a better financial shape than JCPenney and the recent stock performance of both the companies reflect this fact. JCPenney doesn’t have any room for error and its debt is consistently increasing. Macy’s on the other hand is still going strong and looks like a good bet given its shrewd initiatives. Thus, I think investors should buy Macy’s instead of JCPenney.
