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So far in 2018, shares of J.C. Penney (NYSE: JCP) and Kohl's (NYSE: KSS) have been headed in opposite directions. As of this writing, Penney is down 24% compared with a 31% gain for Kohl's. For two companies that are both moderate-price department stores, that is a bewildering difference in performance. The reason is that the future for one of these department store chains looks much more certain.
A side-by-side comparison
| Metric | Kohl's | J.C. Penney |
|---|---|---|
| Revenue (TTM*) | $19.2 billion | $12.4 billion |
| Trailing P/E | 13.6 | N/A |
| Forward P/E | 12.6 | 15.1 |
| Enterprise value | $15.1 billion | $5.0 billion |
| Dividend yield | 3.4% | N/A |
TTM = trailing 12 months. Chart by author. Data source: Yahoo! Finance.
Kohl's for the rebound
Department stores have been roughed up in the last few years, and Kohl's has been no exception. Even while overall retail sales in the U.S. have increased modestly every year for nearly a decade, sales at the department store chain have struggled to gain traction. Over the last three-year stretch, revenue increased a meager 2%.
That has started to change as of late, though. Total revenue increased 2.2% in 2017, with comparable sales -- a combination of foot traffic and average transaction size -- increasing 6.3% during the important holiday season. That was followed by a 3.5% year-over-year revenue increase and 3.6% rise in comparable sales in the first quarter of 2018. Both events are responsible for the strong performance in Kohl's stock so far this year, as they've helped lift earnings by double digits.
While management attributes the strong performance to its work in improving digital sales capabilities and forging new partnerships with other retailers and product suppliers, Kohl's is also benefiting from the decline of some of its peers. Regional chain Bon-Ton is closing, and the decline of longtime mall anchor Sears is well documented. Thus, the story of Kohl's has been one of surviving the competition in today's digital age.
Image source: Getty Images.
J.C. Penney is treading water
One of Kohl's struggling peers is none other than J.C. Penney. Revenue hasn't budged in years, and high expenses have prevented the stores from turning a full-year profit since 2012. A rebound has been slowly mounting from the steep losses of a few years ago, but progress has been slower than at Kohl's. Revenue fell 0.3%, and comparable sales increased only 0.1% in 2017. The first quarter of 2018 was equally dismal, with revenue decreasing 4.3% and comparable sales increasing 0.2%.