Sears owner Eddie Lampert appears to be benefiting from downward spiraling JCPenney, as his chain is selling more clothing and accessories. (AP)
Shoppers are so turned off by JCPenney’s new pricing strategy that they’re starting to buy their clothes at Sears.
At least that’s the scenario painted by one Wall Street analyst after Sears Holdings reported improved apparel margins and its quarterly loss narrowed amid sinking sales.
Shares of Sears — which has endured years of cost cuts by hedge-fund tycoon Eddie Lampert — leapt $3.69, or 6.5 percent, to $60.29 after the retailer said it boosted second-quarter margins by slashing inventory by more than $500 million.
While gross margins companywide rose by a full percentage point to 26.7 percent of sales, margins on apparel rose at more than double that rate.
In addition to its own cleanup efforts, Sears got a helping hand from struggling rival JCPenney, whose CEO, Ron Johnson, sent customers fleeing this spring with a confusing pricing strategy, according to Credit Suisse,
“We are not sure if Mr. Lampert was planning to send Mr. Johnson a thank-you note,” Credit Suisse analyst Gary Balter wrote in a note to clients yesterday. “But we believe JCP’s issues have been a material contributor to better apparel results [at Sears] as these two are neighbors in most malls.”
Earlier this week, Sears moved ahead with plans to spin off its Hometown stores, outlets and certain hardware stores into a separately traded company. The deal will raise $446 million, including a $100 million drawdown on a new credit line.
For the quarter ended July 28, Sears pared its loss to $132 million from $146 million. Sales fell 6.6 percent to $9.47 billion.