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2017 & Sears is Losing. You’ll Never Believe Who Has the Most to Gain.

2017-06-06 02:17 [NEWS] Source:Netword
Guide:As bulls and bears battle it out over Sears (SHLD), one thing is perfectly clear: Sears' days as a retailing powerhouse in the U.S. are probably over. Which begs the question: Who has the most to gain from Sears' retreat? Illustration: Ge

As bulls and bears battle it out over Sears (SHLD), one thing is perfectly clear: Sears' days as a retailing powerhouse in the U.S. are probably over. Which begs the question: Who has the most to gain from Sears' retreat?

2017 & Sears is Losing. You’ll Never Believe Who Has the Most to Gain.

Illustration: Getty Images

Yes, Amazon.com (AMZN) appears to be the big winner in retailing, but that's a result of the shift to the internet from brick-and-mortar stores, not Sears' own problems. Cowen's Oliver Chen and team dig into Sears' woes and come away with a surprise winner: JC Penney (JCP). They explain why:

Dislocation from closures at Sears and K-Mart will create significant opportunities for competitors to capture billions in lost share. In our view, the off-price channel and to a lesser extent JC Penney are in best position to capture share and sales given (1) similar average household income and average age dynamics based on our proprietary study; (2) growing overlap between Sears and K-Mart shoppers with off-price retailers – over past two years, Sears customers shopping at Home Goods increased by 10.9pp and Marshalls by 8.3pp based on Cowen's study; (3) JCP has been aggressively expanding its home department by adding appliance show rooms and is conducting home service tests – JCP previously noted their best performing stores are ones located in malls shared with Sears and (4) off-price retailers have significant room for expansion over the medium term with potential growth of 50% to 70%, including both existing banners and New banners, while we anticipate continued closures and disruptions in the department store channel with most significant closures at mall-based Macy’s (M) and JCP. We also believe "Super Value" Stocks such as outperform rated Costco Wholesale (COST) & Wal-Mart Stores (WMT) may benefit from share gains given existing traffic momentum and attractive low prices and merchandise margin structures.

Shares of Sears have tumbled 7.7% to $6.65 at 11:26 a.m. today, while JC Penney has declined 0.6% to $4.86, Macy's has fallen 0.7% to $23.65, Costco Wholesale has advanced 0.2% to $181.38, Wal-Mart Stores has risen 0.4% to $79.98, and Amazon.com is up 0.3% at $1,010.10.

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