While many retailers may be anticipating the market-share grab they’ll make as Sears Holding Corp.’s demise continues, J.C. Penney Co. Inc. could actually be hurt by the disappearing competitor.
Retailers like Home Depot Inc. HD, -1.41% stand to gain as Sears SHLDQ, -16.84% stores close and customers look for a new place to buy goods, particularly appliances.
But GlobalData Retail’s Neil Saunders thinks J.C. Penney JCP, +11.48% could actually lose as Sears becomes the latest retailer to clear out of already-ailing malls.
Read: Sears customers could soon be taking their business to Home Depot
“The category and shopper overlap is not as great as is sometimes assumed, and while J.C. Penney may make gains, they will be relatively small in scale,” he wrote. “Moreover, the exit of Sears from some malls may actually harm traffic, which will have a negative knock-on impact for J.C. Penney.”
J.C. Penney reported a third-quarter sales decline to $2.65 billion early Thursday, and same-store sales plunged 5.4% for the period.
Nevertheless, shares closed Thursday up 11.5%.
One of the categories that underperformed for J.C. Penney during the quarter was appliances, according to Trent Kruse, head of investor relations. Appliances are a key area for Sears.
The retailer saw stronger performance in women’s and men’s apparel and the juniors category.
J.C. Penney’s new Chief Executive Jill Soltau does, however, see a chance to snap up market share from another defunct retailer: Toys ‘R’ Us.
“We will take advantage of market-share opportunities from competitors’ stores closing across many categories of our business, such as toys, where we have added 40% more to our assortment this holiday season,” she said, according to a FactSet transcript of the Thursday earnings call.
However, J.C. Penney faces stiff competition in toys, from players like Walmart Inc. WMT, -1.96% , Target Corp. TGT, -2.85% and big e-commerce retailers like Amazon.com Inc. AMZN, +1.28% and eBay Inc. EBAY, +1.00% .
See: Amazon and eBay are betting on this old-school strategy to drum up holiday sales
Walmart Chief Executive Doug McMillon said specifically during his Thursday earnings remarks, “Toys will also be a focus. In stores, 30% of our fall assortment in this category is new, and we have 40% more toys online.”
Walmart on Thursday reported sales of $124.9 billion, with e-commerce growth of 43% for the quarter.
Don’t miss: Walmart’s focus on lower prices, e-commerce pays off as costs rise and tariffs loom
Overall, GlobalData had harsh words for J.C. Penney’s most recent earnings report.
“To deliver a comparable sales decline of 5.4% is poor,” Saunders wrote. “To do it at a time when consumer confidence and spending are at their peak is nothing short of atrocious.”
J.C. Penney shares are down 57% for the year to date. The S&P 500 index SPX, +1.06% is up 2.1% for the period.
