Maybe I am sentimental and nostalgic, but I always root for bricks-and-mortar retail. It could be because we always met at the Wanamaker's Eagle, or because my mom worked at Lit's and my dad worked at Gimbel's -- two defunct retailers that were retail bedrock.
So, when I listened to the Macy's (M) and J.C. Penney (JCP) calls this past week, I kept wanting to hear that the holiday season would be just like a few years ago, when Macy's traded at $73 -- July of 2015 -- and JCP ticked at $43, back in February of 2012.
Instead, it's just the same struggling stories, the same defensive nature, with the only twist being a better control of inventory and a sense that they can continue to plod along, something that the people behind Gimbel's and Macy's could never do.
Now, there was a lot to like on Macy's call. CEO Jeff Gennette talked about the capital structure and let you feel pretty good about the then 8%, now 7.6% yield. I thought that all comments about the balance sheet made me feel that Macy's is here to stay, which is why it rallied so hard. That, and the lean inventory.
J.C. Penney's Marvin Ellison talked about how retail is a balance between art and science, and the next for both instincts and curation by smart merchants.
I liked the talk, but I wonder if it isn't these days about science and price, because isn't that what Amazon (AMZN) offers?
J.C. Penney may very well know what its customers like by looking at what they bought. But Amazon can anticipate and offer anything through the price of Penney, if it wants to. Penney has to pay rent, have sales people, be ready for on or offline, and can have too much inventory. Amazon, by nature, has none of those. Sure, Penney might have loyalty, but the loyalty was torched pretty heavily during a previous regime that was way too out of the box.
I like that Penney has a solid franchise in its Sephora store-within-a-store and appliances seem to be selling well, but I don't know if this is one of those "is that all there is" situations.
Penney may be an afterthought.
Macy's, fortunately, never went through a bitter and failed re-do, and it does have substantial real estate holdings that it can still monetize. It can also close more underperforming stores and has enough performing stores to be able to handle its capital base.
I think Macy's stores had gotten tired, but this is what I like about Macy's -- the new CEO, Jeff Gennette, is doing much to make the stores look better, and he's working on a loyalty program to keep long-time, big-time Macy's shoppers happy. That's a welcome change, although I would just turn the whole program over to Salesforce.com (CRM) , to be much more in touch with the customer.
Just to be sure, I am not picking on either Macy's or J.C. Penney. They are just a lot more nostalgic and pointed for me that the "relative" newcomers, Nordstrom (JWN) and Kohl's (KSS) to my day-to-day retail existence as a young Cramer growing up in a house where all we did was talk retail.
They are, though, very different animals from the traditional Macy's-Penney mall model. Nordstrom has 349 stores to Macy's 728 and Penney's 875, and is still putting up big stores, including New York City, which is scheduled for a partial opening next year.
There are plenty of greenfield spaces for more Nordstroms. Kohl's is adding to its 1155 stores. Macy's is closing 68 stores and Penney 138, according to the last press reports.
But still, they all share the desire to try to make their bricks-and-mortar, art-more-than-science stores into a virtue, typically by talking about buy online, pick up in store, or BOPUS for lack of a better acronym.
To me, it all seems a little stilted and a little forced. Only Kohl's has a strip mall parking lot that makes it easy to BOPUS, if you can verbalize it. The rest have grave structural concerns blocking you.
The fact is that if you had to start Macy's over, you either wouldn't or you would do it online, or you would do it with artificial intelligence and salesforce.com to know what the customer wants ahead.
And that's really the sad fact. Just like we would not have built cars for humans if we had known that robots could drive them better, we would not have built malls knowing that the internet could be a more efficient ordering system.
Yes, there will always be a use for department stores, but they are relics. And there's nothing to say that they need to stay alive, not more than Gimbel's and Lit's did when they were entrenched strong competitors in the Philadelphia area.