Retailers On The Ropes: 7 Companies Expected To Have A Difficult 2014

It's been a rough couple of years for the venerable department store chain, in part due a series of very high-profile management snafus. After significant sales erosion and a drop in share prices, JC Penney (NYSE: JCP) CEO Myron Ullman was replaced in late 2011 by Ron Johnson.

The former Apple executive tried to reverse Penney's flagging fortunes by revamping its stores, getting rid of sales in favor of everyday low prices and introducing trendy, in-store boutiques. But Johnson's strategy failed miserably with JC Penney shoppers.

Sales reportedly fell by 25 percent in 2012. In April of last year Johnson was shown the door and Ullman rehired as CEO.

Since then Ullman has been working to bring back Penney's traditional customer base while restoring employee morale. He's also been restructuring the chain.

Earlier this month, the company announced it was closing more than 30 of its stores and cutting 2,000 jobs, in an effort to save about $65 million annually. Ullman said the reductions are part of a company effort to “reexamine the financial performance of our store portfolio and adjust our national footprint accordingly.”

Another famed American retailer, with a history dating back to the pioneer days, Sears (NASDAQ: SHLD) has been bleeding money since 2005. That's when billionaire hedge fund manager and CEO Edward Lampert merged Sears and Kmart.

Company share prices have reportedly dropped over 70 percent since its 2007 highs. The Milwaukee Journal-Sentinel, meanwhile, says Sears lost $3.1 billion in 2011, $930 million in 2012 and $1 billion in the first three quarters of last year.

Sears has closed (or is in the process of closing) about 300 of its U.S. stores, including its flagship Chicago outlet, since 2010, as it attempts to focus more on online retailer shoppers. In December, the retailer also announced plans to sell off its Land's End division, as well as its Sears Auto Center brand.

But the damage, analysts say, has taken its toll. "The challenges the company faces today are far worse than ever before, but they're very much self-inflicted," Arthur Martinez, who served as CEO from 1995 to 2000, told Crain's Chicago Business.

The nation's second-largest department store chain is coming off a very solid holiday shopping season, and recently announced it would beat analyst expectations regarding its profits through early next year.

That being said, Macy's (NYSE: M) – like other big retailers – is struggling with both uneasy consumer confidence and growing competition from online companies.

Macy's recently announced it was cutting 2,500 jobs, as part of a reorganization expected to save the company $100 million annually. And, according to the Associated Press, it will also reassign some employees to online shopping and warehouses – while centralizing company control over the merchandising of “soft home” items like sheets and linens to a regional and national level.

The electronics chain was one of the comeback stories of 2013. Best Buy's (NYSE: BBY) aggressive campaign against “showrooming” – where consumers check out products in brick and mortar stores and then make their purchases online – appeared to be gaining traction. Its stock was up more than 240 percent last year, and prospects for 2014 appeared to be good as well.

But Best Buy share prices tumbled dramatically in mid-January, after it reported a sharp drop in crucial holiday season sales and an unexpectedly large decline in its quarterly operating margins.

Those dismal reports sparked a wave of speculation among investors about Best Buy's continued ability to compete against online rivals like Amazon.com. The company has also been looking to reduce costs through a wave of store closures: with at least 47 large-format outlets darkened in fiscal 2013 and up to ten more stores slated for closure in fiscal 2014.

Consumers have been gun-shy about this retail chain in recent months, following news that internet hackers stole personal information, including debit and credit card numbers, from tens of millions of Target (NYSE: TGT) shoppers. And on the heels of that massive security breach came word that some Target gift cards aren't working.

The company recently sent out an update on its expected results for the fourth quarter of 2013 – with an adjusted EPS of $1.20 to $1.30, compared with prior guidance of $1.50 to $1.60. It also expects a sales decline of around 2.5 percent, instead of its previously predicted flat comparable sales.

Target says it can't estimate all the costs related to the massive hacking scandal – but it believes those costs may “have a material adverse effect on Target’s results of operations in fourth quarter 2013 and/or future periods.”

The teen clothing retailer is trying to claw its way back into the black, after four quarters of losses. Fickle consumer tastes among its target customers haven't helped the company, either. Aeropostale (NYSE: ARO) reported disappointing third quarter earnings results in December, with net sales down 15 percent compared to the same time period a year earlier.

Bloomberg, meanwhile, is reporting the company has contacted several private-equity firms to explore “strategic options,” including sale to another retailer or taking Aeropostale private.

2013 was a very difficult year for Lululemon (NASDAQ: LULU). The Vancouver, Canada-based yoga-wear and sports apparel company had a public relations scandal on its hands when some of its yoga pants were discovered to have been made with a see-through material.

It dealt with another round of consumer outrage after Lululemon founder and board chairman Chip Wilson suggested the problem with the yoga pants was actually due to some customers' bodies.

Despite attempts at damage control – the controversial pants were recalled and Wilson was forced to step down – consumers haven't yet been wooed back to the stores in their previous large numbers. The Wall Street Journal reports Lululemon disappointed investors with relatively weak holiday sales figures. The company also says its next earnings results will probably be below December's forecasted expectations.

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