The economy may be getting better, but affordable broadline retailers like JC Penney, Burlington Stores and Ross Stores won't see much benefit from it -- and the biggest reason is the shift to ecommerce, according to Goldman Sachs analyst Stephen Grambling.
In a research report released Wednesday (Dec. 3), Grambling wrote that “While better macro indicators such as payrolls and wages have corresponded to a 3.8 percent increase in retail sales year to date, our broadlines coverage comps are up a more modest 1.5 percent. We believe the under-performance is being driven by a combination of ecommerce share gains, a share of wallet shift and weather."
Grambling sees ecommerce as the biggest of those factors. Non-store retail sales are up 7.3 percent so far this year, according to the U.S. Census Bureau, while department store sales are down 2.2 percent. Grambling believes those trends will continue, Forbes reported
The report specifically calls out JC Penney, the troubled chain still trying to recover from a disastrous attempt at a makeover under former Apple Stores chief Ron Johnson. Grambling said core Penney customers appear to be returning but spending isn't back yet.
Goldman also downgraded Burlington Stores, which he said still has the ability to improve its sales productivity and margins. And while Goldman removed Ross Stores from his Conviction List he said he still viewed the discount apparel chain as "a long-term secular winner, with opportunity to grow its store base, expand margins, and improve its return on invested capital."