Sears Holdings Corporation (SHLD), J.C. Penney Company Inc. (JCP): The Bad News

Sears Holdings Corporation (NASDAQ:SHLD) wants to use the Shop Your Way rewards program to tailor offers to each customer. Management believes that rewarding the most loyal customers and offering individualized deals will ultimately allow the company to cut back on big companywide promotions, which hurt margins. This strategy could ultimately stabilize sales while boosting margins, which would dramatically improve profitability.

Foolish bottom line
Whereas J.C. Penney Company, Inc. (NYSE:JCP) hopes to recover from Ron Johnson’s failed strategy by returning to its previous strategy — which wasn’t working either — and hoping for the best, Sears Holdings Corporation (NASDAQ:SHLD) is actually trying some new ideas. Management’s commitment to reducing fixed costs and the company’s emphasis on a rewards program as a substitute for margin-sapping discounts give Sears a fighting chance.

This does not necessarily make Sears Holdings Corporation (NASDAQ:SHLD) a good investment opportunity. Investors should not bet much money on the company unless it can finally return to sales growth while also increasing its profit margin. However, unlike J.C. Penney Company, Inc. (NYSE:JCP), Sears has adequate liquidity, a growing e-commerce business, and a credible plan for improving results. Now, the company just has to execute.

The article Will This Retail Icon Bounce Back or Wither Away? originally appeared on Fool.com.

Fool contributor Adam Levine-Weinberg is short shares of Amazon.com. The Motley Fool recommends Amazon.com and Home Depot. The Motley Fool owns shares of Amazon.com. 

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