Why S&P Says Nordstrom and JCPenney Are ‘Vulnerable Retailers’

Two major nationwide chains have been ranked among the “most vulnerable” publicly traded retailers in America.

According to the S&P Global Market Intelligence, which released on Wednesday its monthly retail outlook report, JCPenney and Nordstrom were the No. 13 and No. 15 “most vulnerable” department store and apparel companies. The agency analyzed the retailers’ one-year and two-year probability of default on loans, or the likelihood that the companies will not be able to make its scheduled repayments on time.

The most recent quarter had been a mixed bag for most of the sector’s players — with JCPenney’s third quarter falling short of estimates, while Nordstrom offered a glimmer of hope for the retail industry in November when it reported third-quarter earnings that beat analysts’ expectations.

Amid a rapidly changing retail landscape characterized by widespread store closures and the rise of e-commerce, Nordstrom has arguably managed to stay ahead of many of its competitors. The Seattle-based retailer has often been lauded for its innovative concepts and omnichannel savvy, including its pioneering of the “buy online, pick up in store” service, revamped loyalty program and experiential store offerings.

The firm also noted improvements in its loyalty program, digital marketing efforts and merchandise assortment. In the past couple years, Nordstrom has invested more resources into BOPIS and curbside pickup, opened small-format stores. However, it has also expanded its brick-and-mortar footprint — a selling channel that, in the past few years, has been struggling to cope with the shift to e-commerce — with the October launch of its 320,000-square-foot women’s flagship in New York City.

JCPenney, on the other hand, has struggled for several quarters with declining sales, leadership changes and digital competition that spooked investors and pushed its stock below $1, putting it at risk of delisting from the New York Stock Exchange.

In mid-July, the chain had hired debt restructuring advisers as it continued to carry out its turnaround plan, while CEO Jill Soltau orchestrated the firm’s push to close underperforming stores as well as hired new talent to revive the business. It also announced a partnership with ThredUp in August, arranging for 30 of its stores to soon offer a selection of the online consignment firm’s secondhand apparel and accessories.

Other retailers that made the S&P’s list were New York & Company parent RTW Retailwinds (No. 2), Victoria’s Secret owner L Brands (No. 4) and Ascena Retail Group (No. 9).

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