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A Tale of Two Retailers-Battle of the Titans

Stocks drop modestly on the disappointing 30-year bond auction...stocks have not reacted to the recent Treasury auctions, but the S&P 500 did move down a few points on this one.

Blame the higher yield (4.01 percent), and lower indirect participation (34.5 percent vs. an average of 40.64 percent), and the 2.37 bid-to-cover ratio, well below the norm, all caused a little flutter.

But it's tough keeping stocks down...the S&P 500 and the Dow Industrials are only a few points from closing at new highs, and the new highs at NYSE are at their highest levels in two years.

Kohls vs. JC Penney: battle of the titans. Interesting backstory on the battle between mid-priced department stores.

  • Most Retailers Top Expectations for September Sales

Both Kohls and JC Penney raised guidance, but Kohls is up nearly 3 percent, while JC Penney was DOWN on the day, and only turned slightly positive mid-morning...what gives?

Traders tell me that Kohls is in a big-time offensive posture to take traffic and share away from JC Penney.

"Structurally, Kohls is just clobbering them," one trader said to me. "Inventories are in great shape, they bought awesome real estate in California [the old Mervyn stores], and JC Penney just signed a deal to get Liz Claiborne - the brand that sucked at Macy's."

"Kohls inventories are so lean and gross margins are so good that they can really hammer JC Penney on price whenever they feel like it."

Here's a good example: Both Kohls and JC Penney reported better September sales than expected, both raised guidance, BUT JC Penney said October same store sales will be down 5 to 8 percent compared to a year ago.

Huh? Comps are easier, but sales are still DECLINING 5 to 8 percent?

That is a real disappointment, considering that October 2008 sales were ALREADY down 13 percent from October 2007 sales.

Kohls did not provide October sales guidance, but they are likely to be well above last year's.

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