As Sears goes bankrupt, JC Penney, Walmart and others set to benefit

With Sears Holdings filing for bankruptcy protection and planning to shutter another 142 stores before year end, that leaves some market share up for grabs among the retailers' rivals, especially those in the business of selling appliances and tools.

Though the department store chain has been teetering on the brink of collapse for years already, its Sears and Kmart divisions still recently made about $14 billion in sales annually. Despite shelves that have been increasingly barren, customers still ventured to stores for well-known brands like DieHard and Kenmore.

J.C. Penney could be the biggest beneficiary of this news, according to one analyst.

Penney has a store within a quarter mile of roughly 47 percent of Sears' locations, Gordon Haskett analyst Chuck Grom said in a note to clients. Walmart is the next closest when looking at geographies, the firm found in working with geo-location data provider Alpha-Hat and surveying proximity.

Should Sears end up liquidating its business entirely, the firm expects Penney could get a lift in same-store sales of about 1.8 percent in fiscal 2019.

Grom expects Kohl's, Macy's and Target to see a lift in sales, while Walmart, Lowe's and Home Depot should also benefit, but the spike in sales for the latter three might not be as evident "given their sheer dollar size," or market cap.

Still, it's important to keep in mind that Sears has been burning through more than $3 billion in sales each year for the past few years, Grom said, meaning this collapse is no sudden surprise. Penney has already been taking advantage of that, he said. For example, while Marvin Ellison was still CEO there, the Texas-based department store chain reintroduced selling major appliances.

Most recently, Sears has generated about 55 percent of its total sales from the hardlines category, which includes home appliances under its Kenmore banner, electronics, auto parts, lawn equipment and sporting goods, company filings show. Next is apparel at about 32.5 percent, followed by food and drug at 13 percent.

A separate survey of U.S. consumers by Cowen & Co. found the average Sears shopper today is about 45 years old and makes a little more than $59,000 each year. The average Kmart shopper, meanwhile, is a little more than 43 years old and makes about $53,000 annually. That makes Walmart ($55,200), Burlington Coat Factory ($59,100), J.C. Penney ($61,000) and Ross Stores ($61,400) the most comparable retailers for Sears and Kmart shoppers when looking at household income, the firm said.

Cowen & Co. anticipates sales at Penney stores open for at least 12 months could climb upwards of 1.7 percent, assuming total liquidation of Sears Holdings down the road.

This could be a welcome boost for Penney, which recently went months without a CEO and similar to Sears has struggled to grow sales of late.

"Key factors in driving [Sears] share gains will include distance to store, shopper overlap, product and brand assortment similarities, neighborhood similarities, and tactical promotional strategies," Cowen & Co. analyst Oliver Chen said in a note to clients. "We believe the fight for share gains will be highly competitive," he said, but there's always the chance former Sears and Kmart shoppers "could also just stay home and not shop for items that were more discretionary in nature."