First quarter comps are just around the corner, and investors are bracing for bad news about how much damage the harsh winter did to retail stores earnings. According to a Sterne Agee report, buy-side analysts are consistently in line or below street estimates for department and dollar stores heading into earnings.

Sterne Agee estimates on J.C. Penney comps well below consensus

“We believe the real ‘bar’ on comps lies below Street estimates for Dollar Tree, Inc. (NASDAQ:DLTR), Kohl’s Corporation (NYSE:KSS), Macy’s, Inc. (NYSE:M), Nordstrom, Inc. (NYSE:JWN), and Target Corporation (NYSE:TGT) while investor expectations on Dollar General Corp. (NYSE:DG), Five Below Inc (NASDAQ:FIVE), and J.C. Penney Company, Inc. (NYSE:JCP) are generally well aligned with Street estimates,” writes Sterne Agee analyst Charles Grom in a May 2 report.

consensus v buyside SSS 0514 J.C. Penney

This discrepancy means that a small earnings miss from Dollar Tree, Inc. (NASDAQ:DLTR) or Kohl’s Corporation (NYSE:KSS) would have a dampened impact on their stock price while an earnings beat should cause them to jump. Hard struggling shops like Neutral rated J.C. Penney Company, Inc. (NYSE:JCP) get no such slack, although Grom is more bearish than the street with same store sales (SSS or comps) estimates at half consensus and below the range that J.C. Penney Company, Inc. (NYSE:JCP) has guided for.

Two year SSS stacks to decelerate

SSS are normally measured on year-on-year basis since seasonal effects make sequential comparisons less meaningful for many retail businesses, but you can also look at longer time frames. SSS stacks Look at the changes across multiple years in the same quarter, 1Q11 to 1Q13 for instance.

“The 2-year stacks in 2014 (relative to the 2013) are expected to slow ~150 bps for Discounters/Clubs, ~300 bps for Dollar Stores, ~150 bps for Department Stores, and a significant ~500 bps for Health and Wellness names we cover,” writes Grom.

Stacks are useful in highlighting when a company isn’t so much beating the competition as digging itself out of a hole or coming down off a stellar year and not really in trouble. On a one year basis, J.C. Penney Company, Inc. (NYSE:JCP) looks like it is pulling ahead of its peer group, with estimated SSS above the department store average for the first three quarters of the year and then pulling in line with the average in 4Q14E.

But the two year stacks tell a different story. Here J.C. Penney Company, Inc. (NYSE:JCP) is not only below its peer group, it is still estimated to be negative for the first three quarters. Disastrous 2013 numbers have set the bar too low to be meaningful, and J.C. Penney Company, Inc. (NYSE:JCP) still has a lot of work before it can say that it has healthy levels of traffic.

sss 2 yr stacks 0514