J. C. Penney Company Inc.
) seems to be in an unfavorable position as the soft economic
environment continues to take toll on its performance. This
retailer of apparel and footwear, accessories, fashion jewelry,
beauty products and home furnishing, reported the fourth
consecutive quarter of lower-than-expected bottom-line
The company's dismal performance for the fourth straight
quarter compelled us to retain our bearish stance on the stock.
Thus, we maintain our Underperform recommendation on the stock
with a price target of $26.00.
Falling Short of Zacks Expectation
We observe that despite a well-diversified supplier base, J.
C. Penney has been struggling against other retail chains. The
company's earnings lagged the Zacks Consensus Estimates in the
last four quarters by an average of 328.2%.
J. C. Penney's third-quarter fiscal 2012 results failed to
meet expectations. The company posted a quarterly loss of 93
cents a share that fared worse than the earnings of 18 cents in
the year-ago quarter and the Zacks Consensus Estimate of a loss
of 8 cents.
The quarterly sales of $2,927 million plunged 26.6% from the
prior-year quarter, and fell short of the Zacks Consensus
Estimate of $3,290 million. Internet sales via jcp.com plummeted
37.3% to $214 million in the quarter. The company's quarterly
sales have been missing the Zacks' expectation since the last
five quarters by an average of 5.3%.
Comparable-store sales declined 26.1% during the quarter
compared with a decrease of 1.6% in the prior-year period. We
believe that the company needs to be more vocal regarding its
pricing mechanism and better align its marketing efforts to
attract buyers. Traffic declined 11% in the first quarter, and
12% in both the second and third quarters.
Downward Trend in Estimate Revision
Following J. C. Penney's disappointing third quarter results,
the Zacks Consensus Estimates have been portraying a downward
The Zacks Consensus Estimate for the fourth quarter of fiscal
2012 dropped by 51 cents to 17 cents a share. For the first
quarter of fiscal 2013, the estimate slid to a loss of 25 cents
from a loss of 6 cents over the same time frame. The Zacks
Consensus Estimates dipped to a loss of $1.08 from a loss of 19
cents for fiscal 2012 and plunged by 94 cents to 40 cents a share
for fiscal 2013 in the last 30 days.
J. C. Penney Trying to Reposition
J. C. Penney is in a transitory phase, trying to remould
itself from the way it had operated before Ron Johnson took
charge, and is striving to become America's favorite store. In
order to uplift itself, J. C. Penney announced an array of
measures, which include a new pricing strategy, fresh logo,
strategic merchandise initiatives, cost reduction and enhancement
of customers' shopping experience. The company intends to enable
WiFi network and mobile POS in all the stores. The company aims
to reduce costs by over $900 million by the end of fiscal
We believe that soft results for fourth quarters in a row have
dashed hopes at least for the near term. Moreover, an erratic
consumer behavior and a sluggish economic recovery still remain
matters of concern.
The above analysis supports our unbiased view, and advocates
our bearish stand on the stock, which is well defined through our
Zacks #5 Rank that translates into a short-term Strong Sell
rating. J. C. Penney, which competes with
), currently operates approximately 1,100 department stores in
the United States and Puerto Rico.
PENNEY (JC) INC (JCP): Free Stock Analysis
KOHLS CORP (KSS): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
To read this article on Zacks.com click here.