Shares of J.C. Penney (NYSE:
) rose more than three percent Friday morning even after the
clothing retailer reported quarterly earnings that drastically
missed Wall Street analysts' expectations.
Specifically, J.C. Penney reported Friday a second-quarter
adjusted loss per share of $0.37, missing the consensus analyst
estimate by $0.12. The company also announced that it does not
expect to meet previously issued full-year earnings
These business results might seem dreadful, but last quarter's
results may have been even worse.
For the first quarter, the company missed the consensus earnings
per share estimate by an astounding $0.28. In the same earnings
release, the company announced discontinuation of a prior $0.20 per
share quarterly dividend. On May 16, the day following this
abhorrent first-quarter earnings release, shares fell close to 20
"We have now completed the first six months of our
transformation and while business continues to be softer than
anticipated, we are conﬁdent the transformation of J.C.
Penney is on track," said CEO Ron Johnson in a statement
Moreover, in the company's second-quarter conference call,
Johnson said he is "confident" everyone will understand J.C.
Penney's everyday value.
Short-sellers may have been scared by Johnson's confidence.
Frantic short-covering may have contributed to Friday's price
increase, as shares sold short comprise around 28 percent of J.C.
in June that Johnson had resumed using the word "Sale." This
followed a three-tiered pricing strategy which started in
In the call, Johnson said customers were confused about the
previous pricing strategy. Now, he said, "customers get it."
The word "sale" might become increasingly important to the
company, as it reported $53 million of inventory markdowns for the
first-quarter and $102 million for the second-quarter.
J.C. Penney trades at a similar value to competitors Kohl's
) and Macy's (NYSE:
), as measured by forward price-to-earnings (PE) ratios. All three
companies have forward PE ratios close to 10.
Unlike J.C. Penney, Kohl's and Macy's both reported
better-than-expected quarterly earnings this week. Specifically,
Kohl's reported second-quarter earnings per share of $1.00, beating
analyst expectations by $0.04. Macy's reported second-quarter
earnings per share of $0.67, beating analyst expectations by
Shares of Kohl's fell around 1.6 percent Friday morning while
shares of Macy's fell around 1.1 percent.
Disclosure: At the time of this writing, I did not own shares of
any companies mentioned in this post.
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