Markets

Why J.C. Penney Stock Jumped 23% Today

What happened

J.C. Penney (NYSE: JCP) shares were surging for the third day in a row today after investors continued to respond favorably to the retailer's decision to launch its own men's outdoor apparel brand, trying to grab a piece of a fast-growing segment.

The stock finished Wednesday up 23.8% following a gain of 18.8% the day before. Tuesday's announcement seemed to spark a short squeeze that boosted the stock for a second straight day as investors who had bet against the stock rushed in to cover their bets.

The entrance to a J.C.Penney department store.

Image source: J.C. Penney.

So what

On Tuesday, J.C. Penney said that it was launching St. John's Bay Outdoor, a spinoff of one of its biggest house brands. It called the brand "a new category designed to inspire and serve customer experiences and build on the strength and relevance of the retailer's popular men's private brand."

The company said that St. John's Bay Outdoor would launch in 600 stores on Thursday and online, and it will open outdoor shops featuring several brands of outdoor gear and apparel in 100 stores on Oct. 4.

Separately, J.C. Penney also said it had hired a new senior vice president, finance, Colin Dougherty.

Now what

The outdoor launch is the company's biggest step forward under CEO Jill Soltau, who took the helm nearly a year ago. Soltau pulled the plug on the company's push into appliances, which her predecessor Marvin Ellison had started, and promised instead to focus on apparel, the company's biggest and most important segment.

The launch of St. John's Bay Outdoor and the shops seems like a smart move, as casual and outdoor clothing have grown more popular with changing cultural mores, but it will take a lot to turn around J.C. Penney at this point. Investors should hope that this is the first of several such launches the company has planned ahead of the holiday season, as it desperately needs to take advantage of the shopping rush that comes in December if the stock's rebound is going to continue.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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