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Will J. C. Penney's Strategic Endeavors Help Lift the Stock?

J. C. Penney Company Inc.JCP has taken up several strategic initiatives to drive traffic. The company, in order to improve customer shopping experience, has been focusing on remodeling, renovating and refurbishing its stores, with special focus on enhancing the high-margin center core department that houses handbags, fashion accessories, sunglasses and fashion jewelry.

Moreover, we believe J. C. Penney's efforts to further the reach of national and especially private-label brands through effective marketing campaigns and point-of-sale technology initiatives, should help improve gross margins. The company is also expanding its Home business by integrating an appliance showroom with approximately 500 outlets and online, at jcp.com. Further, the in-store Sephora departments continue to outperform by drawing more customers.

J. C. Penney's strategic efforts enabled it to post a narrower-than-expected loss in the first quarter of fiscal 2016. The company reported adjusted loss per share of 32 cents in the first quarter, narrower than the Zacks Consensus Estimate of a loss of 40 cents. In the year-ago quarter, it had incurred an adjusted loss of 57 cents per share. Notably, this was the fifth straight quarter in which the company's bottom line outperformed the Zacks Consensus Estimate.

PENNEY (JC) INC Price and Consensus

PENNEY (JC) INC Price and Consensus | PENNEY (JC) INC Quote

Despite these positives, the company's debt level raises concerns. Although J. C. Penney lowered its debt significantly during first-quarter fiscal 2016, the level still remains high. At the end of the reported quarter, total long-term debt was $4,388 million, reflecting debt-to-capitalization ratio of 77.8%. The company plans to lower its debt load in fiscal 2016 by $400-$500 million, and intends to reduce its net debt to EBITDA ratio from 5.4 times to less than 3 times by fiscal 2017.

Given the pros and cons embedded, the stock currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Investors interested in the retail space may consider some better-ranked stocks such as Delta Apparel Inc. DLA , sporting a Zacks Rank #1 (Strong Buy), and The Children's Place, Inc. PLCE and Carter's, Inc. CRI , both holding a Zacks Rank #2 (Buy).

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CHILDRENS PLACE (PLCE): Free Stock Analysis Report

CARTERS INC (CRI): Free Stock Analysis Report

PENNEY (JC) INC (JCP): Free Stock Analysis Report

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


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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