J.C. Penney (JCP) Soars on Promise of Better Q3 Sales

Michael Teague  |

The precipitous decline of American-as-apple-pie retailer J.C. Penney Company Inc. (JCP) over the last two years might best be characterized as both spectacular and unprecedented.

The department store retailer has watched shares hemorrhage 75 percent of their listed price in the last 12 months alone, a decline that has been largely attributed to hasty and presumptuous changes in sales strategy implemented by recently departed CEO Ron Johnson.

On Monday, however, shares were trading over 8 percent higher at times throughout the day, to as high as $7.49 after current and former CEO Mike Ullman told investors in attendance at an industry trade conference that the beleaguered company would be posting gains when it releases its earnings report for fiscal third-quarter next month.

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Ullman, who since returning to the company has reinstated its time-tested sales and merchandising strategies, claimed that the department store was starting to see sales growth, that would be reflected in its Q3 statement in the form of improved same-store-sales figure, a key retail metric that measures sales growth in stores open for longer than one year. That number was 26 percent lower in the prior year period, and 12 percent lower at the end of Q2 2013.

Ullman’s confidence and assurances comes as part of a corrective publicity campaign designed to win back disillusioned shoppers, as well as to convince shareholders of better times ahead. But despite the upbeat sentiment, J.C. Penney still has a dramatic uphill battle ahead of it. The company is saddled with debt, and is lagging behind both industry and overall S&P 500 averages in other important metrics; anemic return-on-equity and gross profit margins, and perpetually deflating EPS and operating cash flow numbers. Furthermore, the company has become a playground for short-sellers, with over 25 percent of outstanding shares currently being shorted.

J.C. Penney is also the services sector component in Equities.com's Turnaround Stock Portfolio, a weekly series tracking the performance of one company from each sector that is currently attempting to rebound off of especially poor, if not disastrous, performances over the last year.

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