Gilford Securities analyst Bernard Sosnick rates J.C. Penney Company, Inc. (NYSE:JCP) as a Buy as the retailer achieves a more ambitious targeted sales objective for November-December, 2013.

J.C. Penney JCP

Correcting assortments, closing stores and resuming sales commissions are parts of a return to normalcy. J.C. Penney Company, Inc. (NYSE:JCP) is still at a perilous stage but we expect evidence this spring that it is recovering and anticipate a sizable rally for J.C. Penney shares.

J.C. Penney pleased with its sales

We think when J.C. Penney Company, Inc. (NYSE:JCP) said it was “pleased” with Nov.-Dec. it meant sales met a plan that assured financial liquidity but that weather and competitive conditions kept it from achieving a more ambitious targeted sales objective. Anchor stores in malls were poles apart: Sears Holdings Corp (NASDAQ:SHLD) down 9.2% in same-store stores and Macy’s, Inc. (NYSE:M) up 4.3%. We assume J.C. Penney had a sales gain.

January sales are being held down by inclement weather and fewer clearances. Even so, the bottom line in January might be positive due to lower clearance costs.

J.C. Penney skipping sales report for January

J.C. Penney Company, Inc. (NYSE:JCP) might not issue a sales release for January. It may wait to comment when earnings are released probably on Feb. 26th. Absence of a sales report for January might unsettle the market.

We anticipate 4Q/13 EPS of $(0.50)-$(0.70). There will be no income tax credit to reduce the net loss.

Men’s and women’s apparel clearances are lower than in 2013. A smooth transition to spring assortments should improve operating results in 1Q/14. There is much improvement. But there are issues with brands of kids’ apparel and home goods being discontinued or scaled back. Assortments should be nearly fully corrected by mid-late 1Q/14.

Private brands and spring apparel arriving with richer initial markups will allow 1Q/14 promotions to pack more punch: 50%-off offers vs. 30%-off. With Valentine’s Day and President’s Day promotions, February may begin a period of sustained sales gains of 7.55%-10%. Closing the 33 of 1,100 stores should be accretive to earnings in 2014.

Expect evidence in 1H/14 that Penney has a solid position in retailing and is on track toward profitability.