J.C. Penney Company, Inc. (NYSE:JCP) is still struggling, and losing market share to rivals. Imperial Capital analysts Mary Ross-Gilbert and Seweryn Sztalkoper said that the company’s remerchandised home department sales should rise this year. J.C. Penney’s revenues from home merchandise have declined from $3.19 billion in 2010 to about $950 million in 2013. That’s because the home departments in most of the big stores were closed. Even when the departments were reopened, they were poorly merchandised.

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J.C. Penney’s guidance appears conservative

Imperial Capital analysts estimate J.C. Penney Company, Inc. (NYSE:JCP)’s first quarter sales to rise 4.3%, and second quarter revenues to jump 6.4%. After recent discussions with the company management, Ross-Gilbert and Sztalkoper said that J.C. Penney’s incremental revenue opportunity could be as high as $400-$500 million this year. So, the comparable sales momentum is likely to improve in 2014 due to a jump in sales of home merchandise. Even a modest increase in sales across the rest of the store should offset the decline in revenue due to closure of 33 stores.

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J.C. Penney Company, Inc. (NYSE:JCP) forecasts its first quarter sales to grow between 3-5%, and full year revenues to increase in mid-single digits. That’s well below Imperial Capital’s estimate of 8.7% and 6.6% respectively. Lower Q1 guidance could be because of two reasons. One, harsh winter weather and storms caused temporary store closures, and kept consumers away. Two, not-so-high expectations from the home department. The analysts expect gross margins to rise 268 basis points to 34.5% in Q1. They forecast Q2 and Q3 gross margins to improve to 37.5% and 36.5% respectively.

J.C. Penney to survive in the long-term

Modestly positive comparable sales during the fourth quarter last year suggest that J.C. Penney Company, Inc. (NYSE:JCP)’s turnaround is gaining traction. The Plano, Texas-based company’s current cash position of $1.25 billion in cash and $500 million of revolver availability are sufficient to fund its turnaround plan. J.C. Penney also has the ability to tap into secured financing of $500 million. The research firm says that it expects J.C. Penney to survive in the long-term as a “value-priced’ department store chain serving low-income consumers.

Imperial Capital has a Buy rating on J.C. Penney Company, Inc. (NYSE:JCP)’s longer-dated senior notes that mature between 2020 and 2097. But the research firm maintains Hold rating on shorter-dated senior notes that mature between 2015 and 2018. It has an Underperform rating on the company’s shares with $2.50 price target.

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J.C. Penney Company, Inc. (NYSE:JCP) shares soared 9.26% to $9.20 at 10:47 AM EDT.