J.C. Penney Company, Inc. (NYSE:JCP) has had a rough year after being dragged into a boardroom brawl by activist investor Bill Ackman and struggling in the wake of former CEO Ron Johnson’s failure to turn it around. However, Gilford Securities analysts think the company’s stock is ripe for the picking because they believe shares will rally as sales stores increase.
Shares of the retail chain’s stock rose more than 5% in midday trading as investors consider whether the company will benefit from this year’s holiday shopping season.
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Why Gilford remains bullish on J.C. Penney
Analyst Bernard Sosnick at Gilford says in spite of all the problems J.C. Penney Company, Inc. (NYSE:JCP) has seen over the last few months, he has kept his Buy rating on the company’s stock. He believes that the December quarter is the key to what happens to the aging retailer. He was disappointed in the company’s October results, but he thinks November is going to be a much better story. He’s expecting to see same store sales to rise by 10 to 15%. If that happens, he expects the company’s shares to rally.
The analyst pointed to a promotional ad for Veterans Day Weekend as one of the reasons for his view. He said it was clear from the circular that J.C. Penney had big expectations for that weekend. He did a “limited” sample of store visits and checks and believes that the retailer has achieved its goal for sales and perhaps even surpassed it. He said shoppers at most stores he checked told him the same thing: “Penney is back.”
Where J.C. Penney wants to be
Sosnick assumed that last year’s November sales without any promotional event, fell between 50 and 60% to around “40-50.” He estimates that J.C. Penney Company, Inc. (NYSE:JCP)’s target is to bring sales back up to “70-75.” If the retailer can do this, then it would be a big step in the right direction, according to Sosnick, although the company still wouldn’t be back to 2011 levels.
What shoppers are liking about J.C. Penney
According to his checks, shoppers seem to be responding well to the Disney department. Also the new home department organization seems to have spurred sales there. The retailer reclassified the items according to category. Sosnick predicts that J.C. Penney’s home department will actually be “a sales leader” during the holiday shopping season.
The analyst thinks Black Friday will also be important for the company this year and notes that the chain didn’t start planning for the day until late and that it put together “a last minute feeble effort.” This year, however, J.C. Penney Company, Inc. (NYSE:JCP) is better prepared since it started planning back when Ullman replaced Johnson months ago. He is now estimating that Black Friday will add $200 million or more to the retailer’s sales, which would be a 6 to 7% same store sales addition for the fourth quarter.