J.C. Penney Company, Inc. (NYSE:JCP) released a six line press release saying that it is “pleased with its performance for the holiday period, showing continued progress in its turnaround effort,” but instead of assuring analysts that all is well, the lack of detail has everyone convinced that same store sales (comps) were down in December, even if they are still up for the fourth quarter as a whole.
Most analysts bearish on J.C. Penney
“Our gut tells us that if J.C. Penney Company, Inc. (NYSE:JCP) had a good print in their back pocket – they would have disclosed it . . . in far greater detail,” writes Sterne Agee analyst Charles Grom, in what is one of the more optimistic reactions from the press release. Grom sets a 12 month $9 price target (JCP is currently at $7.47) and gives the stock a Neutral rating, while noting that comps need to improve dramatically if the company’s turnaround efforts are going to succeed.
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“We see the company having access to adequate liquidity into FY2014, but still see EPS losses on a very leveraged balance sheet into the foreseeable future and maintain our Underperform rating,” writes BMO Capital Markets analyst Wayne Hood. He figures that comps were around 3% for December and will come in at 5% for the fourth quarter, and sets a 12 month price target of $7, figures that seem to be more in line with consensus.
UBS analyst Michael Binetti forecasts higher comps (7% both for December and for the fourth quarter), but also sets a $7 price target and rates the stock as a Sell.
J.C. Penney falls even as guidance is reaffirmed
Clearly investors agreed with Binetti’s assessment as J.C. Penney Company, Inc. (NYSE:JCP)’s price fell from just under $9 to $7.37 following the news, and even though it has recovered slightly since the drop, investor confidence in the company has clearly been shaken. Even though management reaffirmed fourth quarter guidance that comps will increase both sequentially and year-on-year, 10.1% growth in November means that the store could have lost ground in December and still have a net improvement for the quarter.
At the beginning of December, there was some buzz that J.C. Penney Company, Inc. (NYSE:JCP)’s recovery could be the real deal, but underperformance in what should be the retailer’s busiest season has stopped such bullish discussion in its tracks.