J C Penney shares are trading higher after Deutsche Bank analyst Paul Trussell upgraded his rating from Hold to Buy citing the reason that the retailer has “multiple layers to pull” to achieve its target of $1.2 billion in EBITDA by 2017.
The stock price of J C Penney increased nearly 2% to $9.11 per share at the time of this writing around 3:00 in the afternoon in New York on Monday.
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In a note to investors, Trussell identified several opportunities for J C Penney to improve its margins including the use of technology to control unintended markdowns. He also noted that the company’s initiatives in improving its store presentation would help increase its sales.
J C Penney CEO is practicing the science of retail
“The company is already proficient in the art of retail under its seasoned merchandising team with what we think are the right brands and assortment. New CEO Marvin Ellison is now driving the next step of applying the science of retail to bring J C Penney up the curve,” according to Trussell.
J C Penney succeeded in its efforts to increase its same-store sales in seven out of the last eight quarters, according to Retail Metrics. Last month, the century-old retailer reported that same-store sales climbed 4.1% during the second quarter—an indication that its turnaround efforts are working under its new CEO.
J C Penney to regain status as world-class retailer
Ellison stated that J C Penney is working to regain its status as a world-class retailer. The retailer has approximately 87 million active consumers.
At present, J C Penney’s objective is to encourage its customers to shop more frequently and increase their spending. As part of its strategies, the company boosted its partnership with Sephora, a special beauty shop, is still driving growth for the company.
J C Penney is improving its stores by adding more fixtures and lighting in major departments including handbags. The company is also networking its InStyle Salon service, and allocating more space for women’s footwear.
J C Penney also launched the same day, buy-online-pick-up-in-store service and revamped its loyalty program. Trussell said the changes could potentially encourage its customers to shop across its different categories.
The management is confident that it has the right assortment to cater all segments of the fashion pyramid. The company’s private label offering is gaining momentum after adjusting its inventory levels for significant items.
Trussell estimated that J C Penney will be able to achieve $1.18 billion in EBITDA by 2017, slightly below the company’s target of $1.2 billion. He issued a price target of $12 per share on the stock.
Trussell said he is still cautious on J C Penney because of “competitive environment and tough compares.”