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Heading Into Holidays Season, Where Does J C Penney Stand?

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The holiday season is certainly an exciting time of year.  The year is coming to an end, football, big dinners, family and festive decorations are on the way.  However, for the economy, the holiday shopping season represents a very important part of the year.  Being that retail sales make up a mass majority of the US GDP, it is often followed very closely this time of year.  According to the National Retail Federation, retail sales for November and December (ex-gas, cars, and restaurants) is forecasted to rise 4.1% to $616.9 billion, compared to 2013’s increase of 3.1%.  This is certainly a bullish outlook, aided by record high online shopping estimates.  While the holiday season is an important time for retailers, not all are created equal.  J C Penney Company Inc (NYSE:JCP), for instance, appears to be slowly falling down and losing influence.  Many investors continue to question whether the company will be able to regain its footing after a disastrous past couple of years.

Analysts at Deutsche Bank AG (NYSE:DB) (ETR:DBK) rate the stock as a “hold” currently and see a price target of $8.00, or nearly 10% increase from current prices.  Deutsche Bank sees full year 2014 earnings coming in at a loss of -$3.13 earnings per share and forecasts full year 2015 earnings per share to rise slightly, but still come in at a loss of -$2.15.

Bull case for J C Penney continuing

The analysts see the bullish case for J C Penney as being the continued effort to regain lost customer base with big sales and with its top departments: center core, home and e-commerce.  Additionally, the analysts see opportunity at J C Penney Company Inc (NYSE:JCP) to liquidate some assets such as real estate to help pay down debts.

The bearish case Deutsche Bank sees with the struggling retailer, J C Penney, is underperformance with its private label brand.  While the private label had regained some market share since tanking in 2011, analysts see the label once again losing market share and expenses ramping up.  Combined with high levels of debt, analysts see a very long and frustrating road back to profitability.

Short sellers taking control of J C Penney

Overall, J C Penney Company Inc (NYSE:JCP) does not have a lot going on for themselves right now.  The stock is down -20% year to date, short sellers are taking control with 31.89% short float, earnings are forecasted to fall -24.10% this year and debt to equity ratio is at 2.09.  The retailer just recently announced an early head start with a massive sale currently going on, but how much will this sale actually help?  With very stiff competition from the likes of Wal-Mart Stores, Inc. (NYSE:WMT), Target Corporation (NYSE:TGT), Macy’s, Inc. (NYSE:M), Amazon.com, Inc. (NASDAQ:AMZN), etc, does J C Penney still have a chance for survival and flourishing?

Disclosure: None

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