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JC Penney in Troubled Waters

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Shares of J. C. Penney Company, Inc. (JCP - Free Report) nosedived 13.2% to close at $9.05 on Friday, Sep 27, when it reached a 52-week low of $8.85 in the day’s session. The stock’s year-to-date performance is also disappointing, as it has plunged 56.6%. It seems that this beleaguered S&P 500 retail chain operator has lost investors’ confidence, and given the numerous challenges that the company faces at present, the stock has more downside left.

The department store’s public offering of 84 million shares at a price of $9.65 per share plus an additional 12.6 million shares in case of excess demand, failed to calm investors’ jitters just ahead of the holiday season. The offering will conclude tomorrow.

J. C. Penney has been in troubled waters for quite some time, and has been grappling with waning revenues and higher losses. The company has not shown any signs of recovery in the recent past. This is evident from its 7th consecutive quarter of sluggish results on Aug 20. The company has been constantly lagging its peers, Macy’s Inc. (M - Free Report) , Target Corporation (TGT - Free Report) and Kohl’s Corporation (KSS - Free Report) in terms of performance.

The company remained in the red with adjusted loss per share of $2.16 in the second quarter of fiscal 2013 that widened from the loss of 37 cents in the year-ago quarter. The Zacks Consensus Estimate for the quarter was a loss of $1.13 per share. Top line plunged 11.9% to $2,663 million and fell short of Zacks Consensus Estimate. Looking at the company’s earnings surprise history, J. C. Penney has missed the Zacks Consensus Estimate by an average of about 523.2% in the trailing four quarters.

However, this Zacks Rank #3 (Hold) stock has taken several strategic initiatives to drive traffic and conversion. The company reverted to promotions, which could be a successful sales driver this holiday season.

Investors remain cautious about the stock, as the company endeavors to recoup and give itself a major facelift. In a significant development, the company’s board of directors in Apr 2013 discharged the Chief Executive Officer (CEO) Ron Johnson of his duties after 17 months, as his ambitious transformational ideas failed to materialize. Consequently, the company’s former CEO, Myron E. (Mike) Ullman, III was reinstated in his post.

However, we have to wait and see if the initiatives undertaken to revive the stock are successful.

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