Back to top

Image: Bigstock

Will J. C. Penney's Strategic Endeavors Help Lift the Stock?

Read MoreHide Full Article

J. C. Penney Company Inc. has taken up several strategic initiatives to drive traffic. The company, in order to improve customer shopping experience, has been focusing on remodeling, renovating and refurbishing its stores, with special focus on enhancing the high-margin center core department that houses handbags, fashion accessories, sunglasses and fashion jewelry.

Moreover, we believe J. C. Penney’s efforts to further the reach of national and especially private-label brands through effective marketing campaigns and point-of-sale technology initiatives, should help improve gross margins. The company is also expanding its Home business by integrating an appliance showroom with approximately 500 outlets and online, at jcp.com. Further, the in-store Sephora departments continue to outperform by drawing more customers.

J. C. Penney’s strategic efforts enabled it to post a narrower-than-expected loss in the first quarter of fiscal 2016. The company reported adjusted loss per share of 32 cents in the first quarter, narrower than the Zacks Consensus Estimate of a loss of 40 cents. In the year-ago quarter, it had incurred an adjusted loss of 57 cents per share. Notably, this was the fifth straight quarter in which the company’s bottom line outperformed the Zacks Consensus Estimate.

PENNEY (JC) INC Price and Consensus

PENNEY (JC) INC Price and Consensus | PENNEY (JC) INC Quote

Despite these positives, the company’s debt level raises concerns. Although J. C. Penney lowered its debt significantly during first-quarter fiscal 2016, the level still remains high. At the end of the reported quarter, total long-term debt was $4,388 million, reflecting debt-to-capitalization ratio of 77.8%. The company plans to lower its debt load in fiscal 2016 by $400–$500 million, and intends to reduce its net debt to EBITDA ratio from 5.4 times to less than 3 times by fiscal 2017.

Given the pros and cons embedded, the stock currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Investors interested in the retail space may consider some better-ranked stocks such as Delta Apparel Inc. (DLA - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and The Children's Place, Inc. (PLCE - Free Report) and Carter's, Inc. (CRI - Free Report) , both holding a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


The Children's Place, Inc. (PLCE) - free report >>

Carter's, Inc. (CRI) - free report >>

Delta Apparel, Inc. (DLA) - free report >>

Published in