Ahead of the Bell: JC Penney

J.C. Penney shares soar in premarket on strong 4th-qtr results, optimistic outlook

Associated Press

NEW YORK (AP) -- J.C. Penney shares surged 25 percent before Thursday's opening bell after the department store saw its first bump for comparable-store sales in more than two years.

Analyst Charles Grom of Sterne Agee called the company's next six months, "probably the most critical in Penney's history."

Grom is talking about cash burn at J.C. Penney, which has raised red flags for some time.

If executives can push same-store-sales to projected levels, Grom said, the company will probably avoid the cash flow and supplier-related problems that have been dogging it for years.

Late Wednesday, the company reported that revenue at stores opened at least a year rose 2 percent. That's compared with a 31.7 percent plunge for the same measure during the holiday quarter a year ago.

Those figures can be a critical gauge of a retailer's health as they strip away the volatility of stores opened or closed in the past year.

The company had been struggling for years, but things got worse under a botched recovery strategy by former CEO, Ron Johnson.

Changes at the retailer, which included jettisoning long-cherished brands, alienated a large number of core shoppers, leading massive losses and plunging sales. Johnson, who had previously managed the retail concept for Apple Inc., was ousted almost a year ago after 17 months on the job.

J.C. Penney rehired CEO Mike Ullman to run the company he had headed for seven years and on Wednesday, projected that comparable-store sales will rise between 3 percent and 5 percent this quarter.

Citigroup also said that the fears of a liquidity crisis at the retailer may now be overblown.

"Share recovery is happening as customers responded well to restocking of basics and private brands," wrote Citigroup's Oliver Chen.

Chen raised his price target for the stock by $1, to $7.50.

In premarket trading, shares of J.C. Penney Co. jumped $1.46 to $7.42.

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