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Will J. C. Penney's (JCP) Turnaround Efforts Boost Sales?

Zacks Equity Research

J. C. Penney Company, Inc. JCP is leaving no stone unturned to boost the optimism of customers and investors. In this regard, the company had previously undertaken initiatives to change logo, store designs, advertisements, brand makeover, enhancement of omni-channel capabilities, strategic partnerships and pricing model to attract consumers. It has also exited the appliance business to focus on core categories.

In spite of these efforts, the company didn’t attain the desired results. Notably, the company witnessed soft sales trend in second-quarter fiscal 2019. Also, the company’s top line lagged the Zacks Consensus Estimate in three of the trailing four quarters. Moreover, the company’s top line has declined year over year. Also, comps in the quarter declined 9% due to the company’s exit from major appliance and in-store furniture categories. This compelled comps to decline 300 basis points (bps).

We note that the company received a notification from the NYSE with respect to its listing status. The company is trading below the minimum requirement of $1 for a while. This exposes it to the risk of being delisted.

A Ray of Hope

Although there is little scope for J. C. Penney to improve, some investors have still not lost hope. Fortunately, the company has been able to drive gross profit margin and lower overhead expenses during the fiscal second quarter. Moreover, it is on track to reduce inventory level that is a key catalyst for its merchandise profit margin. Moving on, the company reintroduced coupons to revive sales.

Apart from these, CEO Jill Soltau made considerable alterations in leadership as part of J. C. Penney’s turnaround endeavors. The company also launched a store checkout process, which is likely to streamline operations and improve customer experience. To this end, it has tested a centralized pickup in returns to improve in-store experience and omni-channel customer experience. In the fiscal second quarter, management rolled out this concept in nearly 500 stores.

Going ahead, the company intends to invest more in women’s apparel. Moreover, J.C. Penney teamed up with thredUP to offer second-hand women’s clothing and handbags. It is on track to roll out thredUP shops across 30 stores.

Recently, the company launched an in-house brand — St. John’s Bay Outdoor — within the men’s department in stores. Apart from this, it is set to introduce an Outdoor Shop featuring St. John’s Bay Outdoor along with three new product lines — American Threads, The American Outdoorsman and HI-TEC. The launch is being considered as a revival attempt by J. C. Penney to boost sales. Backed by such efforts, shares of this Zacks Rank #3 (Hold) company have surged 59.4% in the past month compared with the industry’s growth of 10.5%.



 

Wrapping Up

All said, it is yet to be seen whether the Soltau can revive the 117-years-old business with his merchandising expertise and offset dwindling sales.

Stocks to Consider

Boot Barn Holdings BOOT has a long-term earnings growth rate of 17% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Zumiez ZUMZ has a long-term earnings growth rate of 13.5% and a Zacks Rank #1.

Canada Goose Holdings GOOS has a long-term earnings growth rate of 28.5% and a Zacks Rank #2 (Buy).

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