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JC Penney Stock Down More Than 10% on Dismal Holiday Sales

Zacks Equity Research

J. C. Penney Company, Inc. JCP joins the likes of Kohl’s KSS and L Brands LB that witnessed sluggish holiday season sales. Shares of this Texas-based company fell 10.8% during the trading session on Jan 9, 2020, following the department store retailer’s drab holiday sales numbers.

Analysts pointed that stiff competition from e-commerce players such as Amazon AMZN and a persistent struggle to cope with rapidly changing consumer trends might have taken a toll on the performance.

We note that comparable store sales (comps) for the nine-week period ended Jan 4 dipped 7.5%. On an adjusted basis, comps for the same period fell 5.3% compared with a decline of 5.4% in the last year.

Well, the company has been in a spot of bother for some time, thanks to dismal sales. In the third quarter, net sales fell 10.1% year over year due to soft comps. Comps declined 9.3% due to the company’s exit from the major appliance and in-store furniture categories. Moreover, excluding these exits, comps fell 6.6%.

Nonetheless, management reaffirmed its guidance for fiscal 2019. It continues to expect a comps decline of 7-8%. Excluding the impact of the exit from the major appliance and in-store furniture categories, comps are still anticipated to decline 5-6%. Mounting sales decline have been hurting investors’ sentiments. The stock has lost 7% in the past six months compared with the industry’s decline of 5.6%.

Nevertheless, the Zacks Rank #3 (Hold) company has been undertaking initiatives to regain consumers’ confidence. In this regard, it has launched a brand-defining store in Hurst, TX, which will serve as a lab for extensive consumer research. To attract customers, J. C. Penney is testing a new store format that includes yoga studio, video game lounge and lifestyle workshops. Additionally, the company has added key national brands — including Instant Pot, Ninja, Brookstone and Sharper Image — to boost the top line.

Moving on, J. C. Penney launched an in-house brand — St. John’s Bay Outdoor — within the men’s department in its stores along with an Outdoor Shop. Consumer feedback from the initiative is already encouraging. Moreover, in an effort to draw more customers and ramp up sales performance, the company has enhanced the loyalty program.

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