JCPenney: Can You Expect Upside Potential for the Stock?
Strong holiday sales
JCPenney (JCP) reported same-store sales growth of 3.9% in November and December—the 2015 holiday season. Macy’s (M), the largest department store in terms of sales, reported a 4.7% decline in its same-store sales on an owned-plus-licensed basis in the 2015 holiday period, citing unfavorable warm weather.
Despite this unfavorable weather, JCPenney reported strong same-store sales growth. Its focus on private brands, omnichannel capabilities, and attractive merchandise helped its results. The crucial holiday season comes in the fourth quarter of department stores’ fiscal year.
JCPenney has reported strong same-store sales growth in each of the first three quarters of fiscal 2015. In 3Q15—which ended October 31 2015—the company reported same-store sales growth of 6.4%. This growth was driven by positive comparables across all merchandising divisions—especially men’s apparel, home, Sephora, footwear, and handbags. Overall, JCPenney’s net sales grew 4.8% in 3Q15. JCPenney constitutes 0.04% of the iShares Russell Mid-Cap ETF (IWR).
JCPenney’s same-store sales growth in 3Q15 surpassed its department store peers. Nordstrom (JWN) and Kohl’s (KSS) reported same-store sales growth of 0.9% and 1%, respectively. Macy’s and Dillard’s (DDS) reported a decline of 3.9% and 4% in their same-store sales, respectively, in 3Q15.
In the 3Q15 conference call, JCPenney’s chief executive officer, Marvin R. Ellison, stated that the company expects its 4Q15 same-store sales to be in line with full-year fiscal 2015 expectations. For fiscal 2015, the company expects same-store sales growth in the 4%–5% range.
JCPenney is scheduled to report its 4Q15 results on February 26. As of January 25, the consensus Wall Street sales estimate for 4Q15 sales is $4 billion. This estimate reflects 2.6% growth in 4Q15 sales on a year-over-year basis.
One of the company’s key sales growth drivers is its online sales. We’ll discuss them in the next part of this series.
Browse this series on Market Realist: