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How JCPenney execs magically stopped the stock from crashing below $1.00

Brian Sozzi
Editor-at-Large

If but for one day, JCPenney (JCP) executives managed to prevent their badly beaten up stock crashing below $1.00 after another dismal quarter.

Shares of the struggling department store indicated to open down an alarming 14% on Thursday after the company said same-store sales tanked 5.4% in the third quarter. Further, the company lost $151 million and it opted to pull its full year guidance to give new CEO Jill Soltau time to assess the business.

All in all, ugly stuff. But Soltau — a 30-year retail veteran who joined JCPenney on Oct. 15 after a successful stint leading Joann Stores — had a solid call with analysts. Not only did Soltau show off her retail experience to a Wall Street crowd that is skeptical of JCPenney’s future, but she dispatched long-time investor relations executive Trent Kruse to hint at several possibly lucrative strategic actions.

Here’s how JCPenney executives pulled off the share price reversal magic.

A JCPenney employee helps a customer with her purchase at the JCPenney department store in North Riverside, Illinois, U.S., November 17, 2017. REUTERS/Kamil Krzaczynski/File Photo

Step 1: Hint at more store closures

Often all a troubled retailer has to do to appease profit hungry Wall Street is signal at more store closures. The thinking is easy: fewer stores, fewer expenses, bigger profits (or in the case of JCPenney, less bad losses).

JCPenney managed to whet the appetite of analysts on the store closure front. “We’re in the process of reviewing the store fleet as we do on an ongoing basis, but specifically at the end of the year each year right now, so that’s an ongoing process for us, and look forward to obviously updating you at the end of this year on our thoughts surrounding that,” Kruse told analysts.

The reality is that given its poor sales trends in recent years, high debt levels and intense competitive environment JCPenney still has too many stores in operation (860). The company only closed 140 lagging stores in 2017 under then CEO Marvin Ellison. By comparison, rival Macy’s (who is nicely profitable) has 690 stores.

Step 2: Signal real estate sales

Macy’s (M) has led the way on department stores selling unproductive stores they own to raise cash. It has also downsized owned stores and rented out the space to other companies. JCPenney hasn’t necessarily taken that approach despite owning more than 400 stores, according to its latest annual report.

But it may now be open to it in a bid to raise cash and try to achieve sustainable profits. “We’ll continue to think about options and opportunities with respect to real estate and our debt, and we’ll continue to have conversations with developers on ideas and options to enhance certain mall locations, and improve the customer experience not only in our stores, but across the mall that we co-tenant in,” said Kruse.

“But we feel it is very manageable [debt levels] today, but certainly it’s our commitment to continue to look at, consider, and review several alternatives as it relates to debt, to real estate, frankly to the retail footprint, as Jill alluded to in her prepared remarks. So, we’ll frankly be looking at everything.”

JCPenney shares finished Thursday’s session up 11% to $1.36. Not a bad job on the conference call… the time is coming to deliver on the promises, however.

Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi

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