Despite an earnings report showing a half billion dollar loss, troubled retailer J.C. Penney Company, Inc (NYSE: JCP) jumped 8.38% yesterday in large part due to the following signs that could indicate a turnaround is coming:
Shoplifting is Up. Shoplifting took a full percentage point off the department store chain's profit margins during the quarter. And while that may be interpreted as a good sign that customers are back in the store and (one way or the other) wanting the company's merchandise, its a bit more complicated than that according to the Wall Street Journal. Apparently, sensor tags designed to prevent theft were removed from merchandise because they would have interfered with the radio frequency of new radio frequency identification, or RFID, tags which would introduced to make it easier to manage inventory. J.C. Penney Company is now retagging items on the sales floors with sensors as well as tightening up its returns policy which had encouraged scammers. My Mother is Back in the Store. The return of discounts or sale ads has gotten my mother back into the her local J.C. Penney. Granted, older women were not the demographic that a coastal hipster like Ron Johnson wanted in his stores, but older women tend to have something hipper younger women (especially in this economy) don't have: MONEY…. Sales and Same-Store Sales Rise. Same-store sales rose 0.9% in October. That may not sound great but its also the first same-store sales rise since December 2011. In addition, sales results improved sequentially each month within the third quarter while online sales (on jcp.com) rose 24.5% year over year t0 $266 million. The Hip Trendy C*** is Being liquidated. It will take awhile to get rid of all the "trendy" inventory that Ron Johnson brought into the store and the company will need to deeply discount what's left to get it out the door, but once its gone – its gone (and not so hip customers like older women will be able to find what they want). So losses should start to ease in coming quarters. Liquidity Problems are Easing. J.C. Penney Company had lined up a $2.25 billion financing package earlier this year, sold nearly $800 million in new shares September to further shore up its finances and stuck to its forecast for more than $2 billion in liquidity at fiscal year-end. So baring a real disaster or credit crunch that hits the whole economy, it looks like J.C. Penney Company is not in danger of running out of cash or financing. Optimistic Forecast. J.C. Penney Company expects comparable store sales and gross margin to improve sequentially and year over year plus the CEO has also expressed optimism about the upcoming holiday season. "Normalization," For Better or For Worst. For what his opinion might be worth, CNBC's Jim Cramer made the following comment after earnings – which can be taken either way by investors:5 Best Performing Stocks To Invest In Right Now
"This is the beginning of what I regard as the normalization of J.C. Penney. "We won't be talking about J.C. Penney a year from now—not because they are not thriving or because they are going out of business, but because they're just nothing. They're going to go back to being nothing."
So is J.C. Penney Company finally a buy or a compelling value play? Consider the following long long long term chart for the stock:
Stock splits aside, the stock is trading at levels not seen since 9/11 or the 1980s. Nevertheless, the bearish trend lines on the latest J.C. Penney Company technical chart looks like they might be ready to reverse:
With the above considerations in mind, an investor or speculator with a high tolerance for risk just might want to take a gamble on a J.C. Penney Company turn around.
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