JCP Preview -- Focus on the Forecast

Macy's (M - commentary - Trade Now) guides down, Wal-Mart (WMT - commentary - Trade Now) is discouraging, Kohl's (KSS - commentary - Trade Now) guides down ... is anyone expecting a robust holiday season? The debate now is whether retail managements are truly downbeat, or whether they're merely trying to reset soaring expectations after not-bad October sales results.

J.C. Penney (JCP - commentary - Trade Now) management will weigh in tomorrow morning when they report quarterly results. The Street is looking for earnings of 11 cents a share on $4.117 billion of sales. Investor expectations are probably not too aggressive for the company; the stock has headed straight down since the mid-October high. J.C. Penney reported October sales down 3.5% and comps down 4.5%, not particularly impressive. Management noted that sales were good the first two weeks of October before trailing off in the second half of the month (which helps explain the stock move).

Management is on record with ongoing concern for consumer health given the economy's sluggishness. Mall traffic is "less worse" than earlier in the year, and some "luxury" categories like jewelry and home are seeing improvement on the margin, but management is not willing to signal the all-clear yet. J.C. Penney is focusing more on fresh styles and gift items for the holiday season. The company also sees team sportswear as an area of strength, and J.C. Penney has quintupled the teams represented on its shelves. The deal with Liz Claiborne can also be a big sales driver, and analysts will probe for more detail on the upcoming impact.

The call starts Friday morning at 9:30 EST.

No positions.

---

At the time of publication, Dvorchak had no positions in the stocks mentioned, although positions can change at any time.

Gary Dvorchak is a managing partner of Aviance Capital Management, a Sarasota, Fla.-based institutional asset manager that manages $200 million in growth and value equities and fixed income. Dvorchak holds a master's degree in business administration from Northwestern University and a bachelor's degree in computer science from the University of Iowa.