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J.C. Penney's 'Turnaround'

"Everyone's always talking about getting a younger customer, but I also think first they need to do a much better job of serving its core customer group," he adds. "It's a lot easier to re-activate customers."

Still the company certainly has quite an uphill battle to win. Besides reversing what previous management put in place, then J.C. Penney is back to the problem of how to win Middle America customers against competitors like Wal-Mart (WMT), Target (TGT), Macy's (M) and Kohl's (KSS).

"Long-term, they're in a big fight," says retail consultant Jan Rogers Kniffen.

"When I went into the business there were over 100 department stores literally ... That game is over," he says. "Macy's won the game. Kohl's won the game. J.C. Penney could be a part of that, but do we really need another department store?"

J.C. Penney is bringing back once-popular private-label and national brand merchandise as well as exclusive brands and new partnerships, for instance Disney (DIS) shops that will open in the kids' section starting in October, Ullman said. It's also looking to e-commerce for a boost that Ullman said "popped almost immediately" following the company's realignment of merchandise online to match in-store selections.

Of course, J.C. Penney's biggest test will be whether it can show significant improvement results during this year's holiday season.

J.C. Penney plans to be "a primary destination" for Black Friday and Cyber Monday, Ullman said.

Some say it's too big a fight to win.

"We believe JCP has been burned by the effects of a failed turnaround strategy, which has created a hole that is just too deep," Wells Fargo Securities analyst Paul Lejuez writes in a research note on Wednesday. Lejuez rates the company at "underperform."

"For JCP to get back to break-even from an EPS perspective, they would have to recover 75% of its lost sales (from FY2011), achieve [gross margin] of 37%, and not spend another SG&A dollar vs. FY2012 levels, and there is no telling how long it could take," the note cautions. "While liquidity is not an immediate issue, the company may need additional liquidity in FY2014 if business does not turn sharply."

-- Written by Laurie Kulikowski in New York.

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