This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Making a Case for J.C. Penney

NEW YORK (TheStreet) -- J.C. Penney (JCP) shares were left for dead by investors in September and swooned into the first three weeks of October, but they have now recovered nearly 50% from their Oct. 22 intraday low.

That recovery comes even though the retailer's third-quarter earnings report failed to meet analysts' expectations.

What's going on? First, let's talk relative value, the language I was talking before the September swoon.

The company Wednesday reported net sales of $2.78 billion for the quarter. Before its 9% pop on Wednesday's earnings release, those net sales were worth more than the value of the entire company. It was $2.88 billion at the start of trading today.

The number was reported as below expectations, but it was actually better than the previous two quarters, both of which came in at a little more than $2.6 billion.

Most retailers trade at about half their annual sales. Here's a retail stock that's trading at slightly less than one-fourth of its sales. That's what equity buyers call value. Assuming the company can hold its sales rate near here, it should be good for gains, and because we're talking Christmas, that's not a bad assumption. J.C. Penney had sales of $3.88 billion for its Christmas quarter last year.

Another reason for optimism came on the most recent conference call, where CEO Mike Ullman said the company was fixing problems caused by the RFID sensor system that was bought by former CEO Ron Johnson and had made the store a magnet for thieves.

The company is now returning to traditional tags and a standard return policy, which means gross margins should improve.

Here's another bit of good news. Malls seem to be making a short-term comeback. Macy's (M), Dillards (DDS) and Nordstrom (JWN), all of which anchor many malls, reported better-than-expected results for the most recent quarter. Kohl's (KSS) and Wal-Mart (WMT), which live outside malls, did less well.

This indication of better mall traffic is buttressed by J.C. Penney's own conference call, where Ullman said that November was looking pretty good. Like many retailers, J.C. Penney runs on a fiscal year ending in January, to cover returns on Christmas merchandise, so November is the first month of its current quarter.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs