Shares of the Plano, Texas-based department store have gained about 29% for the year to date, handily out-performing the S&P 500's 1.6% gain. Meanwhile, shares of fellow department store retailers Macy's (M) - Get Report , Bon-Ton (BONT) and Dillard's (DDS) - Get Report and Sears Holding Corp. (SHLD) have fallen 6%, 30%, 12%, and 38%, respectively, so far this year.
The reason for J.C. Penney's red-hot stock price could likely be boiled down into several factors.
Current Sales Trends May Be OK
The onset of summer may be bringing cautious consumers out to buy cheap shorts, t-shirts and dresses.
"Sales were positive through Memorial Day," said J.C. Penney CEO Marvin Ellison during a presentation to investors on June 15. The comments likely spurred optimism on J.C. Penney's sales trends for the important July 4 holiday sales weekend.
Recent U.S. macroeconomic data have fueled the perception that consumers are back spending. The Conference Board's consumer confidence index rose to 98 in June from 92.4 in May, and represented the reading since October 2015. Led by increased spending online and at gas stations, retail sales increased 0.5% in May. Wall Street anticipated an increase of 0.3%.
Possible sales strength during Memorial Day and July 4 would likely help drive a rebound in performance following a challenging first quarter for the company, which initially spooked investors back in May.
Penney's Second-Quarter Sales May Be Better Than Rivals
The company's aggressive weekly promotions over the past year has lured in deal-seeking shoppers, which has led to better same-store sales performance compared to competitors. For example, while J.C. Penney's first-quarter same-store sales fell 0.4%, rivals including Macy's and Kohl's (KSS) - Get Reportreported much steep sales declines of 5.6% and 3.9%, respectively.
With its relentless focus on promoting its affordable private-label brands in the second quarter, J.C. Penney may be poised to outperform its competitors in terms of sales yet again.
Optimism Remains on Penney's Appliance Rollout
Starting this month through the fall, J.C. Penney will introduce major appliances to new stores every week until nearly half of its over 1,000 locations offer kitchen and laundry appliances from Samsung, LG, GE Appliances and Hotpoint. Each store will have 130 to 230 appliances on the sales floor for consumers to browse.
J.C. Penney began testing the sale of appliances at 22 stores in February.
It's not hard to understand the investor optimism over the impact of J.C. Penney's appliance rollout.
"The predominant percent of our customers are homeowners, and they said to us that they would buy appliances from us if we sold them," said Ellison on a call with analysts May 13, adding, "We think appliances is one of those categories that we can have a promotional cadence around it and that can help us to respond in a soft sales environment if we need to."
Meantime, J.C. Penney is entering a pretty hot appliance space being fueled by the rebound in the U.S. housing market. According to the Association of Home Appliance Manufacturers, shipments of electric ranges, dishwashers and refrigerators in the U.S. have increased 5%, 7.2% and 6.4%, respectively, so far this year. Washing machines and drivers have seen shipment growth of 2.6% and 0.9%, respectively.