NEW YORK ( TheStreet) -- Despite J.C. Penney ( JCP - Get Report) reporting exceptionally weak earnings this week, hedge fund giant Bill Ackman thinks there's significantly more room for upside, between $190 and $315 a share.

J.C. Penney reported an awful first quarter on Wednesday, missing analyst estimates, lowering its outlook and cutting its dividend. Speaking at the Ira Sohn hedge fund conference on Wednesday, however, Ackman noted that the 101-year old retailer is taking significant steps to cut costs, improve profitability, and change how customers view the retailer.
Bill Ackman

Even though 80% of J.C. Penney's stores are in shopping centers with more than $300 per square foot in sales, JC. Penney's sales are still suck at mid-nineties levels, Ackman said. At $250 per square foot in sales, J.C. Penney could be worth $191 a share, or $315 a share if J.C. Penney was able to generate $350 in sales per square foot.

The company's stock currently trades at $27.57.

J.C. Penney's average sales are $132 per square foot, although new CEO Ron Johnson is working to improve that by turning the company into a "mall within a mall," Ackman said. J.C. Penney stores currently feature outlets from Sephora, but will now have new stores from companies such as Nike ( NKE), Levi Strauss, Buffalo, and others.

Johnson, who is credited with the success of Apple's ( AAPL - Get Report) retail stores, has stopped handing out coupons and changed the company's pricing and promotional model. The strategy eliminates unproductive store hours, reduces labor hours and frees merchants to focus on product, not promotions, Ackman said.

The Plano, TX-based retailer has been extremely inefficient, so Johnson and his new executive team have identified some $900 million in savings by 2012, of which $200 million could come from the company-owned headquarters and $300 million from advertising. The retailer's inefficient supply chain, capital allocation and inventory are other areas where J.C. Penney can save money, Ackman noted.

With 24% of J.C Penney's float held short, Ackman, who is J.C. Penney's largest shareholder with 18% of shares through his hedge fund Pershing Square, believes that 2012 could continue to be a challenging year for sales. Despite that, CEO Johnson has called J.C. Penney "the single best retail transformation" and Ackman believes that with the mall-within-a-mall concept, better product, and changes to the company's real estate operations, J.C. Penney could generate $6 in earnings per share by 2015.

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-- Written by Chris Ciaccia in New York

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