This story has been updated from 9:26 a.m. EST wiith additional analysis.
NEW YORK (TheStreet) - J.C. Penney (JCP) shares surged on Wednesday after investors cheered the much-maligned retailer's expectations for improved sales and margin trends in the fourth quarter, suggesting that the worst could be behind it.
"The Q3 results and Q4 guidance that J.C. Penney reported today suggest that a turnaround at the chain continues to take hold," Oppeneheimer analyst Brian Nagel wrote in a research note. Nagel has a "perform" rating on the company.
"Comps are improving albeit against easing comparisons. Clearance activity is moderating and turning less of a drag on margins. JCP is more aggressively controlling costs and preserving capital," Nagel wrote. "We are optimistic that trends at the chain should continue to improve as JCP further pursues its 'back to basics' strategy and distances itself from prior, very disruptive, repositioning efforts. JCP is, however, by no means out of the woods. Per our math, sales still need to improve meaningfully in order to take the risk of another capital raise off the table."
|J.C. Penney CEO Mike Ullman says the company is encouraged by November sales so far.|
Early Wednesday, J.C. Penney reported a net loss of $489 million, or $1.94 a share, for the quarter ended Nov. 2. The loss includes 18 cents of restructuring and management transition charges, 4 cents related to primary pension plan expenses and a 9-cent net gain on the sale of a non-operating asset, and a 73-cent loss associated with tax valuation allowances, the company said.