Retail Stocks Pushed Higher in Black Friday Spree

NEW YORK (TheStreet) -- There were no discounts on Wall Street as investors' shopping spree on retail stocks pushed share prices higher. J.C. Penney  (JCP), Macy's (M) and Barnes & Noble (BKS) were rallying ahead of the Thanksgiving break. E-commerce giants eBay (EBAY) and Amazon (AMZN) joined the party in time for Cyber Monday, the biggest online shopping event of the year.

Barnes & Noble led the pack, adding 8% to $16.69 and rebounding from losses a day earlier. The bookstore retailer reported lower-than-expected earnings on Tuesday, but a new e-reader, Nook Glowlight, and reinvented store experience could increase foot traffic over the shopping season. 

Embattled retailer J.C. Penney surged 7.7% to $10.08, despite the absence of company news. The department store chain has risen incrementally over the month as investors grow more confident a turnaround attempt can take root. 

Macy's, a consistent performer during the holiday shopping season, climbed 1.1% to $53.54. Jim Cramer and Stephanie Link added 300 shares of Macy's to their Action Alerts Plus portfolio on Wednesday morning, on the view the company "has kept costs lean and reworked its merchandise, and it has e-commerce upside."

The brick-and-mortar retailers weren't the only ones getting snapped up. eBay and Amazon were both trading higher, the former up 1.1% to $49.30 and the latter gaining 1.3% to $386.49.

TheStreet Ratings team rates J.C. Penney Co as a Sell with a ratings score of D. The team has this to say about its recommendation:

"We rate J.C. Penney Co a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is very high at 2.12 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.36, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Multiline Retail industry and the overall market, J.C. Penney Co's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for J.C. Penney Co is currently lower than what is desirable, coming in at 29.47%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -17.59% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$737 million or 1502.17% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • J.C. Penney Co has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, J.C. Penney Co reported poor results of -$4.49 a share vs. -73 cents a share in the prior year. For the next year, the market is expecting a contraction of 34.3% in earnings (-$6.03 vs. -$4.49).

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