Investors are likely realizing what Wells Fargo Securities analyst Paul Lejuez said in a research note, that November comps "may be as good as it gets in Q4 2013" because the November 2012 sales comps at J.C. Penney were down 34% -- the worst comps of the quarter last year.
"Now that we are past Black Friday, we are likely to see a lull period until the days leading up to Christmas," Lejuez wrote in the note. "Keep in mind December comparisons are more difficult that November (which had the Sandy comparison benefit as well) and January is the toughest. Therefore, if the same run-rate holds, reported comps would decelerate from here."
The beleaguered department store chain late Tuesday said comparable store sales jumped 10.1% in November, benefiting from the all-important Thanksgiving and Black Friday weekend sales. J.C. Penney opened at 8 p.m. on Thanksgiving to compete with other retailers, including Macy's (M) and Target (TGT).
It's the second month in a row the Plano, Texas-based company reported positive monthly sales. Last month, J.C. Penney reported its first positive comp data since December 2011.
Despite the strong sales figures, J.C. Penney shares were down 3.1% to $9.80 in mid Wednesday trading.
Lejuez also believes "many are likely to misread the magnitude of the acceleration" in November. "Using 'simple' stack analysis, it appears November accelerated by 700 bps [basis points]," compared to comp sales for the entire third quarter (down 4.8%). "The 'real' math shows it was only 230 bps," Lejuez said. "Still an acceleration to be fair, but much less impressive in our view."
He continues to rate J.C. Penney shares "underperform," reiterating his investment thesis that J.C. Penney has been "burned by the effects of an unsuccessful turnaround strategy, which has created a hole that is likely too deep" to return to profitability.
J.C. Penney noted on Tuesday that online sales through jcp.com continued to be strong, "running well ahead of last year," though it did not break out the numbers.
"We are pleased with our performance over the Thanksgiving holiday weekend, particularly in light of the continued spending pressures on consumers," J.C. Penney's CEO Myron E. (Mike) Ullman, III said in a press release. "The traffic and conversion we saw both in stores and online this weekend was exciting for everyone across our organization. We know the environment will remain as competitive as ever, and we are all working to maintain our momentum through the holiday season."
analyst Brian Nagel, who rates J.C. Penney at "perform," had a slightly more optimistic take on J.C. Penney's November comps.
"The better than expected Nov. sales results that J.C. Penney announced after the close suggest further that the 'back to basics' strategy of CEO Mike Ullman is allowing the chain to reconnect with core customers," Nagel wrote in a note to clients.
"JCP is by no means out of the woods," he added. "A worst-case scenario for the chain, however, is becoming less and less likely."
Nagel raised his fourth-quarter comp sales. He now expects comps to rise 8% compared to 4-6%, previously. He also raised his 12-month price target by $3 to $11.
Written by Laurie Kulikowski in New York.