In its third-quarter earnings report, released earlier Friday, the company announced expectations for a 1% to 2% increase in sales. Previously J.C. Penney had guided for a 3% to 4% growth.
J.C. Penney reported a loss of 21 cents per share for the third quarter, in line with analysts' expectations. Revenue of $2.86 billion fell short of the $2.95 billion that was predicted.
Steven Ruggiero, head of research at R.W. Pressprich, has a buy rating and a $14 price target on J.C. Penney stock. Shares are currently at $8.80. On Bloomberg Markets: Americas Friday he discussed the company's struggles and its recent bounce back.
"They're focused on three strategies," he said of Penney. "Omni-channel, which most all big box retailers are focused on now and need to be. They're also focused on their private label, which has differentiated them in the past, it's roughly with exclusives about 54% of their sales and they're looking to take that up to 70%."
As J.C. Penney moves forward with its private label, it will help the company's gross profit margins and offers customers a unique product. Finally, the company is focusing on its revenue per customer metric and its BOPUS initiative, which stands for buy online, pickup in store.
The initiative went live in August of this year and there has been high attachment rates associated with that, Ruggiero noted.
Retailers will often use "any excuse" to tell investors why they are having a difficult time, be it the weather or something else, BloombergTV's Mark Barton pointed out. He then asked Ruggiero what President-Elect Donald Trump means for the future of consumer spending.
"It's always difficult to access that except to say I believe it's about consumer confidence and that's yet to be seen," Ruggiero responded. "It's also about what consumers have in their pocket, you know, I think that a situation where last year we had lower gasoline prices at the pump probably helped on the margin for consumer spending."
Another boost to consumer sales would be lower taxes and if that were to actually happen J.C. Penney would be one to benefit. Another helpful factor could be lower healthcare costs for consumers, but again that is an "if" and it remains to be seen what the President-Elect will actually do.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate PENNEY (J C) CO as a Hold with a ratings score of C. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself.
You can view the full analysis from the report here: JCP