Dive Brief:
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J.C. Penney is thriving amid its turnaround and its stock could still be undervalued, according to a column in Barron’s.
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Over the past 12 months, analysts’ consensus EPS estimate for Penney’s 2017 fiscal year rose to 75 cents per share from a previously expected loss. Dallas-based Hodges Capital portfolio manager Chris Terry says that within three to five years the retailer could earn $2 per share, and according to Barron’s, applying what it says is a conservative P/E multiple of 10, “the stock would be worth $20, double today’s price.”
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Part of Hodges’ optimistic view comes from great expectations of J.C. Penney CEO Marvin Ellison, whom Terry called “the real deal and 100% focused on creating shareholder value.”
Dive Insight:
Many observers believed J.C. Penney was dead in the water after too-swift changes wrought by former CEO and onetime Apple retail guru Ron Johnson tanked its standing among loyal customers and failed to bring in many new ones.
Now, despite a tough retail environment, J.C. Penney seems to be achieving what is slipping by the likes of Kohl’s, Sears and Macy’s: Strong sales of apparel and accessories. The retailer also is balancing its demands for cost-cutting with continued investments in mobile, omnichannel, supply chain and merchandise.
Under CEO Ellison, J.C. Penney still must improve its digital performance, which was perhaps necessarily neglected as it worked to cut costs and improve merchandise and its supply chain (an Ellison forte). J.C. Penney is now working to improve its mobile shopping site while it’s also continuing to promote its own apparel and accessories brands, bringing in even more of its successful Sephora at J.C. Penney concessions, and promoting its loyalty credit card.
There’s additional evidence that Penney has successfully burnished its faded brand. Consumer insights firm Civic Science reports that the response to its its daily polling question “How much do you like to shop at J.C. Penney?” has become increasingly positive, rising to 42% at present from 33% in September, according to Barron’s.
“Our focus on private brands, omnichannel and revenue per customer is clearly resonating as we continue to win market share in a competitive environment," said in a statement accompanying February's Q4 earnings report. "I would like to thank our over 100,000 associates who embrace our strategy and come to work each day focused on driving sales and providing excellent customer service."