Can J.C. Penney Leave its Q1 and Q2 Results in the Past?

In advance of Friday’s third-quarter earnings release, shares of J.C. Penney (NYSE:JCP) have already fallen 6.4 percent to $21.34 in late afternoon trading on Thursday.

Analysts are predicting grim results for the upcoming report after the company’s first quarter and second quarter results showed that sales had dropped significantly, with comparable store sales down 18.9 percent and 21.7 percent, respectively.

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Even though J.C. Penney has backed off its anti-couponing stance, analysts are predicting a double-digit loss in sales for the quarter as all the departing shoppers it lost in the company’s pricing restructuring have not been supplemented. Zacks analysts are expecting a loss of 5 cents per share, down from a profit of 18 cents in the year-ago quarter. Analysts have also predicted revenue to fall 17.5 percent year-over-year, from $3.99 billion a year ago to $3.29 billion for the quarter.

However, analysts have gotten slightly more optimistic over the past three months, lowering the projected loss for the quarter from 18 cents per share to 5 cents. In fact, 10 of 16 analysts rate the stock a hold, and until Thursday, the stock price had risen modestly over the period, hitting a high of $29.87 on September 12.

Seeking Alpha reported on Thursday that analysts were counting the rollout of ten new branded shops within J.C. Penney, including Tandy Brands-owned (NASDAQ:TBAC) Levi Strauss and Sephora, to have a positive impact on overall sales and profits. The shops have already proven themselves to be successful thus far, with sales 20 percent higher than comparable stores. However, the publication remains skeptical; these new shops make up only 10 percent of the store, so the overall effect on JC Penney’s sales would be minimal, approximately 2 percent.

The publication cautioned that retailers could be affected by a climate of nervousness in the U.S. as a result of the approaching fiscal cliff. JC Penney’s competitor Macy’s (NYSE:M) released a relatively poor forecast for the fourth quarter on Wednesday, and Kohl’s (NYSE:KSS) and Nordstrom (NYSE:JWN) are set to report earnings on Thursday afternoon.

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