Will Recent News Hurt J.C. Penney Stock?

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With shares of J.C. Penney (NYSE:JCP) trading around $6, is JCP an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

J.C. Penney is a retailer operating more than 1,000 department stores in just about every state in the United States and Puerto Rico. Its business consists of selling merchandise and services to consumers through its department stores and website. It sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products through Sephora, and home furnishings. The company has not done too well in recent years, but it is doing what it can to be a top provider of apparel and related products.

J.C. Penney’s decision to close 33 underperforming stores and to trim 2,000 positions won’t have much significant long-term impact on the retailer’s business model, one analyst says. Rick Snyder, senior retail analyst at Maxim Group, says the announcement — which J.C. Penney says will result in $65 million in annual savings — only changes his forecasting models slightly. Mr. Snyder has a hold rating on J.C. Penney and doesn’t have a price target on the stock. Ultimately, he described the announcement as “much ado about very little.”

“While we applaud the projected $65 million in annual savings, the foregone revenues from the closed stores make it more difficult to lever fixed costs,” he said in a note to clients. “In the end, the change to our numbers is de minimis. We still have the company running out of cash in Q3 of 2015.”

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