Analysts Debate: Can J.C. Penney Company, Inc. (JCP) Become a Top Stock Once Again?

Page 1 of 3

The Motley Fool has been making successful stock picks for many years, but we don’t always agree on what a great stock looks like. That’s what makes us “motley,” and it’s one of our core values. We can disagree respectfully, as we often do. Investors do better when they share their knowledge.

In that spirit, we three Fools have banded together to find the market’s best and worst stocks, which we’ll rate on The Motley Fool’s CAPS system as outperformers or underperformers. We’ll be accountable for every pick based on the sum of our knowledge and the balance of our decisions. Today, we’ll be discussing J.C. Penney Company, Inc. (NYSE:JCP), one of the oldest and most well-known apparel retailers in the U.S.

J.C. Penney by the numbers
Here’s a quick snapshot of the company’s most important numbers:

Metric Result (TTM or most recent available)
Market cap $3.28 billion
Revenue $12.98 billion
Price/book 1
Price/sales 0.3
Price/cash flow 10.9
Forward P/E N/A
Cash/debt $930 million/ $2.98 billion
Competitors Macy’s (NYSE:M)
Kohl’s
Sears Holdings (NASDAQ:SHLD)

Source: Yahoo! Finance, Morningstar. TTM = trailing 12 months. N/A = Earnings are expected to be negative over the next 12 months.

Sean’s take
I don’t have a word to describe just how horrific J.C. Penney Company, Inc. (NYSE:JCP)’s fourth-quarter results were. It obliterated every imaginable barrier for how bad a company could perform on a year-over-year basis. Total revenue plunged 28.4%, same-store sales fell 31.7%, and direct-to-consumer sales caved 34.4%. Cumulatively for the entire year, Penney’s reported a loss of $985 million. These results have left J.C. Penney Company, Inc. (NYSE:JCP)’s and investors at a crossroads. We know something needs to be done (and quickly), but the question is whether or not management has all the right answers now.

J C Penney Company Inc (JCP)Looking at this from the bulls’ perspective, Penney’s is now as cheap as it’s been relative to sales and book value since the height of the recession. Penney’s is a well-known department store that’s one of the anchor brands often found in malls. In addition, it doesn’t have a novice at the helm. CEO Ron Johnson has a history of success under his belt, having led Target (NYSE:TGT) to success in the mid-1990s after he altered the company’s strategy to go after designer brands. Johnson understood early that consumers crave designer brands and moved Target back into relevance. His greatest victory came with the opening of Apple‘s first retail store in 2001; I think we all know how well that turned out.

However, investors couldn’t care less about Johnson’s past successes because his current plans have failed to produce anywhere near the desired results. Johnson attempted to remove sales from Penney’s stores and instead introduced a low everyday pricing strategy. The plan backfired after roughly a year with comparable-store sales nose-diving. Kohl’s saw a blistering January same-store sales rise of 13.3% and Macy’s solid fourth-quarter results showed it grew same-store sales 3.9% (and 11.7% in January). It doesn’t take a rocket scientist to figure out where these sales are coming from… J.C. Penney Company, Inc. (NYSE:JCP)! Johnson has since backpedaled on his pricing stance, but I feel it could be too little, too late.

Page 1 of 3
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!