J.C. Penney Company, Inc. (JCP)’s Value Lies in Its Real Estate

Meanwhile, Macy’s, Inc. (NYSE:M) has been a standout.

First-quarter profit jumped 20%, above estimates, and posted robust revenue.

The department store chain also boosted its quarterly dividend by 25% to $0.25 a share, and announced a $1.5 billion increase to its share buyback program.

The dividend increase is Macy’s third in the past two years. And since resuming its share repurchasing program in August 2011, Macy’s has bought back some 60.3 million shares.

The impressive quarter is a result of Macy’s, Inc. (NYSE:M) new strategy of tailoring merchandise to local tastes, training staff, and focusing on using the Internet, its cache of stores, and warehouses to quickly get merchandise to customers.

J.C. Penney Company, Inc. (NYSE:JCP)’s could quickly impress Wall Street and enjoy a turnaround if it scrapped its retail business altogether and simply became a real estate play.

The company just inked a deal to borrow $2.5 billion backed by hundreds of its stores, distribution centers and Plano, TX headquarters (collectively appraised at about $4.1 billion).

The Wall Street Journal reports Penney’s has owned some of its real estate for so long that the cost it pays for space is often a fraction of its current value.

Subleasing its best performing 300 stores could bring in roughly $1.2 billion in rental income, according to a March report from International Strategy & Investment Group in New York.

Another option is to spin off its real estate as a separate real estate investment trust.

But, J.C. Penney Company, Inc. (NYSE:JCP)’s needs to act fast; the value of its real estate could falter if store profits continue to wane and brand value waivers.

Time is money.

The article Penney’s Value Lies in Its Real Estate originally appeared on Fool.com is written by Diane Alter.

Diane Alter has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Diane is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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