J. C. Penney Company, Inc. (JCP) witnessed a bull ride yesterday, with the stock surging as much as 17.5% in the after-market trading session. The rise came as investors gave thumbs up to the company’s positive commentary on comparable store sales performance during the holiday season.
Comps for the period, i.e., the combined nine weeks of November and December were up 3.7% year over year. Buoyed by strong comparable store sales data, management now expects fourth-quarter fiscal 2014 comps to be at the higher end of its previously provided guidance of 2%-4%.
However, management was tight lipped about margins, which draws some concern as the holiday season was a highly promotional one.
Nevertheless, analysts note that J. C. Penney is one of the first big retailers to furnish positive sales data for the holiday season and in turn sets a positive tone for the retail sector. We are expecting retailers like The Gap, Inc. (GPS), Zumiez, Inc. (ZUMZ) and L Brands, Inc. (LB) to soon come up with their holiday sales numbers.
Coming to J. C. Penney, positive comps infuse a sense that the company’s turnaround is not as shoddy as perceived when it reported flat comps for the third quarter of fiscal 2014 after registering growth of 6%, 6.2% and 2% in the trailing three quarters.
J. C. Penney has been trying hard to reinvent itself after a botched transformation effort by former CEO Ron Johnson that left the company in tatters.
Mike. E. Ullman was reinstated at the helm to turn around the company’s fortunes. J. C. Penney, under Ullman, took several strategic initiatives to drive traffic and conversion. The company brought back promotions, initiated effective marketing campaigns, and launched point-of-sale technology initiatives as well as effective cost and inventory management to drive sales.
To reinforce investor confidence in the stock, it was extremely important for J.C. Penney to perform well in the holiday season and going by the numbers, it looks like the company has hit the bull’s eye.
At present, J. C. Penney carries a Zacks Rank #3 (Hold).
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