J. C. Penney Company Inc. (JCP), a leading retailer of apparel and footwear, accessories, fashion jewelry, beauty products and home furnishings, recently reported sales results for the four-week period ended July 30, 2011. The company’s comparable-store sales for July increased 3.3% with total sales rising 1% to $1,173 million.
During the period under review, The Plano, Texas-based J. C. Penney registered comparable-store sales growth across fine jewelry and women's attire, with the southwest region recording maximum sales.
The company witnessed a 1.5% growth in comparable-store sales for the second quarter of 2011 with a marginal decline of 0.8% in total sales to $3,906 million. The company’s comparable-store sales for the twenty six-week period increased 2.7%. However, total sales inched down 0.2% to $7,849 million.
J. C. Penney’s well diversified supplier base, compelling private and national brands, marketing campaigns, point-of-sale technology initiatives as well as effective cost and inventory management should bode well for sales and margin trends over the long term. The company also remains on track to deliver comparable-store sales growth and boost its market share.
Moreover, the in-store Sephora departments continue to attract younger and more affluent customers. These are part of J. C. Penney's strategy to gain competitive advantage over drug stores, which gave their cosmetic sections facelifts in the recent years. The Sephora concept instigates confidence and is expected to be a significant revenue driver.
The company focuses on remodeling, renovating and refurbishing its stores for enhancing its customers’ shopping experience. Therefore, it also invigorates its website functionality, keeping in mind continued migration to online shopping.
We remain confident about J. C. Penney’s top-line growth based on compelling new merchandise and launch of JCP Rewards program.
However, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively impact their discretionary spending, and in turn, the company’s growth and profitability.
Currently, we have a long-term ‘Neutral’ rating on the stock. Moreover, J. C. Penney, which competes with Macy’s Inc. (M) and Kohl’s Corporation (KSS), holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation.
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