Don’t Get Caught Without this Department Store in Your Portfolio

Photo Credit:Mike Mozart

J.C. Penney Company (JCP) Consumer Discretionary - Multiline Retail | Reports August 12, Before Market Opens

Key Takeaways

• The Estimize consensus is calling for a 13 cent loss per share on $2.93 billion in revenue, 2 cents higher than Wall Street on the bottom line and right in line on the top
• JCP’s road to recovery includes expanding the Sephora rollout, boosting omni channel capabilities, and deeper penetration of private brands
• Several concerns still persist including stiff competition, shifting consumer spending habits and high debt
• What are you expecting for JCP? Get your estimate in here!

Department stores have been one of the most beaten down stocks lately, but that might be changing soon. This morning both Macy’s and Kohl’s reported better than expected earnings and indicated they are making progress to delivering profitability. The good news was enough to send the two stock up double digits. This also bodes well for JCPenney when it announces its second quarter results tomorrow morning.

JCPenney has performed the best amongst the department stores. The company has strung together 5 consecutive beats on the bottom line. Shares have also jumped 17% in the past 12 months where Macy’s and Nordstrom stock have plunged over 35%. If today’s reports are any indication, JCP shouldn’t have a problem topping expectations for another quarter

The Estimize consensus is looking for a 13 cent loss up 67% from the same period last year. That estimate has increased 30% since JCP’s most recent report in May. Revenue is expected to jump 2% to $2.93 billion, marking yet another quarter of positive comparisons. Even if the company posts better than expected earnings, the market shouldn’t expect the stock to move much. Typically shares remain flat through a report and in fact decline in the days and months after.

JCPenney has taken on several strategic initiatives on its path to profitability. Its focus on deeper penetration of private brands, boosting online sales and expanding the Sephora brand have contributed to the strong turnaround. In many of the company’s conference calls over the past year, the continued rollout of Sephora has been cited as a key to driving traffic.

Don’t expect it to be smooth sailing though. JCP still faces stiff competition from the aforementioned department stores and online retailers. Consumers are also spending more on fast fashion trends which are often just as inexpensive as the department stores. Additionally, greater efforts to renovate and expand will put pressure on margins and increase operating expenses.