J.C. Penny: A Quick Look

What’s The Deal with J.C. Penny?

J.C. Penney shares fell off the table after reporting a fourth quarter drop in net income and forecasting profit below estimates citing reduced sales of winter coats and hats.

The  3rd largest department-store in the United States reported a net income of $477 million, or $2.09 per share, down 13% from a year ago, while Q1 should bring in about 99 cents, less than the $1.05 estimated by analysts.

Management says February sales at older stores may be negative as the company had cleared out winter clothing for spring merchandise before the weather turned colder in much of the U.S. To their credit, sales at department stores open at least one year rose 2.2%, while gross margin improved by 180 basis points to 38% of sales.

J.C. Penney sees gross margin, total expenses and operating profit all flat for the first quarter, with moderate improvement for the full year. The company expects total department store sales to grow in the mid-single-digits in the first quarter and for the full year, and same-store sales to increase in the low single digits for both periods.

What does this mean? 

At its current level, the stock trades at 16.6x trailing twelve month earnings, which is a considerable discount to its 10-year historical average of 21.6x. If a prudent investor believes in the future of this company, it may be a good time to begin taking a position.

Meaningless Company Trivia

J.C. Penney was founded in 1902 by James Cash Penney, who lived until the ripe old age of 95!

Glove tap to Cannacord

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