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J.C. Penney's Turnaround Is Moving in the Right Direction

August 25, 2014 | About:



J.C. Penney's (JCP) turnaround has gained solid energy since mid-April, with the stock picking up. ITG expects Penney to report same-store sales development of 6.2%, as contrasted with the analyst consensus of 5.8%. Presently, taking a look at the moves that Penney is making, it won't be surprising on the off chance that it really delivers a finer-than-anticipated performance when it reports its next results.

Strategies are yielding results

Penney's top line has started increasing, and its losses are declining. The organization has had the capacity to accomplish a turnaround on sound strategies, and, going ahead, it expects things to improve.

J.C. Penney is presently in the go-ahead phase of its turnaround, having finished the stabilization and revamping phase last year. The organization is currently looking to increase its share of the overall industry and enhance its operational and money-related results. Also, it is patching up its merchandise in departments such as men's attire, ladies' accessories and Sephora.

Penney is aggressively enhancing its promotion to reconnect with customers and make seamless the customer experience across all channels and services. These priorities are as of now procuring results for the organization. Its gross margin was up to 33.1% in the first quarter as contrasted with 30.8% in the year ago period.

Drawing in more customers

With everything taken into account, Penney is attempting to make an engaging shopping environment around these brands in an offer to pull in more customers to its locations.

Under its diversification moves, Penney is currently focusing on sleeping material and shower, small electrics, improving accessories and home furnishings, which will fit customers' financial plans and lifestyle needs. The organization has re-dispatched Home Collections of J.C. Penney. This is its new home store, which has been re-merchandised to deliver a noticeable improvement in the use of the space to enhance the shopping experience.

Penney is making various impressive customer-driven moves that should help it recapture its customer base going ahead.

Advanced moves and cost controls

Separated from these, the retailer is focusing on its online channel with Penney is conveying tremendous improvements in its online sales. Actually, in the previous quarter, its online sales developed 25.7% from last year. The organization is closely meeting expectations with its associates to help customers discover the suitable size, style and colors at Further, the organization is finishing online orders comfortable purpose of sales, and shipping the orders free of cost from stores.

Also, the organization is attempting various initiatives such as lower corporate support costs and advertising expenses. Its operating loss contracted to $247 million, a change of 49.2% as contrasted with last year. Penney will keep executing on these areas, and this should presumably help the organization to decrease its losses further.

A worry

On the other hand, not everything is to support Penney. Penney's asset report is not in the best of shapes as it has a massive obligation of $5.59 billion, while its cash position is moderately feeble at $1.17 billion. Furthermore, the organization's cash stream metrics also paint a poor picture. In the course of the last 12 months, its operating cash stream is a negative $1.33 billion. Moreover, Penney's levered cash stream is also negative at $2 billion throughout the previous twelve months.

Thus, Penney is smoldering cash as it is investing in its turnaround. Its performance will rely on its negotiations with financiers and bankers. On the off chance that Penney manages to get great terms of financing, then it can keep investing in its turnaround. Then again, an unfavorable situation can prompt inconvenience for the organization.


J.C. Penney is a risky stock because of its colossal obligation. On the other hand, the organization is making some great moves, and it is also reporting development in key metrics such as sales and movement. What's more, Penney is cutting its losses at a decent pace. Going ahead, the organization's turnaround looks set to proceed as analysts anticipate that its bottom line will enhance 54% this year and half one year from now. Henceforth, investors should stay invested in J.C. Penney as it is a luring turnaround play.

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