JC Penney (JCP, Financial) is a solid turnaround story. The stock has been gaining impressively due to its past efforts. The stock has also been impressive on the stock market with its shares trading more than 5% up after the company posted impressive results for the second quarter. The management is confident of re-establishing JC Penney as a leading moderate department store in the U.S. The company is again confident of better performance in the future as its turnaround efforts are gaining momentum. The company thinks that the turnaround might take some time to be fully existing; however, it is confident of achieving it soon. Let us have a look at JC Penney and its strategies.
Looking at the turnaround
In the recently reported quarter, JC Penney reported net sales of $2.80 billion which is more than the $2.66 billon it posted in the same quarter last year. This shows that the company’s turnaround efforts are paying off, and it is getting good traction for its products. The company’s same stores sales also rose by 6%. The gross margin of the company was 36% of sales as compared to 29.6%. However, JC Penney also incurred net loss $172 million.
JC Penney is improving and its turnaround is taking good shape. The company is pleased with its initiatives which continue to produce improved results. The company is gaining additional market share on the back of it. JC Penney is further pleased to have increased its gross margins in a highly competitive environment. It is now focusing on taking initiatives to improve customer traffic in its stores. Besides this, it is focusing on various other initiatives to improve profitability.
Strategies adopted
It is undertaking different strategies. Under its merchandising strategy, it is offering powerful incentives, and many other national brands that are anticipated to be an exclusive attraction for the customers which will drive more customer traffic to JC Penney stores. It is focusing on restoring key brands that can be drivers to JC Penney’s turnaround strategy. The main advantage of adding new brands is that are look stylish and also fits in the budget. It also has 300 to 600 basis points higher than other brands.
Moving on, JC Penney’s partnership with the leading brands such as Nike (NKE, Financial), Carter's, Maidenform (MFB, Financial), IZOD and Van Heusen are expected to perform well on its online store JCPenney.com. These brands have been really performing well and JC Penney thinks these brands to be a growth driver for it in future. In addition, the brands such as Sephora, Liz Claiborne and Royal Velvet are expected to further add value to the company’s turnaround strategy.
In addition to this, JC Penney is also making moves to improve the Omni-channel experience of the customers. It is seeing good customer traffic on it channel, JCPenney.com. Moreover, the marketing strategies of the company are also moving on a right track which is evident of the customer response to its promotional activities that JC Penney initiated in the past. JC Penney was largely benefited by its lipstick campaign that helped over time to create a marketing leading position in the competitive environment. Further, its back-to-school marketing initiative with brand promotional activities seems effective in driving good sales for the company.
Conclusion
Moving to the company’s fundamentals, JC Penney doesn’t have a trailing and forward P/E as it is still making losses. However, the company is making impressive movement with its turnaround strategy and is continually narrowing its loss. But the future prospects of the company doesn’t look concrete as its earnings are declining by -28.00% whereas the industry average is 16.18%. So considering all these facts and statistics I would suggest staying away from the stock until it shows some concrete signs of gaining market share in future.
