Don't be fooled by J.C. Penney same-store sales
September sales show that the bleeding has slowed, not stopped, at the retailer.
By Paul Ausick, 24/7 Wall St.
For the month of September, J.C. Penney (JCP) reported that same-store sales improved by 5.8 percent, compared with the decline in same-store sales posted in August. Said clearly, same-store sales fell 9.8 percent year-over-year in August. Compared with sales in September 2012, same-store sales last month were down 4 percent. The bleeding has slowed, not stopped.
In the third quarter of 2012, J.C. Penney's same-store sales were down 26.1 percent year-over-year. The forecast from Retail Metrics for the third quarter of this year is that same-store sales will fall another 4.9 percent. That is an improvement in the rate of decline, of course, but hardly qualifies as a turnaround.
And a turnaround is what the company says is happening. In an announcement Tuesday morning before markets opened, J.C. Penney's CEO said:
Over the last six months, we have made significant strides and are now seeing positive signs in many important areas of the business, in spite of what continues to be a difficult environment for consumers and retailers in general. While pleased with the improving trends and more predictable performance, we are still in the early stages of the turnaround and will maintain a relentless focus on achieving our long-term goals for the benefit of our customers, associates and shareholders.
The company points to a 25.3 percent growth in online sales in September as a sign of … something. But most retailers post double-digit gains in online sales because that is where the growth is. If this were different at J.C. Penney, that would be the real surprise.
Margins are still nonexistent due to "the overhang of inventory from the first two quarters of the year, higher levels of clearance units sold during the [third quarter], as well as the company's transition back to a promotional pricing strategy during the second quarter of 2013."
Regarding J.C. Penney's financial status, the company said that it expects to end the year with more than $2 billion in liquidity, following the $785 million stock offering. The balance comes from the company's unused portion of its credit facility.
For some reason, J.C. Penney stock was up more than 6 percent in early trading Tuesday morning, at $8.20 in a 52-week range of $7.59 to $27.00.
More from 24/7 Wall St.
Another "glass half empty" story. The vast majority of the public has no idea of the day to day stock price of JCP, and could care less. The retail consumer only cares of a few core categories; quality, price, selection and shopping experience. JCP competes very well in the 1st 3 categories. Other than a large Outlett JCP in an large Outlet Mall in my area, the 3 refurbished stores provide a better shopping enviornment than their competitors. For my metro area, there is a substantial uptick of shoppers in JCP over the past year. Consumers and management will decide its fate, not short sellers and negative stories that seem to hope for its downfall.
If JCP pulls off a miracle and remains out of bankruptcy, then maybe it might be worth
$2.00 a share.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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