Is JC Penney (NYSE:JCP) finally on the Road to Recovery?

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By Daniel Craine on October 15, 2014 Economy

J.C. Penney Company Inc (NYSE:JCP) is an American chain of department stores based in Texas. JC Penney (NYSE:JCP) has over 1000 stores spread across 50 US states and Puerto Rico. Besides the conventional merchandise, JC Penney (NYSE:JCP) stores offer leased services of Sephora, optical centers, jewelry and Seattle’s best coffee. Since 1998 company has been an internet retailer too.

According to the latest speculations, JC Penney (NYSE:JCP) has recently hit rock bottom, and is in the process of making immediate changes in its management. One of these dramatic changes is bringing in a new CEO to the company. Even though management has many expectations from Marvin Ellison; a fast fix seems unrealistic.

Marvin Ellison’s appointment is a big change for JC Penney (NYSE:JCP), as he holds an exceptional track record. But after a presentation of JC Penney (NYSE:JCP)’s turn around strategies were presented to Wall Street analysts last week, the stocks further fell down dramatically by 11 percent. The objective of this presentation was to highlight new strategies that JC Penney (NYSE:JCP) would be adopting to improve their profit figures, such as online initiatives and new product lines. It built the strategies on the hope of increasing annual sales by $2.55 billion within the next three year. Even though, JC Penney (NYSE:JCP) management was trying to paint a better picture of the quarterly revenues to entice investors, the sheer failure to hit the sale targets for September rendered these efforts unsuccessful. This fact has changed the situation quite dramatically. The investors are now questioning the company’s ability to meet quarterly targets and improve revenues.

After its disappointing efforts on analyst day, they tried to turn the situation around by announcing plans of bringing in Ellison as the next CEO, highlighting his strong performance record to convince the investors. He is expected to take over as CEO designee next month.

This announcement has been welcomed by all, however, it is not being seen as a permanent remedy to JC Penney (NYSE:JCP) woes. Analysts at UBS downgraded the price of the share to $5, calling JC Penney (NYSE:JCP)’s 2017 vision unrealistic.

Ellision, no doubt seems to be the best option to take over control of a sinking ship as his past experience is combination of working with best retailers, however, he is expected to face many critics and his performance will be closely watched. At this point many are in favor of JC Penney (NYSE:JCP) returning to its origins of apparel basics and other home and clothing lines.

Latest reviews of JC Penney (NYSE:JCP) show very slight improvement in its fourth consecutive quarter. Even though the losses are continuous; the three consecutive quarters show deficits that are less than expected. This goes hand in hand with improvement in gross margins and inventory levels. But if the company fails to impress the analyst community, its efforts will go to waste. By the end of the previous week, there was a further drop of 20 percent in shares.