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JCPenney's Fallout Survival: After the Fiscal 1Q17 Results

PART:
1 2 3 4 5
Part 5
JCPenney's Fallout Survival: After the Fiscal 1Q17 Results PART 5 OF 5

How JCPenney’s Valuation Looks after Its 1Q17 Results

Reactions to JCP’s 1Q17 results

As of May 15, JCPenney (JCP) was trading at a 12-month forward PE (price-to-earnings) multiple of 9.3x. The company’s valuation multiple fell 13.4% on May 12, the day the company announced its fiscal 1Q17 results. As we discussed in Part 3 of this series, the company disappointed its investors with a 3.7% drop in its top line.

How JCPenney’s Valuation Looks after Its 1Q17 Results

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Peer comparisons

As of May 15, JCPenney peers Macy’s (M), Nordstrom (JWN), and Kohl’s (KSS) were trading at 12-month forward PEs of 7.3x, 13.9x, and 10.1x, respectively. JCPenney and its peers are all trading at lower valuation multiples than the S&P 500 Index’s 16.8x.

Remember, the 12-month forward PE depends on various parameters, including growth expectations, leverage, and risk-return profile.

Analysts now expect JCPenney’s fiscal 2017 sales to rise 2.8% to $12.2 billion. The company’s adjusted EPS (earnings per share) are expected to come in at $0.47 in fiscal 2017, as compared to $0.08 in fiscal 2016.

JCP’s growth strategies

JCPenney is trying to improve the performance of its apparel business by focusing on certain growth categories like activewear. The company is strengthening its partnership with Nike (NKE) by leveraging more than 600 new Nike store environments that will offer an enhanced assortment of apparel, accessories, and footwear. The company is also enhancing the presence of the Adidas brand in its showrooms. The company has added women’s Adidas apparel to 100 stores in March and plans to extend it to 400 stores by the back-to-school season.

Beyond apparel, the company is also enhancing its beauty, footwear, and home business. The company plans to add 100 new appliance showrooms in 2Q17 and also bring in new brand partners to the showroom this year.

Notably, Sephora continues to be a key growth area for the company. JCPenney currently operates 588 Sephora stores within JCPenney locations. The company plans to open 70 new locations in fiscal 2017.

For more updates, visit Market Realist’s Department Stores page.

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