Can JCPenney’s Turnaround Efforts Boost Its Stock Price in 2016?



Stock price trend

As of January 26, JCPenney’s stock was trading at $6.79—down 2.6% since the beginning of 2016. The S&P 500 Index and the SPDR S&P Retail ETF (XRT) have fallen 5.4% and 5.7%, respectively, on a year-to-date basis.

Despite reporting strong holiday sales on January 7, JCPenney’s stock is down in 2016 year-to-date due to overall weakness in the stock market. This weakness resulted from the continued decline in oil prices and slowdown in China.

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Outperformed peers in 2015

JCPenney’s stock price appreciated 5.9% in 2015. This contrasted with the stock prices of major department stores like Macy’s (M), Nordstrom (JWN), Kohl’s (KSS), and Dillard’s (DDS), which fell 46.7%, 36.4%, 20.1%, and 46.0%, respectively, in 2015. JCPenney also outperformed the XRT ETF and the S&P 500 Index, which fell 9.3% and 0.7%, respectively, in 2015. The XRT ETF has 6.8% exposure to department stores and 1.1% exposure to JCPenney. JCPenney also constitutes 0.02% of the iShares Russell 1000 Value ETF (IWD) and 0.04% of the iShares Russell Mid-Cap ETF (IWR).

The appreciation in JCPenney’s stock price in 2015 was driven by its improved performance in the first nine months of fiscal 2015.

Earnings so far in fiscal 2015

JCPenney’s turnaround initiatives helped it trim its losses in each of the first three quarters of fiscal 2015. In the first nine months of fiscal 2015—which ended October 31, 2015—the company reported an adjusted loss per share of $1.45. This loss compared to $2.67 in the previous year. The improvement in adjusted loss per share, which excludes the impact of non-recurring items, was mainly driven by a 3.2% rise in net sales.

We’ll discuss the expectations from the company’s 4Q15 sales in the next part of this series.


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