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Are Analysts Optimistic about JCPenney’s Turnaround Efforts?

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Aug. 13 2018, Updated 10:15 a.m. ET

Current recommendations

As of August 10, 13 of the 16 analysts (81%) covering JCPenney (JCP) stock had a “hold” recommendation for the mid-tier department store chain. One analyst rated the company a “buy,” and two had a “sell” recommendation. There have been no major changes in analysts’ ratings for JCPenney stock over the last two months.

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Strategic efforts

JCPenney is leaving no stone unturned to boost its sales and thrive in a tough retail market where players are facing intense competition from online retailers such as Amazon (AMZN). JCP is continually strengthening its presence in categories such as home and beauty.

In the beauty business, Sephora stores within JCPenney locations are a key customer attraction. The company opened 70 new Sephora stores in fiscal 2017, ending the year with 642 stores within JCPenney locations. It intends to open 30 additional Sephora locations in fiscal 2018. The company also plans to roll out new brands in Sephora stores this year.

JCPenney expects its focus on home business to improve its revenue per customer. As of the end of the first fiscal quarter of 2018, it operated appliance showrooms in more than 600 stores and offered mattresses in about 500 locations. The company has also enhanced its home division merchandise with the addition of televisions.

On August 9, it announced that it would open 500 baby shops within JCPenney stores starting August 30. It has strategically chosen the locations of these 500 shops to take advantage of the closure of specialty retailer Babies R Us. It’s enhancing merchandise offerings in the baby segment, including cribs, high chairs, strollers, car seats, diaper bags, and bouncer seats from reputable brands.

As of August 10, the 12-month average price target for JCPenney stock was $3.35, implying an upside potential of 38%. As we saw in Part 2 of this series, JCPenney stock is down 23.4% YTD.

In the next part of this series, we’ll look at analysts’ expectations for JCPenney’s fiscal second-quarter earnings.

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