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How Is JCPenney Stock Positioned in 2019?

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YTD movement

JCPenney (JCP) stock was trading at $1.85 as of March 14, which reflects a 77.9% rise since the start of 2019. JCPenney stock has risen 49% since the company announced its fiscal 2018 fourth quarter results on February 28. JCPenney’s sales declined, and the bottom line also deteriorated in the fourth quarter. However, JCPenney stock surged as the company’s results were better than analysts’ expectations.

The stock of department store peer Kohl’s (KSS) has risen 3.2% on a year-to-date basis as of March 14, while Macy’s (M) and Nordstrom (JWN) have fallen 20.7% and 4.6%, respectively.

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Analysts’ ratings and price target

On March 1, Telsey Advisory raised its price target for JCPenney stock to $1.50 from $1.25. As of March 14, the average 12-month price target for JCPenney stock was $1.45. This price estimate implies a potential downside of about 22%. As of March 14, JCPenney stock was rated a “hold” by ten analysts and a “sell” by four analysts. None of the analysts had a “buy” recommendation.

Efforts to get back on track

JCPenney’s margins and earnings have been deteriorating, and the company has a significant debt burden. The company’s long-term debt was $3.72 billion as of the end of fiscal 2018. JCPenney’s CEO, Jill Soltau, who assumed the role in October 2018, is taking certain initiatives to turn around the struggling mid-tier department store chain. JCPenney plans to close 18 full-line stores in fiscal 2019 and nine ancillary home and furniture locations.

JCPenney has also decided to discontinue the sale of appliances and restrict the sale of furniture to its e-commerce site and certain Puerto Rico stores. The company intends to allocate the store space that was previously used for appliances to higher margin categories like apparel and soft home furnishings. JCPenney continues to align its physical locations with its omnichannel network to enhance the consumer shopping experience.

Intense competition from online retailers, the strong presence of off-price retailers, and several company-specific issues including the sudden departure of key executives have dragged down JCPenney.

We’ll discuss JCPenney’s sales in the next part of this series.

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