Contrarian play
Motly fool callingJCP contrarian play
The bears often compare JC Penney to Sears Holdings (NASDAQ:SHLD). But I think that comparison is unfair -- JC Penney is implementing numerous turnaround strategies, while Sears is mostly treading water by closing stores.
On the surface, JC Penney's numbers look weak -- its revenue rose 3% in fiscal 2015, but fell 1% in 2016. Comps growth remained flat last year. Wall Street is expecting top line declines for both 2017 and 2018. On the bright side, JC Penney posted its a full-year profit in 2016, thanks to cost-cutting and streamlining strategies, and its earnings should stay in the black for the next two years.
JC Penney plans to boost sales by expanding its home improvement and athletic apparel departments, offering more plus-size apparel, and upgrading its website and analytics capabilities. It also added toy shops, unveiled a B2B program for selling furnishings to hotels, and expanded its Sephora in-store locations. This scattershot strategy might widen its moat against Amazon, but it remains an uphill battle.
Nonetheless, JC Penney looks very cheap at 0.1 times sales and 19 times forward earnings. If the retailer can stop its bleeding, as Wall Street's forecasts suggest, it could be an impressive comeback play.
