JC Penney Gets Apple-Like Bounce

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JC Penney (JCP) rose last year when Ron Johnson, the retail chief at Apple (AAPL) was summoned by hedge-funders to save the moribund company.

For the first few months, investors saw little payoff — same-store-sales continued to flounder and a partnership with Martha Stewart Living Omnimedia (MSO) got a mixed reception.

But today, JC Penney’s moves are starting to pay off for investors, even if Johnson’s strategy is still mostly untested. JCP said that 2012 EPS will rise much more than analysts had been expecting, largely on cost reductions. The company expects to save $900 million in the next two years as it changes its pricing strategy and lowers its selling, general and administrative costs.* The company said it expects to earn $2.16 per share in 2012, above analysts’ expectations for $1.25. Shares are up 16% today.

“While we continue to believe that JCP’s new transformation will take time to play out on the top line — and as we wrote in our note last night after seeing the new strategy, sales in ’12 are likely to disappoint Street expectations and get worse before they get better — we underestimated the degree of expense savings that the company would be able to realize in year 1,” wrote Morgan Stanley analyst Michelle Clark.

JCP will now be updating investors about its same store sales every quarter instead of every month. That could be a way to get investors to think more about the longer-term and take pressure of management to hit numbers every 30 days.



Original Article Source by Barrons.com