J.C. Penney's gain Macy's loss?
Separately, Wells Fargo on Tuesday raised its price target on competitor Macy's to a range of $66 to $70, from between $54 and $58. Analyst Paul Lejuez said that the retailer's fourth-quarter same-store sales growth of 1.4 percent—which was achieved with a relatively consistent gross margin—is proof that the company is winning the battle among mid-tier department store chains such as Penney's and Kohl's.
"Though difficult to quantify, we believe Macy's has benefited from J.C. Penney's massive share loss in the last two years, as the J.C. Penney customer overlaps with the lower end of the Macy's customer demographic," Lejuez said. "Although J.C. Penney seems to have stabilized from a comp perspective, we do not believe J.C. Penney is in a position to take back market share anytime soon."
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Lejuez said that Macy's reputation for having big sales has driven bargain-seeking customers to its stores, and its assortment of popular brands—which include Tommy Hilfiger and Michael Kors—is also a major reason for its lead.
"The momentum and mind share the company has gained makes us believe it will not so easily be reversed," Lejuez said. "Their lead is likely too large."
Macy's shares reached an all-time high near $60 after the upgrade.
—By CNBC's Krystina Gustafson. Follow her on Twitter @KrystinaGustafs.