UPDATE 1-J.C. Penney shares fall after sales plunge
Feb 28 (Reuters) - Shares of J.C. Penney Co Inc opened 19 percent lower on Thursday after the department store operator reported its sharpest drop in sales since announcing a transformation plan 13 months ago.
The results prompted at least three brokerages to cut their price targets on the stock, which has lost 48 percent of its value in the past year.
"We were most surprised by the more than 1,000 basis points decline in gross margins in the quarter," Deborah Weinswig of Citigroup wrote in a note, cutting her price target on the stock to $22 from $25.
Gross margin in the winter holiday quarter fell as the company had to slash prices at the end of the season to clear unsold merchandise.
Rival Kohl's Corp reported a lower fourth-quarter profit on Thursday, hurt by markdowns during the holiday season, and forecast full-year earnings that were short of Wall Street expectations.
J.C. Penney did not provide any same-store sales or earnings forecast on its conference call, which disappointed analysts.
"(J.C. Penney) declined questions on February trends, leaving bulls with little hope that even the easy compares from eliminating coupons in the first quarter of 2012 are enough to drive positive same-store sales in the first quarter," UBS Investment Research analyst Michael Binetti wrote in a client note.
Chief Executive Ron Johnson's master plan, announced in January 2012, had called for "everyday low prices" instead of discounts and sales events along with plans to re-fashion its stores by rolling out dozens of branded boutiques for hip brands by 2015.
"By our math, the current trend points to first-quarter same-store sales could be as low as (negative) 19 percent without a change in trend, well below our modeled (negative) 10 percent," Binetti said, cutting the price target on the stock to $10 from $13.
Weinswig, however, said once the company's plans to roll out about 20 home shops and a Joe Fresh shop this spring are put in place, it could be a catalyst to a return to growth.
Analysts at JP Morgan also cut their price target on the stock to $15 from $18.
The short interest position in J.C. Penney has jumped to 27.2 percent of outstanding shares as of Feb. 15, compared with 14.3 percent on Dec. 31, 2011, according to Thomson Reuters data.
Investors who sell securities "short" profit from betting stocks will fall. Short interest in the stock market is often a gauge for the level of skepticism among investors.
The company's shares were trading at $17.11 on the New York Stock Exchange on Thursday morning.
(Reporting by Arpita Mukherjee in Bangalore; Editing by Don Sebastian)