J.C. Penney Hasn’t Hit Bottom Yet: Analyst
Half a year into J.C. Penney’s strategy to transform its retail experience for shoppers, one analyst expressed doubt that the company’s same-store sales declines had stabilized.
During the quarter, the company’s same-store sales, also known as comps and a key metric for retailers, dropped 21.7 percent.
“I’m not entirely convinced that down 20 is the floor, but I think for the most part I think people are a little bit more encouraged in terms of what they saw month-to-date on traffic trends, which is why I think the stock has kind of bounced back here so far,” said Charles Grom, senior retail equity analyst at Deutsche Bank.
Grom has a “neutral” rating and a $18 price target on the company’s shares. On Friday, J.C. Penney’s shares closed at $23.42 on the New York Stock Exchange, up nearly 6 percent.
The company has lost market share as it tries to wean value-hungry consumers off discounts.
Although Grom told CNBC’s“Squawk on the Street” that “the jury is still out” as to whether the 102-year-old retailer can keep its core customer, he emphasized the importance of holding onto these buyers.
“It’s going to be imperative that J.C. Penney keep their core customer in the store and if they do, then I think the prospects are bright,” he said. “If they don’t, it’s going to be difficult.”
Dana Telsey, CEO of Telsey Advisory Group, questioned how the company would do that without offering sales.
“I think overall you have to have the word ‘sale’ in there in order to drive Mrs. Smith to the store,” Telsey said. “I haven’t seen retailers who haven’t put the word sale in there or haven’t had a percentage off be able to attract the American consumer.”
She added that businesses have been able to reinvent themselves before, but it takes time.
“You’ve got to be able to see some signs of daylight that trends change,” she said. “By fourth quarter, you have to see some element that traffic trends are stabilizing.”
—By CNBC.com’s Katie Little; Follow Her on Twitter @katie_little.
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Deutsche Bank owns shares of J.C. Penney and has an investment banking conflict with the retailer.