Penney's shares rise amid hopeful signs

NEW YORK -- Shares of J.C. Penney Co. rose Thursday for the second day in a row, after a key supplier, Levi Strauss & Co., said that its new shops within the retailer's stores are faring well.

THE SPARK: During a conference call with investors Tuesday, Chip Bergh, president and CEO of Levi Strauss & Co., said that sales at its new mini-shops with J.C. Penney that were rolled out in 700 stores are faring much better than the remaining 400 stores. He described it as a "dramatic" positive improvement.

THE ANALYSIS: The encouraging news offered some evidence that the move by J.C. Penney's CEO Ron Johnson to overhaul the department store chain is gaining some traction. Since Johnson got rid of hundreds of sales events and dumped coupons entirely on Feb. 1, in favor of everyday lower prices, sales have been falling as shoppers, used to big sales signs, flee to rivals. The company has reported two consecutive quarters of losses and deep sales drops.

But Johnson is counting on making the stores more inviting and exciting so that shoppers will come back for the experience, instead of the discounts. Since Aug. 1, Penney has rolled out 10 mini-shops in 700 of Penney's 1,100 stores. Johnson aims to have 100 shops in those 700 stores by 2015. The remaining 400 stores are in small towns and won't feature the full makeover.

With the shop strategy, Johnson is hoping to make a deeper connection with consumers. Levi's new shops are each staffed with Levi's fit specialists who are trained by Penney and the jeans maker. The shops have "denim bars" that feature iPads to let customers browse 11 cuts and 88 washes of jeans.

THE SHARES: Shares of J.C. Penney rose $1.61, more than 7 percent, to $25.76 in afternoon trading. The price has ranged from $19.06 to $43.18 in the past 52 weeks. Shares have been down 30 percent since the beginning of the year.