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UPDATE: Gilford Securities Downgrades J. C. Penney (JCP) to Sell; 'No Reason for Bullishness'

February 14, 2013 2:58 PM EST Send to a Friend
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Price: $10.04 +1.72%

Rating Summary:
    5 Buy, 16 Hold, 6 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 10
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(Updated - February 14, 2013 3:12 PM EST)

Gilford Securities today downgraded J. C. Penney (NYSE: JCP) from Hold to Sell. Analysts said there was no reason for bullishness, and were concerned about JCP's high expense ratio.

"Ron Johnson and Bill Ackman focus on the addition of new shops and how that might invigorate Penney. However, an issue they do not speak about might be a potent negative influence on JCP's future—a high expense ratio," said analyst Bernard Sosnick.

In other words, Johnson may be charging forward with yet another false premise, that JCP can be a price leader despite its higher expense ratio.

"Unlike Ackman, whose bullish comments we discuss on page 8, we believe damage done to Penney by Johnson’s maneuvers is beginning to appear irreparable," added Sosnick.

Sosnick said J.C. Penny's expense ratio jumped to 34.5 percent from 29.6 percent. This high expense ratio will make it impossible to maintain a low-price strategy. In order to maintain its low price theme, sales would have to rocket higher, and fast.

"If not, Penney may reach for more gross margins—as failing retailers
have typically done when in desperate straits," said Sosnick.

Sosnick's conclusion . . . "Mission Impossible".

For an analyst ratings summary and ratings history on J. C. Penney (NYSE: JCP) click here. For more ratings news on J. C. Penney click here.

Shares of J. C. Penney closed at $19.61 yesterday.




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