Clues Point to Lackluster December for J. C. Penney (JCP) - Wells Fargo
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Rating Summary:
1 Buy, 21 Hold, 11 Sell
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Today's Overall Ratings:
Up: 16 | Down: 11 | New: 13
Rating Summary:
1 Buy, 21 Hold, 11 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 16 | Down: 11 | New: 13
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Investors are likely to reexamine hope for a J. C. Penney (NYSE: JCP) turnaround following December results, thinks analyst Paul Lejuez of Wells Fargo. In his view, clues point to a disappointing December comp.
"Although they do not report monthly, department store counterparts Belk and Macy's (that report comps the same way as JCP) have spoken about the Holiday sales split. In an 11/27 WWD article, Belk management predicted that Nov could be up double-digits, with December coming in flat due to the calendar shift. Macy's also indicated that it planned Nov to be much stronger than Dec. If these retailers are any indication, Dec comps for JCP are likely to be well below the +10% Nov comp," said Lejuez.
Another clue is seen in The Gap results.
"Although GPS reports comps on a realigned basis, GPS' total sales in Nov of +8% are reported on the same unaligned basis as JCP. And because GPS typically has a 200bps spread between comps and total sales, we can estimate that if GPS reported comps on that same unaligned calendar, comps would have been +6%. But GPS actually reported a +2% comp on an aligned basis, which means the calendar would have helped comps by 400bps," added the analyst.
"If JCP saw a similar 400bps tailwind to Nov comps, on a realigned basis, the +10% they reported would have been more like a +6%. And if +6% is the underlying trend and Dec gets hurt by the calendar in addition to a slightly tougher comparison, we could be looking at a low single digit comp in Dec (which we may hear about around Jan 9th if their monthly reporting pattern holds)," continued the analyst. "Considering the comparison also gets 400-700bps harder in Dec (we estimate Dec 2012 comps were down ~30% vs. Nov 2012 down 34-37%), we believe Dec may disappoint many that now expect double-digit comps to continue, causing people to rethink the likelihood of a JCP turnaround."
Wells Fargo has an Underperform rating on J. C. Penney (NYSE: JCP) with a price target of $4-$5.
For an analyst ratings summary and ratings history on J. C. Penney click here. For more ratings news on J. C. Penney click here.
Shares of J. C. Penney closed at $8.20 yesterday.
"Although they do not report monthly, department store counterparts Belk and Macy's (that report comps the same way as JCP) have spoken about the Holiday sales split. In an 11/27 WWD article, Belk management predicted that Nov could be up double-digits, with December coming in flat due to the calendar shift. Macy's also indicated that it planned Nov to be much stronger than Dec. If these retailers are any indication, Dec comps for JCP are likely to be well below the +10% Nov comp," said Lejuez.
Another clue is seen in The Gap results.
"Although GPS reports comps on a realigned basis, GPS' total sales in Nov of +8% are reported on the same unaligned basis as JCP. And because GPS typically has a 200bps spread between comps and total sales, we can estimate that if GPS reported comps on that same unaligned calendar, comps would have been +6%. But GPS actually reported a +2% comp on an aligned basis, which means the calendar would have helped comps by 400bps," added the analyst.
"If JCP saw a similar 400bps tailwind to Nov comps, on a realigned basis, the +10% they reported would have been more like a +6%. And if +6% is the underlying trend and Dec gets hurt by the calendar in addition to a slightly tougher comparison, we could be looking at a low single digit comp in Dec (which we may hear about around Jan 9th if their monthly reporting pattern holds)," continued the analyst. "Considering the comparison also gets 400-700bps harder in Dec (we estimate Dec 2012 comps were down ~30% vs. Nov 2012 down 34-37%), we believe Dec may disappoint many that now expect double-digit comps to continue, causing people to rethink the likelihood of a JCP turnaround."
Wells Fargo has an Underperform rating on J. C. Penney (NYSE: JCP) with a price target of $4-$5.
For an analyst ratings summary and ratings history on J. C. Penney click here. For more ratings news on J. C. Penney click here.
Shares of J. C. Penney closed at $8.20 yesterday.
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