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4-Traders Homepage  >  Equities  >  Nyse  >  J C Penney Company Inc    JCP

J C PENNEY COMPANY INC (JCP)
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J.C. Penney stock has worst fall ever

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05/17/2012 | 02:04am CEST
The sign outside the J.C. Penney store is seen in Westminster

(Reuters) - J.C. Penney Co Inc (>> J.C. Penney Company, Inc.) shares plunged nearly 20 percent on Wednesday, their worst decline ever, wiping away $1.43 billion in market value a day after the retailer shocked Wall Street with a much worse-than-expected drop in sales and by scrapping its dividend.

(Reuters) - J.C. Penney Co Inc (>> J.C. Penney Company, Inc.) shares plunged nearly 20 percent on Wednesday, their worst decline ever, wiping away $1.43 billion in market value a day after the retailer shocked Wall Street with a much worse-than-expected drop in sales and by scrapping its dividend.

A number of leading Wall Street firms also lowered their price targets on the company.

Penney shares closed down $6.57 at $26.75 on the New York Stock Exchange. The decline was the worst percentage decline since the company listed its shares on the exchange in 1929, according to Center for Research in Security Prices at the University of Chicago Booth School of Business.

The move pushed the stock well below the $30.11 closing price on June 13, the day before it named Apple Inc (>> Apple Inc.) retail store head Ron Johnson as chief executive.

The retailer said on Tuesday after the stock market close that sales at stores open at least a year fell 18.9 percent in the first quarter, which coincided with the kickoff of its multi-year overhaul, and reported a loss, missing Wall Street estimates on both counts by a wide margin. The company also scrapped its dividend.

JP Morgan cut its price target on Penney's shares to $40 from $49, Goldman cuts its target to $31 from $35, and Citi lowered its target to $40 from $50.

Option turnover was 6.7 times the average daily levels with 129,000 puts and 67,000 calls traded in Penney, according to option analytics firm Trade Alert.

Investors often turn to equity puts, granting them the right to sell shares at a fixed price any time until expiration, to speculate on potential weakness in the stock or to protect an existing long position in the shares.

Penney is in the process of a multi-year transformation, beginning with a new pricing strategy that eschews the use of coupons and sales events in favor of everyday lower prices on most items.

Johnson told analysts at a meeting on Tuesday that the company had not adequately conveyed to shoppers, accustomed to discounts, the benefits of its pricing strategy.

Deutsche Bank analyst Charles Grom said in a research note that Johnson "strongly believes that same store sales will be positive by February 2013."

Barclays analyst Robert Drbul lowered his full year profit estimates, citing the efforts Penney will need to exert "to re-educate the JCP consumer away from coupons and discounts."

Johnson faulted the company's advertising.

"It is not doing the hard work we need it to do right now," Johnson conceded.

Penney's ad campaign has featured comedienne Ellen DeGeneres and been designed to entertain and change the chain's image, rather than emphasize merchandise.

But in April, Penney started running ads called "Do the Math," which uses a summer dress to illustrate how its everyday lower price comes out to less for a shopper than a sale and a coupon.

The next phase of the transformation will come in August when the first of the 100 boutiques each store will house are unveiled. At Tuesday's analyst meeting, Penney announced deals with designers like Vivienne Tam, Betsey Johnson and Michael Graves.

Penney's largest shareholder, William Ackman, on Tuesday reiterated his support for Penney's efforts during its multi-year turnaround.

(Reporting by Phil Wahba in New York, additional reporting by Doris Frankel and Brad Dorfman in Chicago; Editing by Leslie Gevirtz and Phil Berlowitz)

Stocks treated in this article : Apple Inc., J.C. Penney Company, Inc.
Stocks mentioned in the article
ChangeLast1st jan.
APPLE -0.36% 186.31 Delayed Quote.11.20%
J C PENNEY COMPANY INC -2.97% 2.61 Delayed Quote.-10.13%
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Financials ($)
Sales 2019 12 243 M
EBIT 2019 336 M
Net income 2019 21,8 M
Debt 2019 3 296 M
Yield 2019 -
P/E ratio 2019 33,59
P/E ratio 2020 13,09
EV / Sales 2019 0,34x
EV / Sales 2020 0,32x
Capitalization 844 M
Chart J C PENNEY COMPANY INC
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J C Penney Company Inc Technical Analysis Chart | JCP | US7081601061 | 4-Traders
Technical analysis trends J C PENNEY COMPANY INC
Short TermMid-TermLong Term
TrendsBearishBearishNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 19
Average target price 3,41 $
Spread / Average Target 31%
EPS Revisions
Managers
NameTitle
Marvin R. Ellison Chairman, President & Chief Executive Officer
Jeffrey Allan Davis Chief Financial Officer & Executive Vice President
Therace Risch Executive VP, Chief Information & Digital Officer
Robert Gerald Turner Independent Director
Leonard H. Roberts Independent Director
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