Baird’s Mark R. Altschwager prefers to remain cautious on J C Penney Company Inc (NYSE: JCP), especially the company’s top line, ahead of its Q4 results announcements, “given
cyclical/secular headwinds and potential pressure from additional store closures.”
The analyst maintains an Outperform rating on the company, with a price target of $11.
Caution All Around
“We believe management is likely to offer more conservative comp guidance for F2017 versus what was outlined at last August's
analyst day. That said, we continue to see a path to management's F2017 EBITDA target while current valuation reflects investor
skepticism, supporting good risk/reward near $7,” Altschwager mentioned.
JCPenney
reported its November-December comps on January 6 at 0.8 percent, well below the previous Q4 estimate and consensus, while
reaffirming its full year adjusted EBITDA guidance of $1.2 billion.
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Q4 Expectations
Management also highlighted the positive comps from the Thanksgiving week to Christmas, as well as the strength in the
outerwear, appliances, boots, Sephora, jewelry and toys categories, offset by weakness in women’s apparel.
The analyst pointed out that industry checks had been slightly mixed for January, with “sequentially improved but very choppy
traffic,” as well as sequential improvement in department store retail sales, along with a sequential deceleration in SpendTrend
department store data and comps among JC Penney’s retail
peers.
Guidance
Altschwager expects the company’s FY 2017 guidance to reflect flat to low single digit percent comps, with slight expansion in
gross margins, additional SG&A savings and capex close to $400-$425 million.
“Apparel trends will likely be the biggest swing factor for comps while store closures could present additional top-line
pressure,” the analyst added.
At last check, shares of JCPenney were up 1.28 percent at $7.12.
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Commons
Latest Ratings for JCP
Date |
Firm |
Action |
From |
To |
Feb 2017 |
Morgan Stanley |
Upgrades |
Underweight |
Equal-Weight |
Feb 2017 |
Susquehanna |
Initiates Coverage On |
|
Positive |
Jan 2017 |
Credit Suisse |
Downgrades |
Neutral |
Underperform |
View More Analyst Ratings for
JCP
View the Latest Analyst Ratings
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