Credit Suisse Reduces Forecast for J C Penney

In a report published Thursday, Credit Suisse analyst Michael Exstein reiterated an Underperform rating and $7.00 price target on J C Penney Company Inc JCP. In the report, Credit Suisse noted, “JCP reported mixed results, reflecting progress to date in stabilizing the business but challenged by the slow pace of volume growth. The positives were: inventories showed year-over-year declines, gross margin recovered to historical levels, and expenses were well controlled in dollar terms. However, comparable store sales were flat, as e-commerce sales growth continued its sequential deceleration trend. Management explained that there was difficulty in restoring the home business online. We think it will be challenging for the company to achieve its longer term revenue growth expectations. JCP will have to achieve revenue growth while holding on to its current gross margin rate; if it is unable to do both at the same time, it will be difficult to create a sustainable enterprise. Amid a challenging external environment, we believe a strategy embracing store/asset rationalization, expense reduction, and deleverage is a more realistic one for JCP while it continues to work on refining merchandising. We lower our FY14 estimates to -$2.20 from -$2.04, and our FY15 EPS estimate to -$1.67 from -$1.22.” J C Penney closed on Wednesday at $7.76.