Piper Jaffray Pounds The Table On JC Penney: Reiterates As Top Pick For 2016

• J C Penney Company Inc JCP shares have gained 12 percent since January 4.
• Piper Jaffray’s Neely J.N. Tamminga maintained an Overweight rating for the company, with a price target of $18.
• Strong leadership, plans to start selling appliances again, improved inventory and markdown discipline are the company’s main strengths, Tamminga stated.

Analyst Neely Tamminga reiterated JC Penney as the top pick for 2016. She believes that the company’s strength lies in Marvin Ellison’s leadership, its success in reclaiming lost market share and rebuilding to profitability.

Ellison’s strong leadership and experience at Home Depot Inc HD is a positive for JC Penney’s plans to return to selling appliances in 22 stores. Tamminga adding that the company’s new leadership is enabling it to reclaim the once-lost market share, besides rebuilding to profitability.

The y/y decline in JC Penney’s storewide promos and other promo categories, with the exception of free gifts, bodes well for margins. “In FQ4 this year, JCP offered 31 days of storewide discounts, down from 54 days a year ago and 109 days two years ago. The weighted avg discount rate of 17.6% was also down from 19.8% a year ago,” the Piper Jaffray report stated.

Continued signs of inventory and markdown discipline at the company are also encouraging, the analyst commented.