J.C. Penney Rises Sharply on Less Than Atrocious Earnings

Shares of JC Penney JCP rose more than five percent Friday morning after the clothing retailer reported earnings that drastically missed Wall Street analysts' expectations. The company also announced that it does not expect to meet previously issued full-year earnings projections. This share price movement might seem peculiar - without considering that the company's last earnings release was even worse. The company reported Friday a second-quarter adjusted loss per share of $0.37, missing the consensus analyst estimate by $0.12. Last quarter, the company missed the consensus by an astounding $0.28 and announced discontinuation of a prior $0.20 per share quarterly dividend. On May 16, the day following this abhorrent first-quarter earnings release, shares fell close to 20 percent. "We have now completed the first six months of our transformation and while business continues to be softer than anticipated, we are confident the transformation of jcpenney is on track," said CEO Ron Johnson in a statement Friday. Moreover, in the company's second-quarter conference call, Johnson said he is "confident" everyone will understand J.C. Penney's everyday value. Short-sellers may have been scared by Johnson's confidence. Frantic short-covering may have been a contributing factor to Friday's price increase, as shares sold short comprise around 28 percent of J.C. Penney's float. CBS reported in June that Johnson had resumed using the word "Sale." This followed a three-tiered pricing strategy which started in February. In the second-quarter conference call, Johnson said customers were confused about the previous pricing strategy. Now, he said in the call, "customers get it." The word "sale" might become increasingly important to the company, as it reported $53 million of inventory markdowns in the first-quarter and $102 million in the second-quarter. Shares of competitor Sears SHLD rose around 0.8 percent Friday morning, while shares of Kohl's KSS fell around 1.6 percent and shares of Macy's M fell around 1.1 percent. Kohl's and Macy's both reported better-than-expected quarterly earnings this week and Sears is expected to report second-quarter earnings on August 16.