How Did JCPenney’s Stock React to Its 1Q16 Earnings Release?

JCPenney's Turnaround Story Sours in 1Q16: Can It Turn Again?

(Continued from Prior Part)

Reaction to 1Q16 results

JCPenney’s (JCP) stock price fell by 2.8% on May 13, the day the company announced its results for 1Q16 ended April 30, 2016. As discussed in part one of this series, JCPenney missed analysts’ sales estimate in 1Q16 amid a challenging retail environment. However, the company was still able to trim its losses due to a reduction in expenses.

Comparison with peers

As of May 13, JCPenney’s stock price has appreciated by 8.8% on a year-to-date basis. The SPDR S&P Retail ETF (XRT) has a 0.8% exposure to JCPenney.

The stock prices of Macy’s (M), Nordstrom (JWN), Kohl’s (KSS), and Dillard’s (DDS) have declined by 12.8%, 21.9%, 27.9%, and 9.2%, respectively, since the start of 2016.

Department stores are under tremendous pressure due to tepid consumer spending and intense competition from online retailers such as Amazon (AMZN). Also, consumers are looking for value deals offered by off-price retailers such as The TJX Companies (TJX) and Ross Stores (ROST). These off-price retailers sell their merchandise at a 20%–80% discount to department store prices.

Analyst recommendations

As of May 13, 12 out of 27 analysts covering JCPenney’s stock had “hold” recommendations for the stock. 11 analysts had “buy” recommendations and four had “sell” recommendations. JCPenney has been consistently improving its performance in the recent quarters. However, a challenging first quarter impacted the sales of JCPenney and its peers. JCPenney continues to be optimistic about delivering positive adjusted EPS (earnings per share) in fiscal 2016 and EBITDA of $1 billion.

However, the intense competition by JCPenney and its peers might continue to put pressure on their performance for the rest of the year. As discussed in part three of this series, JCPenney is taking on several initiatives to enhance its merchandise and boost its sales. The company is building its online capabilities with the continued rollout of an order online, pick up in store facility. This facility is now available in over 20% of JCPenney’s stores. The company is planning a chainwide rollout of this facility prior to the back-to-school selling season. For more updates, visit our Department Stores page.

Browse this series on Market Realist:

• Part 1 - JCPenney’s 1Q16: Sales Fall after 5 Straight Quarters of Growth

• Part 2 - JCPenney’s Sales Fall in 1Q16: How Did It Trim Its Losses?

• Part 3 - JCPenney Looks for Growth beyond Apparel