JCPenney Stock a Hotter Buy Heading Into the Holidays (JCP)

JCPenney (JCP) stock, suffering a collapse just two years ago as the company was on the brink of bankruptcy, is ready to hold a rally this year with a refreshed brand now that the retail giant has ushered in a new merchant leader.

jcpenney jcp stockJCPenney, known for its simple, affordable clothes but not its high fashion, said it has appointed John Tighe to chief merchant officer, effective Oct. 1, to replace retiring Elizabeth Sweney, who’s been in the role since 2012.

The new leadership in merchandising comes on the heels of the company’s new CEO, Marvin Ellison, who took the helm Aug. 1.

While investors may be cautious of a C-level shakeup so close to the crucial holiday season, Sweney will serve in an advisory role through the end of the fiscal year, giving JCPenney stock two benefits — the much-needed fresh perspective from Tighe and the veteran view from Sweney.

Tighe, who has 24 years of industry experience including a series of merchandising roles for May Department Stores, joined JCPenney in 2002 as a buyer before several promotions to his most recent position as senior general merchandise manager for the men’s, children’s, footwear, handbag and intimate apparel divisions.

Plano, Texas-based JCPenney has already responded well to hints that it wants to shed its mom-jeans image and join the profitable competition that is cheap teen wear, a market dominated by Forever 21 and H&M. At a Goldman Sachs conference earlier this month, Ellison said JCPenney is piloting a new brand called Belle & Sky, “which is our version of fast fashion.”

Indeed, bruised JCPenney stock seems to be tempting investors as of late and has become an analyst darling with a slew of upgrades and price target increases last month in the wake of its surprise second-quarter financial results. The stock is up 44.5% year-to-date, but only after having plunged from all-time highs of about $85.25 in 2007.

JCPenney’s performance is even more impressive when you consider the broader downturn across similar retailers. Macy’s (M) shares are down 19.4% year-to-date, Kohl’s (KSS) is down 20.5%, Sears (SHLD) is down 24.2% and Bon-Ton Stores (BONT) are down 45.8%.

JCPenney stock enjoyed a significant rally after it reported a second-quarter net loss of 41 cents per share, 9 cents better than what analysts were expecting. Meanwhile, its revenue rose 2.7% year-over-year to $2.88 billion, above the Street view of $2.7 billion, and showing increases in comparable-store sales and margins.

Viewed as a serious bankruptcy risk just two years ago, JCP has worked diligently to revive its liquidity and financial stability, including by ongoing cost-cutting measures like closing 40 of its 1,060 stores this year.

Bottom Line

Sure, JCPenney, which is still struggling to swing to profits and still far from its heydays in the ‘90s and early 2000s, still has no shortage of skeptics.

But the divisiveness of opinions on this stock only weighs on its price and makes it a more valuable buy right now.

So, with shares still far from their potential and amid the company’s proactive moves toward fostering a stronger brand, JCPenney stock is among the good buys to be made in the retail sector.

As of this writing, Rebecca McClay did not hold a position in any of the aforementioned securities.

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