Can Listening to Consumers Turn J.C. Penney Around?
Maxim Group’s latest move — an upgrade of its J.C. Penney (NYSE:JCP) stock from Hold to Buy and an increase in its price target to $27 from $16.50 — shows that the firm isn’t ready to give up on the company just yet.
Despite a report Thursday that detailed a greater-than-expected fiscal first-quarter-loss, major players on Wall Street are remaining optimistic about the company’s ability to turn it around. Following the departure of former Chief Executive Ron Johnson and the return of CEO Mike Ullman, firms are expressing more confidence in the retailer, as reflected by its 2.4 percent in shares Monday to 18.45, remaining the most actively traded major retail stock.
Ullman’s recent strategy change is largely to blame for this rise in confidence. While Johnson failed to conduct tests before removing sales, coupons, and popular merchandise last year, Ullman encourages consumer feedback. He explained to the investment community last week that his two recent advertising campaigns were launched only after conducting thorough consumer tests. The return to this traditional sales and promotional strategy is believed to increase sales and return the company to a cash flow positive position in 2014 for the first time since 2010.
Maxim Group Analyst Rick Snyder explains, “CEO Mike Ullman has recently returned to couponing, promoting, and returning popular private brands to the stores. We believe the abandonment of these strategies and brands was a major reason for the steep decline in 2012. Our recent channel checks indicate that store traffic has increased since its company has returned to these strategies,” reported StreetInsider.com.
J.C. Penney recently arranged a loan of $1.75 billion through Goldman Sachs (NYSE:GS), and although analysts see the company’s higher accounts payable as a reason for concern, Snyder maintained his belief that suppliers would be supportive and ”willing to be paid late rather than to force the issue with J.C. Penney.”
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