Oppenheimer Analyst: Penney Promotions May Drive Sales

Monday, 10 Dec 2012 06:18 PM


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J.C. Penney Co.’s “friends and family” event this past weekend shows the 110-year-old department-store company is taking a “more nimble” approach to promotions after sales declines, according to Oppenheimer & Co.

The company, led by Chief Executive Officer Ron Johnson, offered customers 20 percent off everyday and clearance prices from Dec. 8 through Dec. 10, Brian Nagel, a New York-based analyst with Oppenheimer, wrote in a note Monday.

“Recent price events at J.C. Penney, while at odds with Mr. Johnson’s initial stance on promotions, we believe will successfully drive better traffic while maintaining the integrity of new brands in JCP stores,” wrote Nagel, who rates the shares a buy.

Johnson, the former Apple Inc. retail chief who joined as CEO about a year ago, has tweaked the Plano, Texas-based retailer’s pricing strategy after a previous plan confused customers by reducing sale events and coupons. J.C. Penney has more aggressively displayed value to customers and is discounting items earlier in the quarter, with up to 30 percent off deals on outerwear this month, Nagel wrote.

“We believe select ‘limited time type promotions’ are needed to improve conversion,” he wrote.

J.C. Penney’s shares rose 1.7 percent to $18.47 at the close in New York. The stock has lost 47 percent this year through today, as the retailer has posted sales declines of at least 20 percent for three straight quarters.

Content Changes

Johnson’s flexibility with the everyday low pricing strategy is a “step in the right direction,” though it may mean inventory levels are building and that sales are under pressure, Matthew Boss, an analyst at JPMorgan Chase & Co. in New York, wrote in a note today.

Boss, who has the equivalent of a hold rating on the shares, projects same-store sales to decline 30 percent in the fiscal fourth quarter, with negative comparable store sales in the first half of next year.

“The key will be content changes ahead with 100 shop-in- shops launched in stores through 2015 and new brands (including Tourneau, Joe Fresh, and Bodum) announced to date and more to come,” he wrote.

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