J.C. Penney Gains as New Promotions Show Pricing Flexibility
J.C. Penney Co. (JCP) soared the most in more than a year after the department-store company said it will resume holiday-related promotions in another adjustment to Chief Executive Officer Ron Johnson’s pricing strategy.
The shares rose 9.3 percent to $21.01 at the close in New York, the biggest gain since Jan. 26, 2012. The stock declined 44 percent last year, compared with a 13 percent gain for the Standard & Poor’s 500 Index.
Johnson, Apple Inc. (AAPL)’s former retail chief, has eased up on his everyday low pricing model after the company’s revenue fell at least 20 percent for the past three quarters. J.C. Penney will hold sales on popular items tied to “key events and holidays” such as Valentine’s Day, Easter and Mother’s Day, Kate Coultas, a company spokeswoman, said in an e-mail. There will be fewer than 100 of the events, compared with almost 600 unique promotions in 2011, she said.
Investors betting on a drop in the stock “may be worried that some sort of return to the sale strategy may generate an improvement in sales trends,” Liz Dunn, a New York-based analyst at Macquarie Group who rates the shares neutral, the equivalent of a hold, said in a telephone interview.
Investors are placing record bets on a decline in J.C. Penney’s stock. Almost 25 percent of the company’s shares outstanding were sold short this week, the fourth-most in the Standard & Poor’s 500 Index and close to the high of 26 percent reached in December, according to data compiled by Bloomberg and Markit, a London-based research firm. Short-sellers bet that a stock will decline in value, usually by selling shares they borrow, then buying them back at a lower price.
J.C. Penney said during its November earnings call that it will add suggested retail prices to merchandise so customers can see how much they’re saving and will match discounts on national brands such as Jockey when they are running sales.
The company has been sending e-mails to customers alerting them to clearance merchandise and has worked to win back shoppers through offers such as a $10 in-store coupon, 30 percent discounts off clearance items, free children’s haircuts and free family portraits.
“We continue to believe in the importance of great everyday value,” Coultas said in the e-mail. “It has been and will continue to be the cornerstone of our pricing strategy. Every time a customer walks into our store, they can take advantage of low everyday prices.”
J.C. Penney is scheduled to report fourth-quarter earnings on Feb. 27. Sales may decline by 24 percent to $4.13 billion, the average estimate of 15 analysts surveyed by Bloomberg.
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