Things have not been easy for brick-and-mortar retailers.
Across the retail industry, stores are closing at a clip and firms are witnessing their profits diminish as e-commerce firms such as Amazon continue to win over the hearts and cash of shoppers.
JCPenney has not been immune to the changing landscape.
That follows decisions by Macy’s and Sears to close a collective 218 stores in the first half of the year. Other retailers, such as American Apparel, The Limited, Bebe, BCBG, and Payless have also announced that they are shutting down all or most of their stores.
But a group of equity analysts led by Christian Buss at Credit Suisse think JCPenney is navigating the storm relatively well.
In a note out to clients on April 19, the bank said JCPenney is taking key steps to respond to the new retail environment. As such, Credit Suisse has maintained its price target of $US6, above the firm’s current market price of $US5.73. The note said:
“Last week, we met with management from JC Penney at company headquarters in Plano, Texas. Meetings leave us increasingly comfortable that the company is recognising the underlying structural challenges in the domestic retail environment, and appropriately creating a faster, leaner, and smaller footprint retailer.”
The bank is particularly encouraged by JCPenney’s ability to expedite lead times, or how long it takes for its products to get to market.
“This allowed the company to see demand through holiday before committing to buys for the upcoming fall, improve visibility, index buys into in-demand categories and avoid some clear fashion misses,” the bank said.
That said, the bank thinks investors should still consider a few challenges for the firm.
“However, with mall traffic pressure persistent, the company heavily exposed to highly challenged malls even after store closings, and fashion apparel stabilisation unlikely in the near-term, we believe revenue and EBIT are not yet at a trough,” the bank said.
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