JC Penney’s (JCP) stock has run from $38 two years ago to its current level of $78. But, sales activity at the big retailer are slowing. For November, analysts had expected same-stores sales to be up 3.7%. They came in at 1.4%. The number for November 2005 was 3.6%.
Even with the restructuring and overhaul of the company’s stocks, keeping a valuation this high will be difficult if the comany’s sales are going to be below mediocre.
Earnings have been good, but it willl be difficult to keep that momentum if sales continue to slow. In the quarter ending October 28, net rose from $234 last year to $287 in 2006.
Penney also has strengthening competition from Target and Macy’s which want a piece of the middle class shopping market.
Penney is also expensive compared to competitor.It has a market cap of $17.3 billion on trailing twelve month sales of $19.1 billion. Trget’s market cap is $49.7 billion against a market cap of $55.4 billion. And Sears has a market cap of $26.5 billion against sales of $53.1 biilion.
With same-store sales nearly flat, Penney will find it tough to keeps its stock up.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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