How J C Penney Company Inc (JCP) Can Generate More Revenue?
J C Penney Company Inc (NYSE:JCP) shares were nearly written off two years ago. Now, the company is one of the few in the retail sector to generate growth. On top of that, it has continued to provide growth potential because of its focus on a number of factors like the launching of Boutique+ in about 500 stores and a jump in traffic to its portal that indicated a growth 31% in March to reach 11.6 million unique visitors compared to the year-ago quarter. The company is only a few among the retailers to expect revenue growth in the current year whereas most others like Wal-Mart Stores, Inc. (NYSE:WMT) or Target Corp (NYSE:TGT) are expected to struggle for growth in 2016. Therefore, the recent drop in the stock price could be a buying opportunity as the retailer is set to gain from several initiatives launched by it.
Stable Growth Seen
J C Penney Company Inc (NYSE:JCP) overcame the falling revenue trend last year in retail. Two years back, it was nearly counted for dead, and now it has a reversal of fortunes thanks to the number of initiatives yielding fruits. Its current CEO, Marvin Ellison, has brought in the hopes of stable revenue generation among the investors, as well as, analysts. For instance, Street analysts’ have consensus revenue projection of 2.9% for the current year. For the first quarter also, which is not a strong one after the holiday season-dominated fourth quarter, analysts expect 2.8% growth. Interestingly, analysts are not expecting growth in other leading retail companies.
Now that J C Penney Company Inc (NYSE:JCP) has instilled a confidence among the analysts that its revenue will start growing, the next step is to ensure stable growth in revenue. That will ignite a fresh feeling among the investors that the company is poised to be a growth story, which meant upside potential in stock prices could be in the cards. One of the significant factors in turning around the fortunes is that the company was not doing big as far as transformation is concerned. The focus is more on innovation and within the brick-and-mortar retail space. The innovative initiatives also bring in more traffic.
Larger-Size Customer and Private Label
Most recently, J C Penney Company Inc (NYSE:JCP) announced its invention of launching Boutique+ in 500 stores. The objective seems to be focusing on the bigger-size customer. Also, the company appeared to have understood the need for private label merchandise to attracting stylish large-size millennial shopper. That is a focus on Women with the competition predicted to be intense in big-size category. However, there was no other alternative for the company but to jump on the bandwagon. Therefore, the CEO took the right initiative to embrace such type of customers. This would help in the long-term basis though short-term gain may be small.
J C Penney Company Inc (NYSE:JCP)’s Boutique+ would offer feminine silhouettes, and edgy patterns, apart from bold colors. The company indicated that for spring, floral and paisley prints, as well as, vintage denim inspired by the 70’s would be exhibited to attract visitors to purchase them. Aside from that, the retailer would be looking at trendy fashion pieces like fringe tanks, tiered blouses, and pleated skirts to bring in more customers and traffic. The chain of retailer bets that the prices would be affordable. That is an indication that the company is serious about its focus and that it does not want to lose the advantage on pricing.
Performance Keenly Watched
The reports indicated that several retailers have tried to cater to the Plus-size customer and failed. For instance, Queen Latifah and Lane Bryant Stores have tried their luck though some attributed the failure to a lack of a complete plan. Also, there was a lack of sales people to handle the big size of stylish customers. Therefore, there is a question mark on J C Penney Company Inc (NYSE:JCP) too. However, there is strong hope that designers have understood the customer, as well as, design merchandise to remain confident of achieving what others have failed.
The interesting point is that the management recognized the needs of its customers, which would gain momentum in the upcoming years. One of the favorable factors is the company’s strong customer base, which looked for trendy well-designed merchandise. However, the company believes that the stylish women category has not been served properly. J C Penney Company Inc (NYSE:JCP) has designed the new merchandise in such a way to fill the gap. The retailer took care to engage a designer Ashley Neil Tipton as he designed price-winning Plus-size apparels. There is already a strong feeling that the Boutique+ Line and others would add thrill customers to visit the stores.
Committing To Winning Loyalty
Most recently, the company’s SVP of women apparel, Siiri Dougherty, said that there were millions of stylish women seeking comfortable and well-fit clothes offering style, as well as, versatility. He said that J C Penney Company Inc (NYSE:JCP) was committed to winning the loyalty of women by designing a fresh modern brand made for them and create a dedicated shopping environment.
Additionally, the retailer enjoys a great PR advantage. Its initiatives have the potential to extend the retailer’s TAM that it would look for more revenues per customer. Also, there is another possibility that will come from its Sephora & Salon initiatives. J C Penney Company Inc (NYSE:JCP)’s initiatives helped to attain the 3% sales-growth-rate for the three year period. That meant expanded TAM has the possibility of increasing the growth rate.
There is no doubt that there are challenges for the retailers as shoppers prefer online buying. However, companies like J C Penney Company Inc (NYSE:JCP) are also determined to ensure that their initiatives deliver the expected fruits. It has already been showing it in the past. The additional incentives meant that the retailer is serious about innovative approach to attracting consumers. One cannot look at the valuation now. Its growth is stable and could maintain to deliver decent returns for the shareholders.
Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.
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