Q. I am a long-time shareholder in J.C. Penney Co. I am pleased with its performance but wonder whether its many competitors are growing too large for it to handle.
R.C., via the Internet
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A. The late James Cash Penney, who founded the retailing company in 1902, would be proud of its modern inventory-management technology.
The company boasts some of the most advanced software in the industry and knows how to use it effectively.
Its merchandise selection is also progressive, indicated by recent additions of high-end Sephora cosmetics counters, East 5th women’s working apparel and a broader selection of clothing by designer Liz Claiborne.
Definitely not one of the many famous retailing names that have faded into obscurity, it has more than 1,000 U.S. department stores, plus four catalog-Internet fulfillment centers. It is on schedule to annually open 50 new non-mall stores through 2009.
Shares of J.C. Penney (JCP) are up 5 percent this year following gains of 39 percent last year, 34 percent in 2005 and 57 percent in 2004. Third-quarter profits rose 23 percent, helped by strong sales of St. John’s Bay women’s clothing and Chris Madden home goods.
The consensus rating on Penneys stock is a “buy,” according to Thomson Financial. That consists of four “strong buys,” five “buys,” six “holds” and one “underperform.”
Penneys does face fierce competition. Among national rivals, Macy’s is pushing it from the department store side and Target Corp. is shoving it from the discount side.
Although management has proven to be shrewd and the next several years are promising, the chain doesn’t appear to enjoy any especially unique long-term retailing advantages. It also needs to lure back customers it lost during some of its down years, when merchandise selection and pricing were unimpressive.
Earnings are expected to increase 33 percent in the fiscal year ending in January and 12 percent next fiscal year. The predicted five-year annualized growth rate is 16 percent.
Myron Ullman, who became chairman and chief executive two years ago after holding top positions with LVMH Moet Hennessy Louis Vuitton and Macy’s, is focused on improving same-store sales and profit margins.
There has been recent executive turmoil: Catherine West, former president of the U.S. credit card business of Capital One, was fired in late December as the retailer’s chief operating officer after just five months on the job. No reason was given, but West apparently didn’t fit the retailing mold.
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Andrew Leckey is a Tribune Media Services columnist. E-mail him at [email protected].