Bringing Back Sales May Not Bring Back Profits at J.C. Penney Company, Inc. (JCP)

What does the change mean?
There are two possible interpretations of the “return to sales” at J.C. Penney. The first is that revenue has remained extremely weak in the fourth quarter, in spite of the added promotional activities. This has forced management to throw in the towel and return to a reliance on promotions as the primary driver of store traffic. Alternatively, the decision could be evidence that the limited return of promotions in the fourth quarter drove better revenue results. In this scenario, J.C. Penney is just extending its holiday-season strategy to the rest of the year.

Rather than buying the stock now, investors might want to wait to learn which of these story lines is true when J.C. Penney reports fourth-quarter earnings later this month. Macy’s and Dillard’s are formidable competitors; J.C. Penney will have a hard time regaining the market share it lost as a result of its strategy shifts. Therefore, the company needs to demonstrate revenue momentum in order to become a viable investment candidate.

The article Bringing Back Sales May Not Bring Back Profits at J.C. Penney originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg is short shares of Dillard’s. The Motley Fool owns shares of Dillard’s.

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