Could J.C. Penney Company, Inc. (JCP) Really Become an 18-Bagger?

Initially, J.C. Penney completely abandoned its traditional coupon-centric approach in favor of everyday low prices on high-quality merchandise. While management expected to lose business from fanatic deal seekers in favor of a more Target-esque, upper-middle-class crowd, they admittedly underestimated just how much revenue would be lost. Still, they stubbornly stayed the course until just last week, finally announcing they would bring selected sales back after revenue took a larger-than-expected tumble during the holiday season. Johnson was quick to point out, however, that this wasn’t a “deviation” from their plan as much as an “evolution” of it.

Aside from pricing strategies, the company is replacing the age-old “racks of clothing” concept in favor of a new mini-boutique shop idea with plans to roll out 100 such shops in all its 1,100 locations by 2015. While this might sound strange at first, it becomes much more intriguing when we note the existing shops consistently post 20% higher comps than the rest of the store space. Further lending credence to the idea, even Macy’s, Inc. (NYSE:M) seems to be quietly taking notes given its recent announcement of a deal with Finish Line Inc (NASDAQ:FINL) to open branded shops within 450 of its stores by the end of 2014.

Foolish bottom line
To be honest, I’m slightly terrified at the thought of owning shares of J.C Penney, even at today’s depressed price. I even started writing this article as a skeptic and expected to finish by opening an “underperform” CAPSCall on the company.

In the end, however, while I’m not holding my breath for an 18-bagger anytime soon, I find myself cautiously optimistic that J.C. Penney might be able to dig itself out of this hole.  Heck, if it can show any concrete signs of improvement in the coming quarters, patient long-term investors could be handsomely rewarded as the stock returns to normal valuations.

The article Could J.C. Penney Really Become an 18-Bagger? originally appeared on Fool.com and is written by Symington, Steve.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of Dillard’s (NYSE:DDS).

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