Disney and J.C. Penney Join Forces

Shareholders of Disney (NYSE: DIS  ) have reason to cheer today. While the entertainment company's stock is marginally lower in intraday trading, down approximately nine basis points, it was the top stock yesterday on the Dow Jones Industrial Average (INDEX: ^DJI  ) , up well over 1%.

Why the move?
The uptick was tied to a report in Women's Wear Daily that the company will partner with J.C. Penney (NYSE: JCP  ) to open more than 500 in-store boutiques featuring Disney products designed exclusively for the retail giant. According to one account, "The Disney shops will average 750 sq. ft. to 1,100 sq. ft. and sell costumes, plush toys, figurines, footwear, sleepwear, underwear, backpacks, lunch totes and apparel for boys, girls and babies."

In response to the news, Swiss bank Credit Suisse raised its price target on Disney to $58 a share from $56. It currently trades for $52.66.

The partnership is part of J.C. Penney's ongoing "transformation," orchestrated by its new chief executive officer, Ron Johnson, who formerly led the retail division at Apple.

Under Johnson's brief stewardship, the retailer has ditched its coupon-centric pricing model in favor of "everyday low prices" -- the move was accompanied by an extensive ad campaign featuring Ellen DeGeneres -- and is remaking its stores to resemble an amalgamation of separately-branded boutiques by the likes of Levi's, Liz Claiborne, and Disney, among others.

In language reminiscent of his days at Apple, Johnson noted that: "All those boutiques are the apps. What J.C. Penney is creating is a new interface."

The recent success of these fresh bedfellows couldn't be more different. At Disney's last earnings release, it reported upbeat revenue and net income figures, growing the latter by 24% from the same period a year ago. Meanwhile, J.C. Penney reported same-store sales decreases in excess of 20%, and a net loss of $81 million.

A look to the future
While Disney is a bona fide rule maker with the industry power and financial might to perform for years to come, J.C. Penney is a much more speculative play. For a list of other companies that share Disney's potential without J.C. Penney's risk, check out our popular free report, "3 Companies Ready to Rule Retail."

Fool contributor John Maxfield does not have a financial position in any of the companies mentioned above. The Motley Fool owns shares of Walt Disney and Apple. Motley Fool newsletter services have recommended buying shares of Walt Disney and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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Related Tickers

10/24/2014 2:54 PM
^DJI $16787.78 Up +109.88 +0.66%
DOW JONES INDUSTRI… CAPS Rating: No stars
DIS $88.48 Up +0.49 +0.56%
Walt Disney CAPS Rating: *****
JCP $7.57 Down -0.16 -2.11%
J.C. Penney Compan… CAPS Rating: *

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