Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of J.C. Penney (NYSE: JCP ) were regaining some life today, jumping as much as 11% after an analyst suggested the struggling retailer could add value by converting some of its stores into a real estate investment trust.
So what: Omar Saad, a retail analyst with the ISI Group, said that if the department-store chain converted 300 of its top locations into a REIT-like entity, it could make $1.2 billion in net income as a landlord alone. Saad gave that portion of the business a $40 per-share value and assessed the remaining 800 J.C. Penney stores at a value of $6 a share, if they remained traditional retail outlets. Today's share-price jump also come amid positive reports about the launch of Canadian label Joe Fresh at 700 of Penney's 1,100 stores.
Now what: Today's developments seem to be only further confirmation that investors have given up on Penney as a retailer. The company posted nearly $1 billion in losses last year and will need to make serious improvements to avoid a similar disaster in 2013. Perhaps the real-estate avenue could generate more cash, but Saad seems to be mistaken if he thinks removing the 300 best stores will leave a retail chain that has any value at all. J.C. Penney didn't comment on Saad's proposal. I'd be skeptical until the company seems to believe in the real estate angle.
For more information on J.C. Penney, I encourage you to pick up a copy of our premium research report all about the venerable retailer. This detailed analysis features a look at the company's opportunities, risks, and key areas to watch, and it comes with a year's worth of free updates as a bonus. You can get started with this in-depth insight right now. All you have to do is click right here.