Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



J.C. Penney Travels to the Land of Oz

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

In The Wizard of Oz, Judy Garland opens the door of her little farmhouse onto the shining Technicolor glory of Oz and is awestruck. Ignoring the murder bit of it -- poor witch never saw it coming -- that's how I felt when I walked into my local J.C. Penney (NYSE: JCP  ) last week. Floors were clean, displays were full, lights were all on, useful signage was everywhere, and not a flying monkey in sight.

I've often thought of J.C. Penney as the way that you get into the mall. Empty parking lot and big doors, with the only drawback being that you have to walk past that sad-looking perfume station based on the classic, no-longer-relevant downtown department store model. This time, I bought something.

What happened at J.C. Penney?
Now, this like-fest doesn't mean that I think J.C. Penney should be worth $75. Instead, it gave me better perspective on the management of the company. It's a bridge too far to say that J.C. Penney is on its way to a huge bounce, but I do believe that it has a future.

It's not a popular position, I grant you. J.C. Penney's stock has been crushed over the last, well, ever. This year J.C. Penney is down 20%, over the past 12 months it's down 52%, and over the last five years, it's down almost 70%. In short: It's down.

Much of the decline has been, rightly or wrongly, pinned on former CEO Ron Johnson. Johnson's inability to turn J.C. Penney into the next Apple meant that the company simply suffered under his rule. When he departed, former CEO Mike Ullman took the reins back like Rocky in Rocky Balboa

Ullman has helped J.C. Penney bottom out, which seems like a bad thing but is actually indicative of the fall finally ending. In its last earnings report, J.C. Penney actually reported an increase in same-store sales. With the company having closed just 10 locations over the last year, the 2% increase in same-store sales looks like a reflection of actual good news.

J.C. Penney also had fourth-quarter success with its margins. Gross margin, operating margin, and net income margin all improved in the last quarter. Management is expecting these improvements to continue into 2014, with most of the hardest margin hits behind the company. 

J.C. Penney's viability as an investment
Refreshed stores, growing sales, expanding margins -- all signs pointing to yes. It's the first time in years that J.C. Penney has seemed like a potential buy. I remember that when Johnson first stepped in as CEO, one of my friends was very excited about a turnaround because of Johnson's history at Apple. I was less enticed. I believed then and believe still that J.C. Penney is a mediocre brand -- the difference now is that the risk of death seems diminished, while the stock is still priced for annihilation.

I don't think J.C. Penney is going to be the next J. Crew. I don't think it's going to suddenly become the hottest brand in the mall. I don't think that same-store sales are going to hit double digits. I do think that it will grow and that the worst is behind it. With a price to sales ratio of 0.19 -- Macy's is trading at 0.77 -- J.C. Penney is cheaper than it probably should be. For once, I feel comfortable recommending investors look into it. It may not be the yellow brick road, but it seems unlikely that you'll have a house land on you.

Your credit card may soon be completely worthless
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Read/Post Comments (1) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2922132, ~/Articles/ArticleHandler.aspx, 8/28/2015 9:17:36 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Andrew Marder

Andrew Marder worked in retail for years, holding jobs ranging from bookseller to bank strategy analyst. He has worked for the Motley Fool since 2012, and loves coffee.

Today's Market

updated 12 hours ago Sponsored by:
DOW 16,654.77 369.26 0.00%
S&P 500 1,987.66 47.15 0.00%
NASD 4,812.71 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/27/2015 4:02 PM
JCP $8.47 Down +0.00 +0.00%
J.C. Penney Compan… CAPS Rating: *