Morgan Stanley Comments on J.C. Penney's Market Strategy

Morgan Stanley has released a research report on J.C. Penney JCP, noting the potential for market share loss. The report notes a potential failure of J.C. Penney's product and brand differentiation strategies over the past decade. J.C. Penney has attempted and failed to attract younger customers and retains the image of a store that offers "great prices." In the report, Morgan Stanley comments, "We attempt to lay out in this note why we think market share loss is not temporary (i.e. it's more than just exposure to a lower income demographic) and why fundamentals are likely to lag peers for at least the next 6 quarters. To be clear, our call is not a negative one on new CEO Ron Johnson (who will start at JC Penney on November 1st). To the contrary, we think he could prove to be a positive for both the stock and the company longer-term. However, we do believe the challenges facing Mr. Johnson are significant and will take time to fix." Morgan Stanley rates J.C. Penney at Underweight (equivalent to SELL) with a price target of $28.00. J.C. Penney closed yesterday at $32.10.