More Store Closures Likely for J.C. Penny Company According to Belus Capital

J.C. Penny Company Inc. JCP is likely to announce more store closings according to Belus Capital Advisors.

In a note issued on Monday, Belus CEO & Chief Equities Strategist Brian Sozzi discussed the upcoming October 8 J.C. Penny analyst meeting.  According to Sozzi, 3Q 2014 and FY 2014 same store sales should increase in the mid single digits, as a percentage.

FY 2014 gross margin is “expected to improve significantly versus 2013” and the company’s free cash flow is “expected to be positive” with liquidity at $2.1 billion by year end.

According to Sozzi, “As of August 2, J.C. Penney had 1,062 stores in operation after shuttering 32 this year as part of a 33 closure campaign announced in January by Ullman.  We think J.C. Penney’s five-year plan includes bringing the store count to below 1,000 in order to maximize efficiencies and position it properly in a world of online and same-day delivery consumption.”

As a comparison, Macy’s currently has 836 stores in operation with more of its own closings to come.

Sozzi concluded that "with the top and bottom lines moving in the right direction (store closures won’t be viewed as a sign of weakness), analyst day is the right moment to announce a store base restructuring that in our view, was in careful consideration this past summer."

Sozzi has the company rated as Hold with a Price Target of $10.

J.C. Penny Company Inc. traded at $9.44 late Monday, down 5.55 percent.