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Stock Analyst Update

J.C. Penney Remains a Poor Investment

The latest announcement is yet another strike against the company.


What Happened?
J.C. Penney (JCP) issued its third earnings warning in as many months, this time citing problems at its Eckerd drugstore division and a "challenging" retail environment. The company said on Thursday that it expects to miss current consensus earnings estimates of $0.10 per share for the third quarter. Instead, it expects earnings per share to range from a small profit to a loss.

What It Means for Investors
We were skeptical about the company's outlook in our recent analysis, and we think investors should continue to avoid the stock. J.C. Penney's shares do seem incredibly cheap right now, selling for only 12 times projected earnings for the year ending January 2001. But even though new CEO Allen Questrom is a noted turnaround expert, he may have taken on more than he bargained for when he accepted Penney's top post. The company's problems are nothing short of humongous, and include an inefficient supply chain, outdated apparel offerings, a stodgy brand name, and a money-losing drugstore operation.

Mark Sellers does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.