This image provided by J.C. Penney shows the company's new advertising campaign. Penney is still embracing its “fair and square” strategy as the cornerstone of its reinvention plan, and says the promotions will be targeted. But the latest tactic acknowledges that middle-income shoppers can't be weaned off sales. (AP Photo/J.C.Penney)
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This image provided by J.C. Penney shows the company's new advertising campaign. Penney is still embracing its “fair and square” strategy as the cornerstone of its reinvention plan, and says the promotions will be targeted. But the latest tactic acknowledges that middle-income shoppers can't be weaned off sales. (AP Photo/J.C.Penney)
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In this Thursday, Dec. 13, 2012 photo, shoppers walk past a Macy's at the Downtown Crossing in Boston. Macy's reported Tuesday, Feb. 26, 2013, a fourth-quarter profit that beat Wall Street expectations as its strategy of tailoring merchandise to local markets paid off during the holiday season. (AP Photo/Charles Krupa)
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In this Wednesday, Aug. 22, 2012 photo, a shopper pushes a trolley through the clearance section of a store in Chicago. During the recession, retailers used sales to lure cash-strapped Americans into stores. But that strategy has backfired. It has bred a group of deal junkies that won’t shop unless they see “70 percent” signs or yellow clearance stickers. (AP Photo/Sitthixay Ditthavong)
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FILE - In this Tuesday, June 19, 2012 file photo, Lauren Jonker opens up a dishwasher on display at a Lowe's store in Atlanta. During the recession, retailers used sales to lure cash-strapped Americans into stores. But that strategy has backfired. It has bred a group of deal junkies that won’t shop unless they see “70 percent” signs or yellow clearance stickers. (AP Photo/David Goldman, File)
Ahead of the Bell: Citi analyst downgrades Penney
NEW YORK (
AP) — A Citi analyst lowered her rating on J.C.
Penney on Wednesday, saying she doubts that the department store chain can soon fix the pricing missteps that have decimated sales.
Analyst Deborah Weinswig lowered her rating on the struggling retailer to "Neutral" from "Buy." She dropped her price target to $15, from $22.
Penney shares fell 1.9 percent to $14.68 in premarket trading Wednesday. The stock has already lost 60 percent of its value over the past 12 months, hitting a four-year low Tuesday.
CEO Ron Johnson, as part of his effort to revitalize Penney, had made big changes to the company's pricing strategy, slashing the number of sales in favor of everyday low prices. Since that policy began last year, Penney has reported huge losses, with sales declines in four straight quarters.
In its most recent quarter, the Plano, Texas, company reported a bigger-than-expected loss as revenue plunged nearly 30 percent. Johnson has acknowledged that the 1,100-store chain had made mistakes and said in late February that Penney would start offering sales in stores every week.
Penney has other worries aside from the steep sales drop. It is in a legal battle with Macy's regarding its ability to sell Martha Stewart-brand products. It has already invested in her products, and if Penney loses, it could wind up with merchandise that it isn't allowed to sell.
Weinswig said that after a trip to the company's headquarters, she still supports Penney's long-term strategy, which also includes bringing in hipper designer brands such as Betsy Johnson and remaking outdated stores. But she's concerned that Penney's pricing strategy has "yet to resonate" with shoppers, and worries that attempts to fix pricing and marketing won't help sales recover fast enough. She also noted that the company's plans could be further derailed by the outcome of the Macy's lawsuit, given Penney's substantial inventory commitments to the Martha Stewart products.
Media reports this week said that a large shareholder sold a chunk of the company's shares and that some of Penney's board members may want to sell the chain or replace CEO Ron Johnson.
Weinswig noted that asset sales, a management shakeup or plans to take Penney private could limit further stock-price declines.
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