The best thing about Penney is that the bar for success is
set very low. Since he took over, Johnson has taken out
$900 million in costs. Its sales per square foot should
rise with every redesigned store. If Penney achieves the
pre-Johnson level of $150 per square foot and gets to keep
$700 million of cost cuts, its earnings power will be $3
to $4 per share. If sales per square foot come back to the 2007
peak of $170, earnings will jump to $6 a share. Considering
that Penney stock is trading at about $19, if your career
can survive neutered theta in the short run, this is one cheap
stock for the long run.
Vitaliy Katsenelson (firstname.lastname@example.org) is
CIO at Investment Management Associates in Denver and
author of The Little Book of Sideways Markets.