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J.C. Penney surges as stocks slump. Huh?

April 5, 2013: 1:10 PM ET
Wall Street wants to see more scenes like this from struggling retailer JCPenney. Sales are still plunging.

Wall Street wants to see more scenes like this from struggling retailer JCPenney. Sales are still plunging.

The market slid Friday after a terrible jobs report. Retail stocks were not spared. The SPDR S&P Retail exchange-traded fund (XRT) was down nearly 1%.

It makes sense. If the job market is going into another spring swoon, then consumers probably will spend less at the mall. So why on Earth were shares of J.C. Penney (JCP) up 4%?

J.C. Penney's problems are well-known at this point. The department store chain's sales have continued to fall despite an ambitious store-within-a-store strategy launched by CEO Ron Johnson. The former Apple (AAPL) retail guru has not been able to convince investors that his plan will work.

Earlier this week, JCP disclosed that it slashed the compensation packages of Johnson and other senior executives last year due to the poor performance. And things aren't expected to get better anytime soon. Analysts are forecasting that sales will keep dropping this year and that JCP will rack up even more losses.

So why was JCP up this much on a down day? It could just be a short squeeze. Short sellers own more than 40% of the available stock. But some traders on StockTwits expressed optimism that Johnson's strategy might finally be bearing fruit.

bellinghart
$JCP On this one, seeing is believing. I avoided this store the past 10yrs but the ones I've been in past 2 wks have GREAT clothes + prices.

MarkLarson
$JCP Home goods shops opening starting today. Designers like Michael Graves, Jonathan Adler & Sir Terence Conran. $270/sq ft vs $135/sq ft. Bullish

If Johnson can pull this off, a lot of skeptics (and shorts) will be eating crow. To be honest, Johnson's strategy makes sense. There is strong evidence that the sales per square foot should go up for all of JCP if the company can successfully revamp the entire chain. But execution is going to be key.

Other traders suggested that even though JCP is a hated stock -- shares are still down 20% this year -- there are some big institutional investors supporting it. In particular, hedge fund manager Bill Ackman has continued to show support for Johnson. Ackman's Pershing Square is JCP's largest shareholder, with a nearly 18% stake.

briander81
$SPY now watching some individual stocks showing strength during spy bloodbath. $JCP beaten down but looking good now. Go figure. Big$ knows

etfhack
$JCP Ackman was measured and solid this am at conf in boston w/ laying out story Bullish

One trader joked about how another retailer in the midst of a turnaround seems to be adopting Johnson's strategy too.

a_jackson
it's hilarious $BBY announces the samsung store within a store concept and $JCP bottoms the same day. Ron shoulda stayed in tech.

Ha! Johnson should be envious of Best Buy (BBY). It's been one of the best performing stocks this year and shares got a further lift Thursday on news of the Samsung partnership. Although leaving Apple no longer looks like that disastrous of a move.

Related: J.C. Penney cut 27% workers in 2012

Finally, one witty StockTwits user reminded investors that it's premature to say that the worst is over just yet.

upsidetrader
First uptick in $JCP since the Age of Pericles, CNBC and Ackman awestruck

Joe D. for the win! Although I wonder if JCP would do well in Greece. Or Cyprus for that matter.

And now for the Reader Comments of the Week! I've had enough of the Bitcoin hype. It's a bubble. Plain and simple. But why listen to me when these readers sum it up best.

Ka-ching!

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Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

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