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Quick Hits: J.C. Penney's Split Personality


Brief scrutiny of today's headlines

J.C. Penney's (JCP) first quarter earnings prove it's impossible to please all the people all the time.

According to Forbes, net income profits fell from $238 million, or $1.04 per share one year ago, to $120 million, or $0.54 per share.

The retailer blames shaky consumer confidence and belt-tightening for the loss. Equally shaky is the company's outlook for the remainder of the year. Consumer spending constitutes 70% of the U.S. economy. Penney predicts its first quarter results are a precursor to even tougher times ahead.

According to Long Beach, California's Press-Telegram, the acquisition of the pricier American Living line of clothing and home goods designed by Polo Ralph Lauren (RL) is to blame for some of the losses. In retrospect, the move was an ill-considered attempt to bring affordable luxury to a target audience that puts affordable before luxury. American living in 2008 looks different than it did in 2007.

Beyond the economy, a concern for all merchants, Penney has a unique set of problems. It strives to compete with discount chains Wal-Mart (WMT) and Kohl's (KSS) on price, while trying to project the allure of Nordstrom (JWN) and Lord & Taylor. Penney can easily resolve its identity crisis -- and maybe some of its financial woes -- by catering to a single market.
No positions in stocks mentioned.

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