UPDATE 1-Morgan Stanley sees strong margins at J.C. Penney

lunedì 29 giugno 2009 16:49

 June 29 (Reuters) - Morgan Stanley upgraded J.C. Penney Co
Inc (JCP.N: Quotazione) to "overweight" from "equal-weight," and said the
retailer was "the most likely candidate" in the department
store group to outperform current gross margin expectations in
the second half of 2009 and beyond.
 The brokerage, which also prefers the stock from a
valuation standpoint, said the department store operator's
margins would benefit more from a fall in apparel costs than
its peers and also from sales of private-label merchandise.
 Private-label products are those on which retailers put
their own labels on what are often lower-priced goods made for
them by vendors. They tend to cost less than brand-name
products, they also tend to carry higher margins for retailers,
helping profits.
 J.C. Penney ended the first quarter of 2009 with "the most
favorable" sales to inventory position in the group, Morgan
Stanley added.
 Morgan Stanley said it expects the tight alignment between
sales and inventories to continue through the remainder of the
year as the retailer has bought conservatively for the back
half of 2009.
 "As the consumer environment improves, J.C. Penney's
merchandising, sourcing and real estate strengths will show
through," the brokerage said.
 J.C. Penney shares were up 3 percent, or 87 cents, at
$29.24 Monday morning on the New York Stock Exchange.
 (Reporting by Dhanya Skariachan in Bangalore; Editing by
Deepak Kannan)