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Wait Till 2013 For 'Meaningful' Penney Earnings: Analyst
CNBC.com | February 24, 2012 | 02:48 PM EST

It will take at least a year before J.C. Penneyreports earnings improvement resulting from its new “store within a store” strategy, Piper Jaffrey retail analyst Jeff Klinefelter told CNBC.

On Friday, Penney reported quarterly earnings that beat Wall Street’s expectations but profit margins fell because sales at stores open at least a year fell 1.8 percent during the holiday quarter.

“It’s really next year where we’ll start to see meaningful earnings gains,” said Klinefelter, who has a $50 price target on Penney.

“We’re viewing Penney as a margin recovery story. It’s going to take a couple of years to get to an earnings level that we think warrants a 15-times valuation. That’s how we based our $50 price target,” he explained.

He said it’s going to take “not only additional months but probably several quarters until we have a firm grasp on the success of the [Penney] strategy. However, there are glimmers of hope.”

And then there’s Gap, whose fourth-quarter net income dropped 40 percent, although still beating expectations, on higher costs and heavy discounting to get holiday shoppers into the store. On Thursday, Gap also announced a $1 billion share repurchase and approved a plan to raise its annual dividend to 50 cents from 45 cents.

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