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Tickers in this Article: JCP, ANN, M, WMT, DDS
Back in May, I wrote an article entitled "Don't Jump Into JC Penney...Yet". In that piece, I outlined why I thought that shares of the well-known retailer should be avoided. More specifically, I argued that a general weakness among mall-based retailers and a slowing economy could stymie the stock.

After penning that article I have to admit that I have since regretted it for a brief moment. You see, this past week JC Penney (NYSE:JCP) reported a 10.8% increase in its July same store sales numbers. It also revealed that total company sales were up 13.3%.

At first I was a bit dumbfounded and embarrassed. But when I dug a bit deeper, I didn't feel so bad. You see, the company was up against some pretty easy comparables. In the same period a year ago, same store numbers were up just 4.9%.

But even beyond the relatively easy same-store comparisons, management indicated that a big chunk of its back-to-school business fell into the month of July, and also that August comparable-store-sales numbers are now expected to be down somewhere in the mid- to high-single-digit percentage range.

It's All Uphill From Here
Of course, I would argue that there remain several other reasons to stay away from the stock. Have you seen what's been happening to some of the big-name retailers lately? Just check out AnnTaylor (NYSE:ANN). Its July comps were off 5%. Meanwhile, Dillard's (NYSE:DDS) posted a 6% decline. Macy's (NYSE:M) reported a 1.4% decline. In short, if these deep-pocketed players are suffering, you've got to suspect that the situation can't be too much different over at JC Penney.

Another reason I'm worried is that Wal-Mart (NYSE:WMT) is hurting as well. Now, you may be thinking, "Why should Wal-Mart even matter - it's not a mall-based retailer?"

However, even though Wal-Mart's merchandise mix isn't an exact match with JC Penney's, there is a significant amount of overlap. With Wal-Mart cutting its prices so sharply on countless items, it could have a big impact on JCP and its peers going forward. In short, when the 800-pound gorilla of the retail suffers, all retailers suffer.

Tax Loss Selling on the Horizon
The next thing I'm worried about is tax loss selling. Its only August, however many retailers are trading either at or near the low end of their 52-week trading range. And JC Penney is no exception. I suspect that these stocks may be dumped big time as both individuals and institutions look to offset some of their stock market gains near year-end. In any case, I know better than to catch a falling knife come tax loss selling season.


Finally, what about earnings? As of right now Wall Street figures that the company will earn $5.49 per share this year and $6.31 per share next - implying an expected growth rate of almost 15%. I skeptical this is achievable with the domestic economy mired in uncertainty.

To be clear, I don't think JC Penney is a bad long-term investment. However, there will probably be a more opportune time to purchase this stock down the road.

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