• by Sarah Mahoney  @mahoney_sarah, October 9, 2014

Followers of the JCPenney saga have been crossing their fingers that old management’s new strategy would click with the women of Middle America, and since replacing former CEO Ron Johnson, the company has delivered three consecutive quarters of sales growth.

But the retailer has hit a few snags attracting shoppers back to its moderately priced aisles. And the company lowered its sales estimates for the remainder of the year, acknowledging that traffic isn’t what it had hoped for, and that its back-to-school results were disappointing. The Plano, Tex.-based chain lowered its third quarter sales guidance, and now says it expects comparable-store sales for the third quarter in the low-single-digit range, not mid-single-digit growth it initially forecast. 

Still, in presentations prepared for its annual Investor Day, the company was bullish on its prospects: “While we recognize that there’s more work to be done, I couldn’t be more encouraged by the significant progress our teams have made in such a short amount of time,” says Myron E. (Mike) Ullman, III, CEO, in remarks prepared for the event. “I am confident that the initiatives we are putting in place will fuel new growth and earn greater customer loyalty as we pursue our vision to become the preferred shopping choice for Middle America.”

Industry observers aren’t so sure, and the stock took a beating on Wall Street following the news. Despite the chain’s “Back-to-the-Future” merchandising and marketing strategy, “it has found customer frequency to be elusive,” writes analyst Charles Grom, who follows the company for Sterne Agee. “We remain unconvinced, at best. Said differently, we think former CEO Ron Johnson may have permanently fired the core JCP shopper, which is a shame.”

After losing $5.4 billion in market share from 2011 to 2103, he adds that investors are likely frustrated that the chain hasn’t decided to close some of its stores and reduce its footprint, a move that many believe is necessary to continue the turnaround.

The company says some sales within the store, such as at its Sephora units, are quite strong, and that it sees potential for growth in key areas as women’s footwear, center-store, and the home area, particularly hard-hit during the Johnson era. 

But Grom calls some of those goals overly optimistic, and lowered his estimates across the board: “Our sense is that it will be challenging, to say the least, for these initiatives to generate such meaningful gains as the return of JCP’s core shopper is in question.” 

Standard & Poor’s is also wary about the brand’s ability to achieve its longer-term financial goals. “We view achieving these targets to be highly uncertain given a lack of a clear catalyst to drive healthier consumer spending growth and a less promotional environment for moderate-priced department stores. The ultimate outcome of JCP's plans may depend on relevant factors that are outside their control.”