Penney, Kohl's Get Extra Encouragement As Retail Stocks Surge

On a strong day for retail stocks, J.C. Penney Corp. (JCP) and Kohl's Corp. (KSS) are receiving an extra boost from positive comments - and big target price increases - by Deutsche Bank, which sees the department stores significantly benefiting from "up-for-grabs" sales.

J.C. Penney's shares are headed to $24 from Deutsche Bank's prior $18 target, and Kohl's stock is looking at $53, a rise from $43, said Bill Dreher, the firm's retail analyst.

J.C. Penney shares were recently trading at $22.93, up 6.6%, or $1.35. Kohl's stock is ahead $1.51, or 3.5%, to $45.07.

Dreher sees a general acceleration in sales momentum at J.C. Penney and Kohl's, and also places the chains with Wal-Mart Stores Inc. (WMT), Target Corp. (TGT) and Macy's Inc. (M) as being in a good position to gain from the retail industry's shakeout. Wal-Mart stock is up $1.05, or 2%, to $53.88; Target is ahead $1.80, or 5.3%, to $36.20 and Macy's has gained $1.13, or 12.5%, to $10.15.

Deutsche Bank's positive comments for J.C. Penney and Macy's come one day after Moody's Investors Service reduced the two department stores' debt ratings to junk status, saying their operating results will likely continue to decline because of still-sluggish consumer spending.

Dreher's upbeat call is among the first for retail stocks, which have been pounded by the recession but are now starting to see strong demand on sentiment the economy may be bottoming.

The Standard & Poor's Retail Index recently rose 1.4% to 297.65, with advances being marked by all but four of its member companies.

A further industry shakeout is expected, however, with the latest retail casualty West Coast department store chain Gottschalks (GOTT), whose liquidation will place almost $600 million in sales up for grabs, Dreher said.

Gottschalks' going out of business and Sears Holdings Corp.'s (SHLD) late February announcement of plans to close an additional 24 Kmart and Sears stores contributed to Dreher upping to $22 billion from $19.3 billion his "Up-For-Grabs" tally of sales that should migrate to other retailers from those that are shutting down locations or altogether.

-By Karen Talley, Dow Jones Newswires; 201-938-5106; [e-mail]