Discount Retailer Operating Income Growth

JC Penney (JCP) continues to rack up impressive gains in operating income. From 2004 to 2005, Penney's operating profit was up 43.7%. While its year over year growth in operating income slowed slightly in 2006, it still handily beat other companies in this sector.

On an annual basis, JC Penney's growth was more than double Target's (TGT) whose 20% growth in operating income landed it in second place here:

More recently, JC Penney's year over year growth has slowed a bit - increasing 29.4% in this year's first quarter and 36.3% in the second quarter.

The three companies with the strongest Q2 growth in operating income ( JC Penney, TJX (TJX) and Kohl's (KSS)) have the best 12 month stock performance of the companies mentioned here (notice the nice rank ordering):

With the exception of Target, 12 month stock performance for the rest of the group also rank orders with their Q2 growth in operating income.

Comments: This discount retail sector has been under pressure lately. Declining gasoline prices should help the sector, just in time for the holiday season. The wild-card here is the softening housing market's impact on retail sales.

Related: Second quarter earnings conference calls for JC Penney, Wal-Mart, Target, Costco and Bed Bath & Beyond.