Why J.C. Penney is Worth $191 a Share

NEW YORK (TheStreet) -- Despite J.C. Penney(JCP) reporting exceptionally weak earnings this week, hedge fund giant Bill Ackman thinks there's significantly more room for upside, between $190 and $315 a share.

J.C. Penney reported an awful first quarter on Wednesday, missing analyst estimates, lowering its outlook and cutting its dividend. Speaking at the Ira Sohn hedge fund conference on Wednesday, however, Ackman noted that the 101-year old retailer is taking significant steps to cut costs, improve profitability, and change how customers view the retailer.

Bill Ackman

Even though 80% of J.C. Penney's stores are in shopping centers with more than $300 per square foot in sales, JC. Penney's sales are still suck at mid-nineties levels, Ackman said. At $250 per square foot in sales, J.C. Penney could be worth $191 a share, or $315 a share if J.C. Penney was able to generate $350 in sales per square foot.

The company's stock currently trades at $27.57.

J.C. Penney's average sales are $132 per square foot, although new CEO Ron Johnson is working to improve that by turning the company into a "mall within a mall," Ackman said. J.C. Penney stores currently feature outlets from Sephora, but will now have new stores from companies such as Nike(NKE) , Levi Strauss, Buffalo, and others.

Johnson, who is credited with the success of Apple's(AAPL) retail stores, has stopped handing out coupons and changed the company's pricing and promotional model. The strategy eliminates unproductive store hours, reduces labor hours and frees merchants to focus on product, not promotions, Ackman said.