JCPenney's Brief Stock Surge Is Over And Now It's Tanking

Scott Olson/Getty ImagesJCPenney shares spiked by as much as 10% in after-hours trading Thursday following an earnings report that appeared to give investors hope that the retailer's turnaround plan was gaining traction.

But the rally vanished Friday and the stock was down nearly 5% mid-day.

Brian Sozzi of Belus Capital Advisors says investors may have been spooked by the company's admission in an SEC filing that CEO Mike Ullman has undergone a surgical procedure.

In the filing, JCPenney states that Ullman had "undergone surgery related to a medical condition he has had for more than 20 years," and that he "is recovering and he expects to return to work soon."

"Given that Ullman has built the leadership team and strategies for the company to return to relevance in the mall, his surgical procedure that has him 'returning to work soon' per a filing has caused concern," Sozzi said.

Sozzi said he expects JCPenney to announce a successor to Ullman before the company's Oct. 8 analyst day.

In the meantime, JCPenney board member and former Saks CEO Stephen Sadove would be a "quick, highly credible fallback option should the company not announce a successor to Ullman before the holidays or if Ullman is on the shelf for a considerable period," Sozzi said.

JCPenney reported a same-store sales increase of 6% for the second quarter, marking the company's third straight quarter of positive comparable sales.

The company generated revenue of $2.8 billion for the period, which is up about 5% from last year. Analysts were expecting revenue of $2.7 billion.