JCPenney plunges on absolutely dreadful results

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Why JCPenney is in serious trouble

It is onerous to think about how the scenario may get any worse at JCPenney, which was as soon as a powerhouse of retail.

The inventory plunged almost 25% Thursday to a brand new all-time low under $2 a share after the corporate’s newest dismal outcomes.

JCPenney (JCP) continues to lose cash. It lately closed greater than 100 shops. Gross sales are falling. It simply minimize its outlook for the 12 months. And oh yeah, it would not have a CEO.

JCPenney is a transparent instance of a retailer that did not adapt to the Amazon-ation of the business.

Whereas different massive retailers like Walmart (WMT) and Finest Purchase (BBY) have invested closely in digital operations to meet up with Amazon (AMZN), JCPenney — very like the equally floundering Sears (SHLD) — is means behind.

JCPenney is now making an attempt to reinvent itself as a retailer specializing in girls’s and youngsters’s attire. The corporate stated they have been among the many prime gross sales performers within the quarter, together with jewellery and the mini-Sephora cosmetics shops in JCPenney areas.

However the transition has been painful. Jeffrey Davis, JCPenney’s chief monetary officer, stated in a press release that the corporate’s stock buildup is outpacing gross sales. The corporate had quite a lot of unsold items sitting on the cabinets as a result of the corporate made dangerous buying selections.

America's top retailers in trouble

Davis stated JCPenney has modified its technique. It used to purchase as a lot stock because it wanted to refill its shops. Now it would now chase confirmed gross sales tendencies.

It isn’t clear how a lot endurance Wall Road has left. The plunging inventory value is simply the tip of the iceberg for the titanic challenges dealing with the corporate.

JCPenney stated Thursday that it now had simply $182 million in money left, a greater than 40% drop from a 12 months in the past. Though JCPenney famous it had $2.2 billion in whole liquidity, it additionally reported having almost $four billion in long-term debt — up from final 12 months.

Making issues worse is the truth that JCPenney has no CEO. Marvin Ellison left earlier this 12 months to take the highest spot at Lowe’s (LOW).

JCPenney chairman Ronald Tysoe stated in a press release that the seek for a brand new CEO is “going properly” and that the board has “met with extremely certified candidates who’ve expressed a powerful need to turn into the subsequent chief of JCPenney.”

Tysoe careworn that hiring a brand new CEO is the board’s “prime precedence.”

The truth about the retail apocalypse

However the firm cannot afford to tread water whereas on the lookout for its subsequent CEO. Shoppers are spending due to tax cuts and a powerful job market and general economic system. Many different retailers — not simply Amazon — are benefiting from that.

Walmart’s inventory soared Thursday after it reported robust outcomes. Coach proprietor Tapestry (TPR) simply posted stable earnings too.

So JCPenney must discover a method to get folks again in its shops. Quick. It will not be straightforward.

“JCPenney has been in a stoop that I feel is irreversible,” stated Forrester retail analyst Sucharita Kodali.

“This is sort of a film sequel that has had one too many variations. If they can not make first rate numbers on this nice retail atmosphere, what is going to they do in a downturn?” she added. “At this level, I assume you are simply making an attempt to take advantage of what you’ll be able to from the model. I do not actually see any hope for a profitable turnaround, sadly.”

CNNMoney (New York) First printed August 16, 2018: 11:37 AM ET

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