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7 Sunday, January 12, 2020 15:43

J.C. Penney's Blue Christmas Means the End Is Near

J.C. Penney (NYSE:JCP) closed the third quarter with $8.69 billion in assets and $8.69 billion in liabilities. That puts the company in a very tough position, as it lacks the cash needed to make a major transformation.Its one hope -- albeit an improbable one  -- was that the holiday season would create some cash for the company.

People spend a lot of money between Thanksgiving and the end of the year, and that could have provided a boost for the struggling retailer.But that was a pipe dream for company executives and shareholders from the beginning. As you might imagine, there was no Christmas miracle for J.C. Penney. The company got coal in its stocking, and its holiday season results suggest it may not live to see another Thanksgiving.


J.C. Penney had very poor holiday results. Image source: J.C. Penney.How bad was it for J.C. Penney?At a time of the year when Americans open their wallets -- often in irrational ways -- few chose to do that at J.C. Penney. The company saw comparable-store sales drop by 7.5% for the nine-week period ending Jan.

4. If you exclude the fact that the retailer exited the appliance and furniture categories, comp sales dropped by only 5.3%.For the full year, the company expects same-store sales to drop by 7%-8%. That number improves compared to a loss of 5%-6% if you exclude the company dropping appliances and furniture.

Those are dismal results that show that the company has lost its connection with consumers. CEO Jill Soltau understands how dire the situation is -- and she has some good ideas about how to change things -- but she lacks the cash to make meaningful changes.J.C. Penney closed the third quarter with $157 million in cash on hand.

Its likely that the total dropped after the chains poor holiday performance. Its simply not possible to make major changes when you have no money.Soltau took an upbeat tone in her remarks in the companys third-quarter earnings release, however, and those remarks gave shareholders hope heading into the fourth quarter.

We are beginning to see results -- both in our numbers and how we operate as a business -- from the early implementation of our Plan for Renewal, which is focused on driving traffic, offering compelling merchandise, providing an engaging experience, fueling growth, and building a results-minded culture, she said late this week.

Going forward, I am confident that delivering our strategy, coupled with our ongoing discipline and commitment to improving the foundational elements of our business, will return JCPenney to its rightful place in the retail industry.That sounds nice, but its not reflective of whats actually happening with the company.

You cant win in retail without customers, and J.C. Penney has chased away too many of its customer base to turn things around.Whats next for J.C. Penney?Soltau will continue to make positive statements because thats what CEOs do when facing disaster. She needs vendors to keep supplying her company, and she wants banks to keep loaning.

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News Code: 377045  |  Motley Fool
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