Is This the Beginning of the End for J.C. Penney Company, Inc. (JCP)? – Sears Holdings Corporation (SHLD), Best Buy Co., Inc.(BBY)

Page 1 of 2

J.C. Penney Company, Inc. (NYSE:JCP)‘s recent quarter may have been one for the record books, and not in a good way. In the quarter that usually means a windfall for retailers, the troubled department-store chain posted an adjusted loss of $427 million, or $1.95 per share. Without adjustments, that number jumps to $552 million, or $2.51 per share. By comparison, in the fourth quarter last year, the company lost $0.38 per share.

J.C. Penney Company Inc. (NYSE:JCP)Same-store sales were similarly terrible, falling 31.7%, and overall sales fell 28.4% to $3.9 billion. Gross margin dropped 640 basis points to 23.8%, and Internet sales fell 34.4% to $315 million.

CEO Ron Johnson essentially ignored the numbers on the earnings call, choosing instead to highlight steps the company’s taken to revamp the brand, including rolling out its shops strategy, renovating its homes department, and using mobile devices to ring up customers and track sales and inventory.

Apple Inc. (NASDAQ:AAPL)s and oranges
Johnson rose to fame, in part, for his success in implementing Apple‘s retail strategy, but the two companies couldn’t be any different. Apple caters to a young, hip, tech-savvy crowd. Its stores occupy the most expensive real estate in the toniest neighborhoods across the country. J.C. Penney Company, Inc. (NYSE:JCP), on the other hand, is a 100-year-old brand in decline. It targets families and an older market, and its department stores are often found in languishing malls in forgotten corners of suburbs and rural areas.

Johnson conceded that his company had learned a few things over the past year, such as that his customers like sales and discounts, which he had tried to remove in an attempt to make it a more upscale brand. The key problem here seems to be that Johnson has alienated his core customer in order to save the company, but it’s difficult to see where he’s going to replace the third of sales that the company’s lost. Comps would have to grow 50% to get back to 2011 levels.

Cash rules everything
J.C. Penney’s free cash flow for the quarter looks decent at $415 million, but $1.02 billion of that comes from reduction in inventory as retailers often stockpile product ahead of the holiday quarter. For the year, free cash flow was negative-$820 million, and total cash on the balance sheet dropped from $1.5 billion to $930 million. Its debt burden remains high at nearly $3 billion, further straining finances as interest expense cost $226 million in 2012. The company recently extended a credit facility, indicating that more borrowing may be on the way, probably at a higher interest rate, and could even lead to shareholder dilution.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!