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
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

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!