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 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

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!