J.C. Penney Company, Inc. (JCP): The Supreme Discounter

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Bed Bath & Beyond Inc. (NASDAQ:BBBY) also appears to be an attractive investment opportunity. The company currently trades at a P/E ratio of 15.07, versus the industry average of 18.99 and its five-year historical P/E of 16.02. It trades at a price/sales ration of 1.12, versus the industry average of 1.40, and has impressive operating margins of 15.01%, versus the industry average of 10.09%. The company has minimal long-term debt and a five-year history of strong operating cash flows.

Can the sinking ship be righted?

J.C. Penney Company, Inc. (NYSE:JCP) has made it clear that it plans to return to the old way of doing business. By returning to deep discounting and coupon issuing, it hopes to bring back customers that were lost during the tenure of Ron Johnson.

The company recently released first quarter 2013 data, and it was not pretty. The company saw sales decrease by 16.4% from the same quarter in 2012, and comparable store sales declined by 16.6%. The company also lost $348 million in the quarter, building on the nearly $1 billion loss from 2012. The quarterly sales losses were partially attributed to construction at 505 stores. The company also announced that its approximate debt level is $3.818 billion, and the company has approximately $821 million in cash.

While the stock has rallied approximately 18% since the change in leadership, the company is still facing many hurdles. There is little data on whether customers will return and how the store constructions will impact sales. The company also has a significant amount of debt that could quickly become problematic if free cash flow doesn’t pick up. Given all the unknowns, J.C. Penney Company, Inc. (NYSE:JCP) appears to be more of a gamble than an investment.

Foolish Thoughts

If you are looking for retail exposure, Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) and Bed Bath & Beyond Inc. (NASDAQ:BBBY) look like appealing opportunities. They have mastered their pricing strategies and appear committed to maintaining them. As J.C. Penney Company, Inc. (NYSE:JCP)’s woes continue to be played out in the public eye, the company is just too risky to invest in.

The article Beating J.C. Penney At Its Old Game originally appeared on Fool.com.

John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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