J C Penney Company Inc. (NYSE:JCP) financial woes could slowly be creeping in as the company continues to register a slowdown in sales across its stores. Cash problems are poised to affect the retail store’s operating flexibility as well as takeover appeal.
Downsizing Suggestions Thwarted
Downsizing is an option that J C Penney Company Inc. (NYSE:JCP) has not considered despite having 220 more stores than the thriving Macy’s, Inc. (NYSE:M). Questions are already being asked on the company’s set target of $1.2 billion in EBITDA earnings by 2017 considering it is four times this year’s estimate. As sales continue to diminish, it is highly unlikely that the retail store will attain the set EBITDA estimates.
To achieve the $1.2 billion estimate by 2017, J C Penney will have to grow its sales by 5.4% a year and bolster its margins while also cutting back on spending. Penney will reportedly post a low single-digit growth in sales for the month of October against an earlier guidance of mid-single digit growth. The first half of the year was impressive for the retail store seen by a 6% growth in sales aided by warm weather and fewer clearance deals.
Declining Sales
J C Penney Company Inc. (NYSE:JCP) has been lowering its future sales estimate signaling that weather effects may not be the only challenge that the company is poised to face going forward. Wall Street now expects the retail store to post a 4.3% same-store sale growth for 2015 down from an initial estimate of 4.7% further throwing into doubt the possibility of attaining the $1.2 billion target.
Since 2010, J C Penney Company Inc. (NYSE:JCP) has lost nearly $6 billion in revenue in contrast to its primary competitors that that have added about $12 billion and also opened nearly 80 stores. Most of the rivals have invested vast sums in technology in response to changing fashion trends. The company’s management is taking light of the situation with optimism it can sell more of higher-margin items like cosmetics and accessories while also raising ‘Omni-channel’ sales.
J C Penney Company Inc. (NYSE:JCP) has already named a new chief, Marvin Ellison, who is to take over in August 2015; awaiting to see if he will initiate his own plan considering he has little experience in fashion.
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