Here's Why J. C. Penney Is Down More Than 50% In 6 Months
Zacks Investment Research | Dec 17, 2018 12:26AM ET
J. C. Penney Company, Inc. (NYSE:JCP) has been in troubled waters for quite some time, losing customers to cheap sellers. Though it has been making turnaround efforts to revive its lost sheen, none seem to be working out. Earlier, the company changed its logo, store designs, advertisements and pricing model to attract consumers. But these strategies failed to deliver desired results.
Further, the company’s comparable sales (comps) don’t paint a rosy picture. Although the metric improved by 0.3% and 0.1% in the first and second quarters, it declined 5.4% in the third quarter of fiscal 2018, crushing all hopes of a turnaround. Also, the company anticipates comps for fiscal 2018 to decline low-single digits compared with the prior view of remaining almost flat.
Moreover, it has been struggling with shrinking gross margin, which is likely to remain under pressure in the fourth quarter of fiscal 2018. Management plans to right size inventory levels, which may hurt gross margin for the next few quarters.
Moving on, the company witnessed sales decline of 5.9% in the nine months ending Nov 3, 2018. Adding to the woes, it lost $330 million in the same time frame. Amid such downsides, the company had a soft start to the recent holiday season, which was touted as a golden opportunity for it to get back on track. Per media reports, the company had a showdown on Black Friday with flat traffic year over year compared with 3% growth at Macy’s (NYSE:M) , 12% growth at Walmart (NYSE:WMT) , and 16% growth at Target (NYSE:TGT) .
Apart from these, the company has long-term debt of $4 billion that has marred its operational performance over the past few quarters. Also, it is not producing enough free cash flow to repay debt.
This Zacks Rank #3 (Hold) company has lost 56.5% in the past six months, underperforming the Zacks Investment Research
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